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The Anderson Case

The Anderson case was a 1999 case where the defendants (the Andersons) defrauded investors of millions in a Ponzi scheme (you can read about what a Ponzi scheme by clicking here).

When the Andersons knew troubles were brewing with the clients they bilked out of millions, they transferred to a Cook Island Trust (Foreign Asset Protection Trust (FAPT)) several million dollars.  The Andersons were co-trustees of the trust along with a local foreign trust company.  When the lawsuit was filed, by the rules of the trust, the Andersons were dropped as co-trustees and the remaining foreign trustee was the only person/entity that could authorize the disbursement of money from the foreign trust.

To make a long story short, the court in Anderson threw the clients in jail for contempt of court when they refused the court’s demand that the Anderson as co-trustees bring the money from the Cook Islands back to the states where it could be divided out by the court at the conclusion of the case against the Andersons.

The Andersons argued that, when the suit was filed and a demand was made on the trust to bring the money back to the U.S., they were automatically terminated as trustees and did not have the authority under the foreign jurisdiction to take money out of the trust and bring it back to the U.S.  This argument normally would have worked except that the Andersons set up the foreign trust with knowledge that a lawsuit was imminent.

Could a court hold you in contempt of court and throw you in jail if you did not bring money back to the states after you deposited it into an offshore trust?

It is very unlikely that a U.S. court would hold someone in contempt of court if the money transferred to a properly set-up offshore trust was done for a legitimate business purpose and done before there was an awareness of future litigation. The Anderson case is a classic example that bad facts make bad law, and why the APS™ believes the Anderson case only applicable to clients if they are making transfers to an offshore trust with the knowledge of potential litigation.