clock menu more-arrow no yes

Filed under:

In Sounders We Trust: Trusts 101(ish)

New, 117 comments

There seems to be some confusion and some anger about the structure of the 20% fan-owned portion of #S2. The Sounders Community Trust is the vehicle for ownership that fans and the Sounders FO have chosen. As a charitable trust, there are several structural mechanisms to ensure that fans, businesses, and community members get what they paid for in becoming members of the Trust.

Steven Bisig-USA TODAY Sports

trust, n. 1. ... [A] property interest held by one person (the trustee) at the request of another person (the settlor)  for the benefit of a third party (the beneficiary).

charitable trust. A trust created to benefit a specific charity, specific charities, or the general public rather than a private individual or entity.

Blacks Law Dictionary, Third Pocket Ed. (1996).

The following does not constitute legal advice. Neither Sounder at Heart nor I are your attorneys. If you have any legal issues related to trusts you should consult an attorney you trust (pun intended). The following is a mix of general information on trusts and my speculation as to how this general information may apply to the Sounders Community Trust.

There seems to be some confusion and some anger about the structure of the 20% fan-owned portion of Sounders 2. I've seen it on Twitter, I've seen it on comments here on Sounder at Heart. Hopefully I can help clarify some of your questions and maybe alleviate some of those concerns. Before we start, I am assuming that you've read most of our coverage here and have read the FAQ and the History and Mission over at the official SCT website. If you still have questions or concerns, or generally want to read about trusts, read on.

The Sounders Community Trust is exactly that, a Trust. There are four parts to a trust: (1) the property interest(s); (2) the person holding the property, aka the Trustee; (3) the person who granted the property; and (4) the intended beneficiary of the property.

The Property Interest can really be anything that is "property." It can be cash, financial investments, maybe real estate. I'm sure someone somewhere has a Trust that primarily consists of livestock. In the case of SCT, there are two main property interests. The first is the 20% liquid equity stake in the Sounders 2. The second is the money from membership fees (not from the tickets).

There must be a Trustee, the person who directs use of the property interest in such a way that it benefits the beneficiary. The Trustee has a fiduciary duty to the beneficiary of the trust, which basically means that the beneficiary can sue the Trustee if the Trustee is not doing the right things with the property interest. SCT will have a Board of Trustees who will guide the Trust. The first known member of the Board of Trustees is Shawn Wheeler, representing ECS's portion of the SCT. It sounds like the Alliance Council will be appointing the rest of the initial Board members, with staggered elections for the Board positions so that some are elected by SCT members every year.

The person who granted the property, the Settlor, is sometimes very important to trusts. Here, I believe the Sounders FC is the settlor of the primary property interest, as it looks like SSFC owns the remaining 80% of S2. Trusts are assumed to be irrevocable unless stated otherwise, so SSFC can't go back and revoke the 20% ownership interest. Members can't just take back their $250 investment either. Not much important for SCT here.

Finally, every trust has a Beneficiary. As SCT is a charitable trust, it must benefit a charitable purpose. To a certain extent, SCT may seem like it is stretching the definition of charity:

"Today, the Sounders Community Trust's mission is to serve as the minority owner of the second team- and to give the Club's fans and supporters a way to own part of their beloved Seattle Sounders FC, as well as support and encourage soccer in the region."

But plenty of charities have very specific purposes. SCT will leverage the ownership interest to ensure S2 is run in a way that benefits SCT members and Sounders fans in general. The Board of Trustees will place an Executive Officer in S2's Executive Committee, meaning there will be a direct SCT representative working in the day-to-day operations of S2. The Board will also have voting power as an owner of the club (as the Trustee), and the soft power that comes with being the voice of a powerful organization.

SCT will also use the membership fees to upgrade facilities at Starfire Sports, which is itself a nonprofit that provides parks for public use. Keep in mind that these upgrades will stay in Tukwila, no matter what happens to SSFC or S2. Your membership fees are paying for an infrastructure investment in a nonprofit local facility. SSFC and S2 are just tenants at Starfire. One might argue that SSFC has the "responsibility" to pay for these upgrades and that they probably would have paid for the upgrades themselves had there been no fan ownership. I'd argue that this is actually the best use of membership money to ensure the investment benefits the members and the general public instead of just bailing out S2's bottom line.