The FTC v. Affordable Media, LLC case, also known as the Anderson Case, is a well-known example of what can go wrong with offshore asset protection trusts. This article breaks down the Anderson Case and highlights key lessons for better asset protection.


The Andersons, Michael and Denise, were sued by the Federal Trade Commission (FTC) for running a fraudulent investment scheme through their company, Affordable Media, LLC. The company promised high returns from investments in a media business, but the funds were actually being misused. In 1998, the FTC accused the Andersons of operating a Ponzi scheme.

The Andersons were involved in a telemarketing venture, Affordable Media, LLC, which offered investors the chance to participate in the sale of items like talking pet tags and water-filled barbells through late-night television. They promised that an investment would provide a return of fifty percent in just sixty to ninety days. The investors’ money was eventually lost, leading the FTC to file suit against Affordable Media, LLC and the Andersons.

The Trust Setup

red umbrella on top of coins

Three years before the lawsuit, in 1995, the Andersons set up a Cook Islands Trust. Unfortunately, they named themselves as co-trustees along with a third-party Cook Islands trustee. This setup gave them too much control over the trust. By naming themselves as trustees, the Andersons retained undue control, giving creditors an argument to pierce the trust as illusory and lacking independence.

Legal Issues

When the FTC sued, the third-party trustee in the Cook Islands removed the Andersons as co-trustees, citing the lawsuit as an event of “duress.” However, the Andersons still had power as Trust Protectors, allowing them to challenge the trustee’s decisions.

The District Court ruled that the Andersons as Trust Protector had too much control over their trust and held the Anderson’s in contempt of court for not bringing the trust assets back to the U.S. The U.S. Court of Appeals for the Ninth Circuit upheld this decision. The Andersons were not held in contempt for creating or funding their trust but rather for their failure to comply with a U.S. court order.

The Andersons, even with their improperly structured trust, had a duress provision which helped them avoid recovery by the U.S. courts. The duress provision of the Cook Islands Trust removes the Andersons as co-trustees if there is an “event of duress.” Since the Andersons were subject to a temporary restraining order as part of the preliminary injunction entered by the U.S. courts, the duress provision was enacted, and the Andersons were removed.


shaking hands with gavel underneath

The U.S. courts attempted to repatriate all the assets held in the international trust, which led to the Andersons being found in contempt of court and jailed until they complied with the U.S. order. The Andersons eventually agreed to provide direction to the trust on three things: (1) remove the overseas Trustee and replace it with a corporation formed by the FTC, FTC, Inc.; (2) replace the Protector of the CIT with FTC, Inc.; and (3) amend the trust to remove the FTC as an “Excluded Person.”

The Cook Islands Trustee did not comply and sought a ruling from the Cook Islands court to determine the validity of the three agreements. The Cook Islands court ruled in favor of the Cook Islands trustee and nullified the effect of the U.S.-ordered agreements, demonstrating the strength of Cook Islands statute against foreign rulings. The Cook Islands court found: (1) the documents purporting to remove the existing Cook Islands Trustee and appoint the FTC were an invalid exercise of the Protector’s powers; (2) the attempt to amend the document would be invalid because it would benefit an “Excluded Person”; and (3) the appointment of the FTC as Protector would be invalid because it would benefit an “Excluded Person.” Costs were awarded against the FTC in favor of the Cook Islands Trustee.

The FTC ultimately decided to forgo its appeal rights in the Cook Islands and settled with the Cook Islands Trustee. Although there was no formal judgment from the Cook Islands High Court, the U.S. Bankruptcy Trustee determined that it was better to settle than continue to expend trust resources litigating. The FTC settled and released the Cook Islands Trustee and the Cook Islands Trust from any further liability.

Lessons Learned

The Anderson Case shows the importance of properly setting up an offshore trust:

  1. Avoid Naming Settlors as Trustees: Naming yourself as a trustee or co-trustee can lead to too much control over the trust, making it vulnerable to court rulings.
  2. Use Third-Party Trustees: At Blake Harris Law, we recommend using professional third-party trust companies in the Cook Islands as sole trustees to ensure assets are well-managed and protected from U.S. court orders.
  3. Choose Independent Trust Protectors: Using a third-party trust protector outside the U.S. is best to further safeguard the trust.

The Andersons’ choices, possibly due to poor advice or lack of concern for legal repercussions, highlight the need for expert guidance in setting up offshore trusts. Offshore asset protection has advanced significantly, and working with experienced attorneys can help you avoid similar pitfalls.

Contact Us

If you’re considering a Cook Islands Trust, consult with Blake Harris Law. We have extensive experience in creating legally sound trusts to safeguard your wealth. Contact Blake Harris Law today to consult our asset protection attorneys about setting up your offshore trust.