State Bar leaders remain deeply divided over special purpose trust

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“Highly unusual.”

“Something doesn’t smell right.”

“As a member of the Board of Governors, I felt like we let our members down.”

These recent comments from opponents of the State Bar of Wisconsin’s special purpose trust show that the feelings among high-level members of the bar are still very raw, creating an atmosphere of distrust about how the Board of Governors is handling the organization’s finances.

Nearly a year after the State Bar of Wisconsin barely approved creation of a $5 million trust to set aside bar funds, the organization remains seriously divided over the issue, with questions about transparency of the process, complaints about the fiduciary responsibility of the leadership and concerns that many members still haven’t seen the actual trust document. The Wisconsin Law Journal requested a copy of the Trust from the State Bar and our request was ignored. However, a copy was provided to us by the Wisconsin Institute for Law & Liberty.

While it’s not unusual for the State Bar to have a vigorous public debate over key issues, the fight has further escalated in recent months, often playing out in the commentary pages of this publication. After Board of Governor’s attorney Nick Zales published a piece calling out “buffoonery” of the Board, Past-President Margaret Wrenn Hickey responded in kind with a detailed defense of the special trust.

One outside group, WILL, is considering legal challenges again, saying members have been in the dark about what’s happening with the trust.

“Lawyers get in trouble all the time for mismanaging trusts,” said Skylar Croy, an attorney for WILL. “Members of our own Board of Governors have whistleblown on this.”

At this point, there’s little to be done about the trust. It was created last year under a fairly quick process, and management of the $5 million asset is under way. One of the main purposes of the trust was to protect assets in case the bar’s mandatory dues rule is dissolved, and that threat “was certainly a primary driver to potentially mitigate future financial risk,” according to an explanation published in Inside Track, a bar publication.

The vote to create the trust was 23-21, a tight margin considering the amount of money involved. All of these months later, it doesn’t seem like many opinions have moved from that divisive vote.

“There’s still a lot of people who don’t know about it,” said Greg Banchy, a member of the Board of Governors and an attorney based in Eau Claire.

“It’s one of those things that’s on a slow boil right now and as more people learn about it, it may become more of an issue,” Banchy added.

Banchy, like every board member interviewed for this article, made it clear he was talking for himself and not for the Board of Governors.

With a June Board of Governors meeting looming, some members are bracing for another tough discussion about board management and the status of the trust – even if little may be done about the issue.

The fact that many key members of the Board of Governors are still steaming about this issue some eight months after the vote last summer, coming on the heels of a high-profile lawsuit the bar lost over its diversity, equity and inclusion programs, shows the State Bar still may face some internal turmoil ahead.

When the Wisconsin Law Journal set out to report on the latest about the trust, opponents still presented a unified, vocal front. In fact, one member of the Board of Governors, Banchy, said he was not going to run for re-election to the BOG because he’s frustrated by the board’s mismanagement.

Board defends trust, wants to move on

Leadership at the State Bar of Wisconsin appears as if it would like to simply move on from last summer’s controversy.

When the Law Journal reached out to the communications office at the State Bar of Wisconsin, an email response was received.

Joe Forward, the communications director for the bar, provided a series of links to pieces already published in the Inside Track, the bar’s internal publication, including a Q&A published last summer.

“Numerous members of the Board scrutinized and questioned the uncertainty and risk associated with creating the Special Purpose Trust, but ultimately a majority felt this was a risk worth taking to protect the future financial security of the State Bar,” Margaret Wrenn Hickey wrote in the Inside Track. “There were dissenters, but the Board took action on this issue by a majority vote.”

Reached at his law office, current State Bar President Dean Dietrich said the organization was not going to provide any further comment.

“The stuff that we presented should be enough,” Dietrich said over the phone. “I’m not refusing to respond, I’m telling you the information we provided gives you a clear understanding what was done.”

The Wisconsin Law Journal sent follow-up emails to the communications director requesting interviews, and also requested the actual trust documents, but nobody responded as of press time.

A few days after we reached Dietrich’s office, he sent an email to Board of Governors members warning them not to talk to the press, according to one BOG member who received the email. View a copy of that memo by clicking here.

Why the opposition is still fighting the trust

Even though it’s been nearly a year since the vote on the trust, opponents of the move still say the lack of communication and transparency has created an air of distrust.

“There’s still a lot of people who don’t know about it,” Banchy said.

But whether that tension from the opposition goes anywhere is an open question. Croy, the attorney at WILL, says there’s still potential for legal challenges and amendments to the trust.

There’s also a concern over whether the State Bar will increase its mandatory dues in the near future now that $5 million has been sequestered in a special trust.

“Are they going to say they need members to pay more in dues because they put $5 million in a trust?” said Croy. “They are losing out on a lot of interest. Now we need to make up for that by charging members more?”

One Board of Governor’s member also questioned whether the exact process that was used to create the special purpose trust was actually within the authority of the Board of Governors. The board is allowed under its charter to “enter into contracts, acquire, hold, encumber and dispose of real and personal property.”

But the member, who opposed creation of the trust, said they should have petitioned the state Supreme Court to gain approval, which would have required a two-thirds vote.

“I personally had an issue with whether the Board of Governors had the authority to adopt the special purpose trust,” said Lisa Lawless, a member of the Board of Governors who opposed creation of the trust. “… The State Bar is a creature of the Supreme Court, it has the duties and powers that Supreme Court grants it by rule. If the State Bar takes an action that’s outside those powers and duties it should go to Supreme Court to petition it to give it that power.”