In 1987, Boris Godunov was a 25 year old newlywed in his native Latvia. He and his bride were set to emmigrate to the USA. At their farewell party, Boris’ extended family pooled their savings and presented him with $200,000, the accumulated contributions from his many aunts, uncles, cousins and other family members. His father solemnly told him: “In America, you will be our hope and salvation. You are the shepherd of all our life savings. Protect this money and make it grow. As each of our children come of age, we will somehow get them to America and you will give each of them a nest egg with which to start their life in the land of opportunity.”
In America, Boris took his father’s words to heart. He studied hard, invested wisely and by 2007, the original $200,000 had grown to $5,000,000 in stocks and bonds.
Over those 20 years, along with their growing wealth, his wife had also learned to enjoy the American dream. In 2007, Boris’s wife lost 40 pounds, shaved off her mustache and ran away with her personal trainer.
Boris came to see us because he was afraid that in the anticipated divorce, his wife would claim a right to one-half of the $5,000,000. He was concerned that a divorce court might not agree that he was merely the “shepherd” of his family’s money.
We took Boris to Antigua, where he established an asset protection trust and appointed an Antiguan attorney (insured, bonded, licensed and government regulated) to act as trustee. Boris arranged for the immediate transfer of the $5,000,000 to a trust account at Antigua Overseas Bank. The trustee also opened an investment account (for investment in non-US assets) and appointed Boris as investment advisor to the trust.
After three days, Boris returned to the US. He took a taxi from the airport to his home. When he got out of the taxi, a process server handed him a Summons and Complaint for Divorce, together with a court Order restraining him from transferring any assets. Boris smiled. “Too late,” he thought; “timing is everything.”
In the ensuing divorce litigation, Boris disclosed the existence of the Antigua trust. He also pointed out that Antigua law did not recognize or enforce US civil judgments or US court orders.
The divorce judge, upset by Boris’ challenge to the authority of the US court, declared the trust void because it “violated the public policy of the State of New York.” Boris’ attorney respectfully pointed out that, because the court had no jurisdiction over the Antigua trust or its assets, the court’s declaration was of no effect. The trust was valid and legal in Antigua, and its assets remained safe and protected there.
The judge’s next move was to issue an Order dismissing the Antiguan trustee and appointing a US trustee over the trust, who would be subject to US jurisdiction and follow the orders of the US court. When this order was delivered to the Antiguan trustee, he respectfully responded that he did not recognize the US court’s order because the US court had no jurisdiction over him, the Antigua trust or its assets, which continued to remain safe and protected in Antigua.
In a final act of exasperation, the judge ordered Boris to instruct the trustee to immediately close all Antigua trust accounts and return the proceeds to a US account within the jurisdiction of the court. The judge appointed Boris’ (soon to be ex-) wife as receiver over this US account. The judge threatened to jail Boris for contempt of court, if Boris failed to comply with the court’s Order.
Boris, of course, complied fully with the court’s Order. He sent a certified letter to the trustee, instructing him to close all accounts and return all assets to the US. Boris sent a copy of his letter to the Court as proof of his compliance.
Two weeks later, Boris (and the Court) received the trustee’s response: Clause 17 of the Trust Deed of Settlement prohibited the trustee from following any instruction that was the result of duress or compulsion. The trustee was therefore unable to comply with the instructions in Boris’s letter, which were made under compulsion of the US court. Boris had complied with the Judge’s Order; the Antiguan trustee, over whom the US court had no power or jurisdiction, had not.
The Judge finally acknowledged that even US courts have limitations on their power. He recognized the court’s lack of jurisdiction over the Antigua trust or its assets and suggested that Boris and his wife settle the matter of division of the assets outside the court.
Boris offered his wife $50,000. She accepted. The balance of the assets continued to be invested and grow safely within the trust.
After the divorce and the settlement was finalized, Boris and his wife signed mutual releases. The trust was terminated and the assets were returned to Boris in the US. Boris changed his name to Baxter and became a successful hedge fund manager. Boris’ wife regained her 40 pounds, her mustache grew back and the trainer left.