Cook Islands Trusts in U.S. Courts: Lessons from FTC v. Affordable Media, LLC

Executive summary

For U.S. families evaluating Cook Islands asset-protection trusts, FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999), remains the most instructive federal appellate decision. The opinion:

• describes trust provisions “intended to frustrate the operation of domestic courts,” Id. at 1232;
• affirms that repatriation orders and civil contempt are available remedies when assets are placed offshore for a settlor’s benefit, Id. at 1231–32; and
• expresses pronounced skepticism where a settlor claims to have retained no control while circumstances indicate otherwise, Id. at 1241–42.

What follows is a concise, professionally neutral synthesis anchored in the court’s own language.

How the Ninth Circuit framed the structure and its purpose

The court characterized the trust mechanics directly: “…the provisions of the trust were intended to frustrate the operation of domestic courts.” FTC v. Affordable Media, LLC, 179 F.3d 1228, 1232 (9th Cir. 1999).

It also summarized the broader model at issue: “These ‘so-called asset protection trusts’ are designed to shield wealth by moving it to a foreign jurisdiction that does not recognize U.S. judgments or other legal processes, such as asset freezes.” Id. at 1240.

Court orders and immediate consequences

From the outset, the directives were unambiguous: “Both the temporary restraining order and the preliminary injunction required the Andersons to repatriate any assets held for their benefit outside of the United States.” Id. at 1232.

When the orders were defied, the panel endorsed the district court’s use of contempt:

“An old adage warns that a fool and his money are easily parted. This case shows that the same is not true of a district court judge and his common sense. After the Andersons refused to comply with the preliminary injunction by refusing to return their illicit proceeds, the district court found the Andersons in civil contempt of court.” Id. at 1231.

The “duress” sequence—and why impossibility failed

The opinion recounts how duress provisions operated when a U.S. order issued:

“In response to the preliminary injunction, the Andersons [sent] a letter to AsiaCiti on May 12, 1998, instructing AsiaCiti to provide an accounting of the assets held in the trust and to repatriate the assets to the United States to be held under the control of the district court. AsiaCiti thereupon notified the Andersons that the temporary restraining order was an event of duress under the trust, removed the Andersons as co-trustees under the trust because of the event of duress, and refused to provide an accounting or repatriation of the assets.” Id. at 1233.

Further attempts to substitute trustees met the same response:

“In attempting to purge themselves of their contempt, the Andersons attempted to appoint their children as trustees of the trust, but AsiaCiti removed them from acting as trustees because the event … of duress was continuing. At the June 17 hearing, the district court indicated that it believed that the Andersons remained in control of the trust and rejected their assertion that compliance with the repatriation provisions of the trust was impossible.” Id. at 1233.

The panel then addressed the core defense:

“The Andersons claim that the refusal of the foreign trustee to repatriate the trust assets to the United States, which apparently was the goal of the trust, makes their compliance with the preliminary injunction impossible.” Id. at 1239.

Its conclusion was unequivocal:

“It is readily apparent that the Andersons’ inability to comply with the district court’s repatriation order is the intended result of their own conduct— their inability to comply and the foreign trustee’s refusal to comply appears to be the precise goal of the Andersons’ trust.” Id. at 1240.

The court tied that outcome to specific drafting:

“The Andersons’ trust created the circumstances in which a foreign trustee would refuse to repatriate assets to the United States by means of so-called duress provisions.” Id. at 1239 n.9.

And it signaled the limited role of “impossibility” in this context:

“Given that these offshore trusts operate by means of frustrating domestic courts’ jurisdiction, we are unsure that we would find that the Andersons’ inability to comply with the district court’s order is a defense to a civil contempt charge. We leave for another day the resolution of this more difficult question because we find that the Andersons have not satisfied their burden of proving that compliance with the district court’s repatriation order was impossible.” Id. at 1241.

Judicial skepticism regarding “no control”

The opinion repeatedly notes doubt that a settlor truly surrendered control:

“Given these considerations, we cannot find that the district court clearly erred in finding that the Andersons’ compliance with the repatriation order was not impossible because the Andersons remain in control of their Cook Islands trust.” Id. at 1241.

“While it is possible that a rational person would send millions of dollars overseas and retain absolutely no control over the assets, we share the district court’s skepticism.” Id. at 1242.

That skepticism was informed by the overall record, including the court’s description of the Andersons’ initial position:

“The Andersons claimed that they were unable to repatriate the assets in the Cook Islands trust because they had willingly relinquished all control over the millions of dollars of commissions in order to place this money overseas in the benevolent hands of unaccountable overseers, just on the off chance that a law suit might result from their business activities.” Id. at 1231.

A candid passage the court reproduced—and its import

The panel quoted a description of how an offshore trust might be defended in U.S. court:

“Finally, the settlor should be aware that, although his trust will probably prove unassailable by domestic creditors, he may face minor hassles while defending his trust in court. In particular, if a creditor attacks an offshore trust in United States court, the settlor may face contempt of court orders during the proceedings. . . . There is a possibility that the court will . . . order the settlor to collect his assets from the trust and turn them over to the court. If the settlor does not comply with these orders, a court may hold him in contempt. However, there are ways around such a conflict. . . . The settlor could comply with the court order and ‘order’ his trustee to turn over the funds, knowing full well that the trustee will not comply with his request. Thereby, the settlor would technically comply with the court’s orders, escape contempt of court charges, and still rest assured that his assets will remain protected.” Id. at 1241.

Placed alongside the findings above, the court’s closing perspective is clear:

“Given that the Andersons’ trust is operating precisely as they intended, we are not overly sympathetic to their claims and would be hesitant to overly-restrict the district court’s discretion, and thus legitimize what the Andersons have done.” Id. at 1244.

Practical implications for U.S. families

• Repatriation and contempt remain available tools. Courts will require assets “held for [a settlor’s] benefit” outside the U.S. to be returned and will use civil contempt if orders are not obeyed. Id. at 1231–32.
• Drafting that disables compliance at the moment of a U.S. order invites adverse inferences. Duress provisions and similar mechanics factored centrally in the court’s analysis. Id. at 1233, 1239 & n.9, 1240–41.
• Assertions of “no control” face exacting scrutiny. Where the record suggests retained influence or practical access, courts are skeptical. Id. at 1241–42.

For families weighing offshore options or reviewing existing documents, a disciplined, case-driven risk assessment is essential before any funding occurs—particularly with appreciated assets or complex reporting obligations.

Our practice conducts confidential feasibility reviews focused on control, enforcement exposure, and tax/reporting alignment, so decision-makers can proceed—onshore or offshore—with a full understanding of the legal posture reflected in Affordable Media.

Contact Dilendorf Law Firm

Dilendorf Law Firm assists tech founders, high-net-worth individuals, and cross-border families in evaluating offshore trusts and related structures—including Cook Islands trusts.

We provide confidential, fixed-scope reviews that assess control mechanics, enforcement risk (including repatriation and contempt exposure), and U.S. tax and reporting requirements before assets are moved and legal title is reassigned to an offshore trustee.

To discuss a paid initial consultation:

Email: info@dilendorf.com | Phone: 212-457-9797 |Web: dilendorf.com

This material is for educational purposes only and does not constitute legal or tax advice.