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Bankruptcy Trustee’s Compromise With Offshore Trust Fails To Win Court Approval In Olson

This story has its genesis in 2008, with one of the largest start-up busts in history. A former NASA engineer, Erlend Olson, created a Newport Beach company called Terralliance Technologies which intended to dominate the oil exploration market through a sophisticated means of exploring for oil from aircraft. Erlend’s story attracted very sophisticated investors, including Goldman Sachs and Kleiner Perkins, the latter which placed a $93 million bet on Terralliance. A San Francisco hedge fund, Passport Capital, made a big bet too through a bridge loan for $150 million, albeit laying about a third of the loan off to London-based investment firm Franklin Enterprises.

Eventually, Terralliance took in about $500 million in investor money, with Erlend hinting around that an IPO for the company might draw as much as $60 billion. To locate the oil, Erlend spent Terralliance’s money as if investors’ money was a never-ending gusher of green, with exploratory wells going down all around the globe, and the company on the hunt for former Soviet military aircraft to conduct high-altitude exploration.

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Long story short, about the time that Terralliance got rolling, the market for oil had crashed and there wasn’t much interest in anybody who located more of the black smelly stuff. Erlend was demoted to “chief scientist” to get him out of management and cut off his global spending spree. The new CEO, Howard Selzer, faced, among other things, poor record-keeping by Erlend as to Terralliance’s records, and particularly Erlend’s travel expenses. The business and personal assets of Erlend and Terralliance were sometimes comingled.

With Terralliance’s future in serious doubt, Erlend hooked up with attorney Jeffrey Matsen, a prolific marketer of asset protection plans in Orange County, California. Matsen created a Cook Islands trust for the benefit of Erlend’s wife, Jana Olson, and the Olson children, called the Miyim 2009 Cook Islands Trust. Approximately 28 other entities (hereinafter referred to as the “Olson entities”) were also created which were owned by the Cook Islands trust, and into these entities Erland transferred over $20 million of his personal wealth.

By the end of 2008, price of oil had fallen to $60 a barrel, which sealed Terralliance’s and Erlend’s fate. Erlend was let go in May of 2009, and Terralliance subsequently sued him for theft of trade secrets. That was just the first of the lawsuits which embroiled Erlend and investors alike for years to come.

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