A complicated legal battle being waged in the Cayman Islands and the United States over the assets of charitable foundations run by Michael Hammer, father of actor Armie Hammer, took a step towards resolution with a recent Cayman Grand Court ruling.
Michael Hammer, grandson of oil tycoon and philanthropist Armand Hammer, died on 20 Nov. 2022.
The issue determined by the local court centred around whether Michael Hammer’s widow Misty and others had the right to authorise the transfer of tens of millions of dollars in artwork and other property from a US-incorporated non-profit to a Cayman Islands non-profit set up by Michael Hammer.
A three-day trial was heard in June before Grand Court Justice Jalil Asif to determine who could control and give instructions on behalf of the Hammer International Foundation, the Cayman entity established by Hammer in the 1990s when he lived in Grand Cayman and helped set up Grace Christian Academy in West Bay.
The 11 defendants in the case included the Hammer International Foundation, known in the trial as ‘Cayman Hammer’, which contended that it had the legal authority to control the company. Other defendants included Misty Hammer, Mark Alfano, Rex Alexander, Jeff Katofsky, Randall Barton, Raisha Park, Cecil Kyte and Alexander Menzel, who had been purported to be members or directors of Cayman Hammer.
The court heard that, many years ago, Armand Hammer established the Armand Hammer Foundation, known as California Hammer, as a charity incorporated in California. Several generations of the Hammer family had used it for philanthropic purposes, and its assets, estimated to be worth US$100 million, included valuable real estate in Carpinteria, California, and a famed art collection.
When Michael Hammer incorporated Cayman Hammer, California Hammer was its sole founding member, with himself, Dru Hammer and Samuel I Ltd. – a Cayman Islands company with Michael Hammer as its sole shareholder and director – as the company’s three directors.
Until June 2021, the directors of California Hammer were Michael, his younger son Viktor, and three of his business associates, Jim Fraser, Rex Alexander and Peter Sansone, who died in late 2023.
The judge, in his 74-page ruling issued on 14 Aug., noted, “Through California Hammer’s membership of Cayman Hammer, and Michael’s role in both entities, their operation was co-ordinated.”
Michael and Dru Hammer divorced in 2012. He married Misty Hammer, nee Millward, in 2017, and he moved back with his new wife to Grand Cayman.
In November 2020, California Hammer began a process of redomiciling in Florida by merging with Florida Hammer, which had been incorporated as a non-profit organisation solely for that purpose. The merger was completed on 25 June 2021, causing California Hammer to automatically be dissolved and immediately cease to exist.
Following his diagnosis with glioblastoma, an aggressive form of brain tumour, in November 2021, Hammer gave his power of attorney and control of Samuel I Ltd. to Mark Alfano, a friend and chief of staff of California Hammer and Cayman Hammer.
No evidence of plans to merge Cayman and Florida entities
Legal counsel Graeme McPherson, representing Florida Hammer, contended that as Michael Hammer became sick, the defendants sought to take over control of Cayman Hammer and to strip Florida Hammer’s assets to bring them under their control.
However, the defendants claimed that it had been intended since 2017 to merge California Hammer with Cayman Hammer, and that the merger with Florida Hammer was part of a two-stage process to achieve this.
The judge ruled in his 14 Aug. judgment that there was no evidence to support the defendants’ contentions.
“To the contrary,” he wrote, “Florida Hammer was intended to be a fully operational entity, continuing the work and aims of California Hammer. The sole reason for the merger between California Hammer and Florida Hammer was to shift the centre of operations from California to Florida for Michael’s personal convenience.”
Asif said he was “entirely satisfied” that it was not Michael Hammer’s intention that California Hammer should merge with Cayman Hammer. The fact that Florida Hammer had taken offices, hired staff and maintained an investment portfolio indicated it had a genuine operational role and was not simply a “staging post on the way to a merger with Cayman Hammer”.
The court heard that following the merger, the first meeting of Florida Hammer’s board of directors was held on 25 April 2022. The minutes of the meeting indicated that Michael Hammer attended but moved that Alexander be elected chairman. At Hammer’s request, Misty Hammer was appointed as a director. With the addition of Misty Hammer, the board at that time was made up of her, Michael Hammer, Viktor Hammer, Fraser, Sansone and Alexander.
Viktor Hammer later called for a meeting of the board to discuss some issues and proposed 24 Aug. for the meeting. He suggested he should chair the meeting, given his father’s condition, but was told by Barton, an attorney, that as per the April meeting, Alexander would be the acting chairman at all meetings.
