By Jim Hopkins
Boulevard Publisher

When Brown-Forman stockholders gathered in July at the whiskey giant’s Georgian Revival headquarters west of downtown, the outcome of a crucial vote — re-electing 12 directors to the governing board — was anything but a surprise.

This has been the founding Brown family’s company for nearly 150 years. Six of the directors were Browns, including board Chairman George Garvin Brown IV — a great-great grandson of the founder — and the rest were unquestionably family loyalists.

Stockholders outside the family knew what Brown-Forman has disclosed for years in an annual statement soliciting their votes: 13 individual Browns and family groups hold 67% of all the voting shares in “a variety of family trusts and entities, with multiple family members often sharing voting control and investment power.”

Much less has been known about the scope of those entities, leaving more than 5,600 other stockholders in the dark about exactly how the Browns divvy up nearly $6 billion in shares among a core group of relatives.

But now, documents filed by the Browns with the Securities and Exchange Commission detail how complex their ownership has grown since the pharmaceuticals salesman George Garvin Brown founded the company in 1870. They shed light on how the Browns have deployed extensive trust accounts, business partnerships, and other legal vehicles to pass down Brown-Forman stock through six generations. That’s an exceptional legacy in American business: Just 12% of family-owned companies survive into the third generation, and a slim 3% survive to the fourth and beyond.

The documents also point to a network of boutique consulting firms and other white-shoe professionals advising the city’s wealthiest families on everything from investments to taxes and charitable giving, hiring housekeepers and gardeners — even organizing vacation travel and family gatherings. Paid tens of thousands of dollars a year in fees, the firms are the backbone of a larger, multibillion-dollar economy serving the area’s uber-rich.

The documents were filed over the past 18 months by Garvin Brown IV, the chairman, and 12 relatives. They include his brother Campbell Brown, a top Brown-Forman executive and one of the directors re-elected in July; Christy Brown, the well-known Louisville philanthropist; J. McCauley “Mac” Brown, chairman of the Kentucky Republican party; and cousins Sandra Frazier, a newly appointed University of Louisville trustee, and Laura Frazier, another of the re-elected directors.

In all, the Securities and Exchange Commission documents show they own stock through 113 separate trusts, partnerships, and limited liability companies, including two that may be registered in business-friendly Delaware. At least 18 are so-called dynasty trusts, a common estate-planning strategy that minimizes inheritance taxes that might otherwise force the family to sell stock to raise cash.

The total number of trusts across the Brown family is certainly much higher, because the documents only cover Browns whose stock holdings are big enough to require public disclosure under SEC regulations. Many other Browns sitting atop multimillion-dollar stakes likely have extensive legal arrangements of their own. The family now includes 126 living descendants of Brown-Forman’s founder, plus 38 widows or spouses, according to the company.

How the family retains control of their corporate empire is of tremendous interest to Louisville. Led by its marquee Jack Daniel’s and 18 other brands, Brown-Forman has operations in about 160 countries around the globe. The company employs 4,600 workers, including 1,300 in Louisville, and the wealth it generates makes the family one of the city’s most generous financial supporters of the arts, education, and the environment.

Crummy, Birdnest, and Hackberry 2010

The family’s ownership hasn’t always been so Byzantine, according to the hundreds of pages of SEC documents I’ve examined over the past two months; my focus was the agency’s Form 4, which insiders and big stockholders file throughout the year. The Browns disclosed only 10 trusts and other legal vehicles in 2002, the furthest back the company’s online records extend. Since then, members of the third and fourth generations have died, leading to a division of estates among children and grandchildren. The fifth and sixth generations have gotten bigger through marriages and births, leading to the establishment of more trusts. And changes in tax regulations have no doubt played a role, too.

The trusts, limited liability companies and other vehicles carry an array of names. Some are generic or named for individuals. But many are not: OB2 Reverse QTIP Trust; Polaris LLC; the Crummy and Spray trusts; Hackberry 2010 LLC; Birdnest 2006 Ltd.; Olympus Three LLC, and Driftwood Holding Three LLC. All told, they stand behind the 13 Browns and family groups collectively owning 114 million voting shares.

Some of the entities hold beneficial ownership of stock amounting to little more than a rounding error for the Browns’ wealth. The Crummy Trust has 2,000 shares worth $96,000 based on the current stock price and the effect of a recent two-for-one stock split. Birdnest 2006 holds 88,600 worth $4.3 million, according to a filing by Augusta Brown Holland, a real estate developer who’s also a Brown-Forman director.

