US District Judge Marvin Aspen of the Northern District of Illinois ruled that neither the trust’s beneficiaries – senior Outboard executives – nor the bank that issued a letter of credit to the company had an ownership stake in the rabbi trust money, according to a BNA report.
Aspen’s ruling came out of request from Alex Moglia, bankruptcy trustee in Outboard’s US Bankruptcy Court case filed in 2000, to clarify who rightfully owned the $13.5 million.
The former Outboard Marine executives who were to benefit from the 13-year-old rabbi trust asked Aspen to award the money to them while Bank of America likewise contended in court filings that it should receive the money. The rabbi trust was used to provide a source of funding for several incentive and deferred compensation plans for executives.
According to court documents, Outboard Marine withdrew money from the rabbi trust in 1998 and obtained from Bank of America an irrevocable letter of credit.
In sorting out the dispute, Aspen:
- rebuffed claims from the executives that the trust should be separate from Outboard’s bankruptcy estate and, therefore, available to award to them, and
- turned away Bank of America’s contention that Outboard Marine had the right to assign the trust’s remaining assets to the bank. The judge noted that the trust clearly prohibited such assignments.
The case is Bank of America N.A. v Moglia