A convoluted legal saga involving a Cook Islands trust has recently been reported on in the US, invoking a description of the Cook Islands as “a unique debtor’s haven”.
Tracing its origins back to 2008, the case involves the (now former) wife of an ex-Nasa engineer turned failed oilman, who had started up a company which intended to hunt for oil using former Soviet military aircraft to conduct high-altitude exploration.
The company, Terralliance Technologies, initially took in “about US$500 million in investor money” said Las Vegas creditor-debtor lawyer Jay Adkisson, reporting for business website Forbes.com.
Terralliance’s founder and chief executive Erlend Olson – the ex-Nasa engineer, “spent Terralliance’s money as if investors’ money was a never-ending gusher of green” writes Adkisson, before going on to add that “the business and personal assets of Erlend and Terralliance were sometimes commingled”.
Erlend was eventually demoted from company CEO to “chief scientist”, but with the market for oil crashing and his management of Terralliance being questioned, the former engineer took steps to create a Cook Islands trust – the ‘Miyim 2009 Cook Islands Trust’ – for the benefit of his wife Jana Olson and their children.
According to Adkisson, “approximately 28 other entities were also created which were owned by the Cook Islands trust, and into these entities Erlend transferred over US$20 million of his personal wealth”.
Some time later, San Francisco hedge fund Passport Capital, which had loaned Terralliance US$150 million, took Erlend and his wife Jana to court, eventually obtaining a May 2012 judgement in their favour to the tune of more than US$6 million.
At this point things start to get a little complicated – unless presumably you’re a highly qualified lawyer.
Suffice to say that, after some legal to-ing and fro-ing, Jana Olson eventually declared bankruptcy in May 2015.
“In her bankruptcy schedules,” writes Adkisson, “Jana stated that the Miyim 2009 Cook Islands Trust was no longer in existence, had no assets, and Jana claimed that she no longer had a right to information about that trust. Jana’s representations were simply a big lie”.
In fact, the trust did still exist – albeit renamed as the “Pink Panther Trust”, and Jana did still have access to it, although in 2010 she had removed herself as a named beneficiary, transferring her interest to her children.
Much more legal back and forth later, Jana was jailed for contempt, was released, and was jailed for contempt again, all while facing continuing legal action from both the aforementioned hedge fund Passport Capital and the Bankruptcy Court’s Bankruptcy Trustee for more or less doing her very best to keep the assets of her Pink Panther Trust in the Cook Islands out of their hands.
We now skip ahead to July 2017, by which point a compromise had been proffered in which Jana’s children would retain a little under US$1 million if she would just give up the assets held for them in trust. The acceptance of that deal led to her release from prison on July 7.
Not all parties were happy however, with Passport Capital still insisting that they were entitled to all of the money from the Cook Islands trust.
The matter is still yet to be fully resolved, with the whole case causing one Bankruptcy Court official in the US to note, “their distaste for Cook Islands asset protection planning”.
“I think somebody in Cook Islands probably decided that they weren’t going to corner the world’s market of coconuts,” said the official.
“So what they would do instead is they would create what, as I’ve always understood it to be, a unique debtor’s haven, whereby the laws are tilted so heavily in favour of debtors that no matter how righteous Passport’s claim might be, and how seemingly powerful this building – with its mahogany slabs and so forth and a gold eagle up there – how fearsome that might be, they can simply go, ‘Come get it’.
“And a lot of people seem to find that that protection is attractive. So much so, that they give them billions of dollars.”