But others overflow: Olympus Three beneficially owns 13.4 million shares worth $643 million, according to a filing by her brother, Owsley Brown III, a vintner and documentary filmmaker in San Francisco whose name adorns the Speed Museum’s new high-tech movie theater. Holland, with her brother and sister Brooke Brown Barzun, came to those shares through their father, the late Brown-Forman CEO Owsley Brown II, according to the June 28 proxy statement. Christy Brown is their mother.

Delaware’s Division of Corporations says an Olympus Three LLC was formed in the state in 2006 and registered to the Corporation Trust Co. in Wilmington. The agency also says a Driftwood Holding Three LLC was incorporated there in 2011 by National Registered Agents Inc. Many companies and partnerships are incorporated in Delaware because of its business and tax-friendly laws.

A ‘lifestyle management’ firm

Another limited liability company, Hackberry 2010, says its office is at Zelkova Strategic Partners‘ East Main Street headquarters downtown, according to the Kentucky Secretary of State’s office. Hackberry was organized in December 2010, agency records show.

A fourth LLC, Birdnest 2006, listed Holland as general partner and also gave the East Main address now occupied by Zelkova, according to the Secretary of State’s records. Birdnest was dissolved two years ago, the records show.

Zelkova is what’s known as a multi-family office, a firm that advises exceptionally wealthy families on their investment portfolios, charitable giving and tax planning. Zelkova also provides what it calls “lifestyle management,” including overseeing household staff such as maids, arranging for vacation and other travel, and paying bills.

Zelkova’s managing director, Mark Campisano, formerly worked at JPMorgan Chase’s Private Wealth Management Group, where he specialized in risk management, taxes, and generational planning for high net-worth clients. He’s also on the board of directors of the Community Foundation of Louisville, which is home to at least 10 individual Brown family donor-advised funds.

Three Brown charitable foundations also list Zelkova as their address: those named for Owsley Brown III, and his sisters Holland and Barzun, according to their public IRS tax returns. The returns were prepared by Summit Strategic Partners, a boutique accounting firm in the same building as Zelkova’s office. On its website, Summit says its clients include “high net worth and ultra-high net worth individuals and families.”

Advising families with means can be lucrative. Owsley Brown III and his sisters each paid more than $25,000 in accounting and other professional fees through their foundations during the most recent fiscal years. One of their late father’s foundations, the Owsley Brown II Cockayne Fund, which also lists Zelkova, paid $67,260 in investment management and other fees last year.

The Rockefellers pioneered the concept of family offices in the late 19th century, and they gained popularity in the financially go-go 1980s, according to The New York Times. “But they have proliferated rapidly over the last decade, as the ranks of the super-rich, and the size of their fortunes, swelled to record proportions,” the newspaper said last December.

In Kentucky, there’s plenty of business for the asking.

A $74 billion market

Concentrated in Louisville and Lexington, the state has an estimated 74,000 households with $1 million or more in investible assets, according to the Phoenix Global Wealth Monitor. That’s less than 5% of the state’s households owning at least $74 billion in stocks and other valuables.

Zelkova and Summit aren’t the only consultants to rich Louisvillians. Until 2014, Hackberry listed its office at Atlas Brown Inc., which is also at the same East Main Street address as Zelkova and Summit. Barzun’s charitable foundation has employed Atlas, too. In addition to managing investment portfolios and charitable giving, Atlas also organizes family meetings, offers financial education, and develops family mission statements.

Other Brown family members and their foundations use Glenview Trust Co., which manages portfolios for more than 500 of the area’s wealthiest families, with a combined $6.5 billion in assets. Its 10-person board of directors is a who’s who of Louisville’s most financially and socially prominent residents.

They include two members of the Brown family itself: the philanthropist Ina Brown Bond, who is Owsley Brown II’s sister; and Sandra Frazier, who retired last month from Brown-Forman’s board. Gov. Matt Bevin appointed Frazier and Glenview Chairman David Grissom to the restructured University of Louisville board of trustees in late June.

Founded 15 years ago in one of the area’s most exclusive enclaves, Glenview’s 40 employees include nine attorneys, seven financial analysts and four CPAs. Its simple motto is elegantly apropos: “Enriching Life.”

—
Please read my disclosures.