FTC v. Affordable Media: What the Anderson Case Actually Decided

Every list of "failed offshore trust" cases opens with the same decision. FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999) - the Anderson case - is the most cited Cook Islands trust decision in American law, and it is almost always cited for a proposition it does not establish.

Two things happened in that case, and keeping them separate is the whole exercise. A married couple went to jail. Their Cook Islands trust assets were never recovered.

What Actually Happened

Denyse and Michael Anderson were telemarketers. In 1995 they established a trust in the Cook Islands. Some years later they were hired to run telemarketing for a venture that turned out to be defrauding its customers - an operation that raised roughly $13 million from investors, of which the Andersons kept about $6.3 million in commissions.

The Federal Trade Commission sued. It sought, and obtained, a preliminary injunction requiring the Andersons to repatriate the money held in the Cook Islands trust. This was a preliminary-injunction and contempt proceeding, not a $13 million money judgment against them - a detail frequently lost when the case is summarized secondhand.

The Andersons notified their Cook Islands trustee of the order. The trustee responded that, under the trust's own terms, the Andersons were acting under duress, and that a trustee facing a settlor under duress was prohibited from sending the money back. The Andersons returned to the district court and argued that compliance was impossible.

The court did not accept it. It found the Andersons still controlled the trust, held them in civil contempt, and ordered them jailed. They were incarcerated in July 1998 and released that December, having handed over their passports; the contempt itself continued after their release. They appealed, and in June 1999 the Ninth Circuit affirmed.

Why the Impossibility Defense Failed

A person ordered to produce assets can defend against contempt by showing genuine inability to comply. The showing must be made in detail, and courts will not excuse an inability that the person manufactured. The Andersons could not clear that bar, for reasons specific to how their trust was built and how they had used it.

They were the protectors of their own trust. The protector role carried the power to force the foreign trustee to repatriate assets. A settlor holding that power is not powerless, and the court treated the claim of helplessness accordingly.

They had taken money out before. The Andersons had previously obtained more than $1 million from the trust to pay their taxes. A structure that produces seven figures on request when the settlor wants it, and nothing at all when a court asks, invites exactly the skepticism it received.

They resigned as protectors only after being exposed. The attempt to step down came after the FTC revealed they held the role - timing the court read as consciousness of the problem rather than as a genuine surrender of authority.

Reviewing the contempt finding for abuse of discretion and the underlying facts for clear error, the Ninth Circuit found no basis to disturb any of it.

What the Case Does Not Establish

Here is where the citation practice breaks down. The Anderson case is offered as proof that offshore trusts fail. Look at what the court actually did and did not reach.

The Cook Islands corpus was never repatriated. The foreign trustee declined, invoking the trust's duress provision, and no U.S. court compelled the assets back. The FTC's leverage ran against the Andersons' bodies, not against the trust. Whatever else it demonstrates, the case shows a U.S. court unable to reach assets held by an independent foreign trustee - the exact jurisdictional gap offshore planning is built around. It reached the people instead, because that was all it could reach.

This was not a timing case. The trust was funded in 1995, before any FTC claim existed. Critics sometimes press this as the strongest form of the argument: the Andersons did the "fund it early" part right and still lost. That is correct, and it is worth meeting head-on rather than avoiding. They lost on a different rule. Sound offshore planning requires funding before a claim arises and genuinely divesting control; satisfying the first while failing the second is what the Anderson record documents.

The trust structure was not tested on its merits. No court adjudicated whether Cook Islands law protected these assets from this creditor. The litigation never got there. It resolved on the Andersons' personal conduct and credibility.

What the case does establish is real and worth stating plainly: a settlor who keeps the power to compel repatriation cannot later claim it is impossible. That is a genuine and important holding, and any competent planner should treat it as binding guidance about how not to build a trust.

The Critics' Own Analysis Says the Same Thing

The most detailed contemporaneous analysis of the case was written by attorney Jay Adkisson, a longtime creditor-rights litigator and one of offshore planning's most persistent critics. He read the case as devastating for the industry.

Yet his own account of the facts identifies precisely the flaw described above. Adkisson notes in his analysis that the Andersons serving as protectors of their own trust was not a smart arrangement - while adding, pointedly, that many planners routinely set trusts up that way for their clients. His critique of the industry and our critique of the Andersons' structure converge on the same defect: settlors holding powers they claim not to hold.

Where we part company is what follows from that. The critical reading is that the impossibility defense is dead and offshore trusts with it. The narrower and, we think, more accurate reading is that the defense is unavailable to someone who retained control - which is what the facts of this case are about, and which says nothing about a settlor who genuinely divested.

What a Planner Should Take From It

The Anderson case is not an argument against offshore trusts. It is a specification for building one that holds:

• The settlor must not hold protector powers over their own trust. This is the single lesson of the case, and it remains the most common defect we see in structures built elsewhere.
• The trustee must be genuinely independent - a licensed fiduciary the settlor cannot compel, not a nominee who takes direction.
• Distribution history matters. A pattern of the settlor pulling money on demand is evidence of control that will be read back against them later.
• A duress clause is not a substitute for divestiture. The Andersons' trustee did invoke the duress provision, and it did keep the assets offshore. It did not keep the Andersons out of jail, because the court was looking at their powers, not the trustee's response.

Timing, control, disclosure, and lawful purpose are the four rules that decide these cases. The Andersons satisfied the first and broke the second, and the reported consequences all flow from that.

Read the Sources

We think readers should check this against the record rather than take our summary of it. The opinion is public, and so is our full case-by-case review of the list this case anchors.

For the wider context - every circulating list of supposed offshore trust failures, reviewed decision by decision - see our review of offshore trust case law, and our discussion of what contempt rulings actually decide.