On the day of the proposed meeting, a lawyer acting for Viktor Hammer, Fraser and Sansone wrote to Barton saying they would not attend because financial information they had requested had not been provided. Without their presence, the board could not reach the quorum required for a meeting.
Around the same time, the court heard, Viktor Hammer and his mother Dru made a surprise visit to Michael and Misty Hammer in their California home. That visit “quickly became rancorous”.
A few days later, attorneys representing Michael and Misty Hammer, and Florida Hammer, requested Viktor and Dru Hammer stop communicating with Michael, his healthcare providers and Misty. They also demanded that Viktor Hammer stop representing that he had authority to speak on behalf of Florida Hammer.
“From this point onwards, until 20 November 2022, Florida Hammer’s board was effectively deadlocked,” the judge noted.
Following Michael Hammer’s death, however, Viktor Hammer, Fraser and Alexander made up the majority of the board members and were in effective control of Florida Hammer.
Accusations of asset stripping
The court heard that Alexander, as chairman of Florida Hammer, on 27 Oct. 2022 took action to transfer the Carpinteria property and 32 listed artworks from Florida Hammer to Cayman Hammer.
McPherson described this “as the first stage of the Defendants’ asset stripping of Florida Hammer in favour of Cayman Hammer”.
On 1 Nov. 2022, Alexander, as Florida Hammer chairman, and Misty Hammer, as president and chairman of Cayman Hammer, signed a bill of sale and assignment to transfer the contents of the Carpinteria property to Cayman Hammer for US$10. The contents of the property included Armand Hammer’s art collection, estimated to be worth up to $80 million.
Asif, in his ruling, stated that while the transfer of the property’s contents to Cayman Hammer for such a small sum may be explicable if it were part of a genuine restructuring of Florida Hammer and Cayman Hammer, there was no evidence before him to indicate any consideration of tax or regulatory implications of the asset transfers.
“Given that the ownership of the assets was being moved outside the United States to the Cayman islands, I would expect that the parties would wish to consider whether there was a resulting tax liability or any regulatory issues, and the US IRS would be very likely to take a keen interest in the transactions,” the judge wrote.
He said the impression generated supported McPherson’s characterisation of the events as asset stripping.
On 1 Nov. 2022, membership of the Cayman board was expanded and became stacked against Viktor Hammer, Fraser and Sansone, the court heard.
Following Michael Hammer’s death on 20 Nov., Viktor Hammer, Fraser and Sansone convened a special meeting of Florida Hammer over Teams at which they removed Misty Hammer, Alexander and Alfano as directors. Vicktor Hammer was elected chairman and president, Sansone as treasurer and Fraser as secretary.
However, the judge ruled that there had been no resolution to increase the numbers of members of the company, and that the only member of Cayman Hammer was Florida Hammer.
Since they were not members of the company, the judge ruled, the purported new members could not have validly voted to appoint directors to the board, approve a merger between Florida Hammer and Cayman Hammer or to transfer the Carpinteria property, the Hammer art collection or any other assets to Cayman Hammer.
“As a result of the invalidity of the purported appointments, my conclusion is that Samuel I Ltd. remained as California Hammer’s sole director following Michael’s death on 22 November 2022,” Asif wrote.
Samuel I Ltd. resigned as a director of Cayman Hammer on 3 Feb. 2023, meaning that from that date onwards, the company had no validly appointed directors. The judge ruled that Cayman Hammer’s register of members should be rectified to record Florida Hammer as being its sole member with resultant voting rights as of 25 June 2021.
This means that the appointment of Viktor Hammer, Fraser and the late Sansone as directors of Cayman Hammer should retroactively be treated as effective, and that Viktor Hammer and Fraser are the current directors of the company.
The appointments of all other directors, other than Samuel I Ltd., the judge ruled, are invalid.
Following the failure by the defendants to pay court-ordered costs in an earlier related hearing, the judge had debarred them from defending the claim against them by Florida Hammer.
Florida Hammer had applied for its costs of the proceeding be paid by the defendants personally. The judge said the defendants should be allowed to make submissions on this issue.
The judge noted that as well as the legal proceedings in Cayman, there are ongoing proceedings in California and two in Florida involving the same parties, and that bankruptcy proceedings were initiated in California in respect of Cayman Hammer in May this year.
Asif said he had been told that his decision in this case was likely to be relevant to at least some of the US cases.
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