Minnesota billionaire's family splits apart as they sell off drug company that made them rich

The acrimony grew in billionaire Ken Evenstad's family slowly, then ripped the family apart in the last years of his life.

Evenstad, who died in late 2020, made a fortune by driving a small Minneapolis drug company in the 1970s into the then-nascent market for generic drugs. The firm — Upsher-Smith Laboratories, now in Maple Grove — became a significant player in generics and developed dozens of its own drugs.

But as he battled pulmonary disease in his final years, Evenstad also struggled to separate the family from Upsher-Smith — which had no other shareholders except himself, his wife Grace, their daughter Serene and son Mark.

The family decided in 2016 to put Upsher-Smith up for sale. A year after the first and biggest transaction in that process took place, Serene filed suit against the rest of the family alleging they were trying to freeze her out.

The case reached a climax last week, when lawyers made their closing arguments before a Hennepin County District Court judge who will decide whether Ken, Grace and Mark cheated Serene out of tens of millions of dollars.

"We are not in family court. … The shareholder relationships are different from the family relationships," Thomas Swigert, one of Serene's attorneys, told Judge Edward Wahl in a hearing conducted over Zoom Friday.

"As a shareholder, she has legal rights," he added. "It doesn't matter how she received her shares. It doesn't matter whether she worked at the company. Nor does it matter how much money she has."

Lawyers representing Ken's estate, Grace, Mark and trust attorney Howard Rubin portrayed Serene as a selfish attention-seeker who should be happy with the approximately $200 million she has received since 2017.

"She perceives that she is the focal point of everything her family does," attorney Brooks Poley, who represented Rubin, told Wahl.

"One of the factors that your honor has to look at … is what is fair, what is equitable," Chris Madel, an attorney representing Ken's estate, Grace and Mark, said to the judge. He noted that Serene never worked for Upsher-Smith and avoided her parents on multiple occasions in recent years, even as Ken's health declined.

"Serene Warren has done nothing to earn these shares," Madel said. "She was given them by her mom and dad. When her dad needed her the most, she turned her back."

The case thrust into public view the finances and private disagreements in the family of one of the most successful entrepreneurs of his generation in Minnesota.

In 1969, Ken Evenstad was a pharmacist in St. Paul who itched to do more than count pills. He bought the remnants of Upsher-Smith, a small heart-drug company started by Grace's grandfather, and entered the generics industry.

Generics are off-patent drugs that are sold at lower prices, and as they gained popularity, Upsher-Smith grew by making innovations to drugs in small market niches.

In 1989, Evenstad and wife Grace turned to another passion. They bought an estate in Oregon, started a vineyard and began to produce wine under the brand Domaine Serene, named after their daughter.

Today, Domaine Serene is one of the nation's leading producers of pinot noir, and the Evenstads are recognized as leaders in the rise of Oregon's Willamette Valley region. In 2015, the couple purchased a 600-year-old Burgundy vineyard in France.

The seeds of the financial dispute were planted long ago when Evenstad split the ownership of Upsher-Smith with Grace, Serene and Mark. Each had the same 25% monetary stake, but Ken retained voting control over the firm.

In 2014, Ken decided to give some of his stake to Mark to reward his son's career in the company and his role as its CEO since 2003. Initially, he intended to raise Mark's stake to 35%. Serene objected, and Mark's stake ultimately increased to 26.5%.

That episode — including its details and effects — is one of many that the two sides portrayed differently in court filings and at a trial that stretched over 16 days in January and February.

In early 2016, Serene upset Mark by questioning other executives at Upsher-Smith about how much time he was spending on the company's work. A few weeks later, Mark ended the company's regular updates to her.

"You have troubled my team with your issues, projected on me, enough," Mark wrote to her.

Serene replied a week later that, as owner of a 25% stake in the firm, she thought it was "irresponsible" not to be well-informed.

She added: "Like you, I am deeply and forever appreciative of the extraordinary opportunities that our parents, Ken and Grace, have provided us … [husband] Chris and I want to make clear that we are grateful to you for your commitment to build upon the foundation to take the company to new heights."

A few days later, Ken sent a letter to Upsher-Smith executives saying he would handle all questions from Serene. He set a November date for a shareholders meeting, but Serene said she had a conflict that day.

The autumn of 2016 ultimately turned into a tumultuous time for the Evenstads. Ken's health began to decline, Mark went through a divorce, Serene stewed about her financial position and Upsher-Smith came under growing competitive pressures.

In October, Mark sent Serene a text suggesting three ways for the squabbling siblings to separate their financial interests. He could buy her Upsher-Smith stake, she could buy his or the family could sell the company.

Three weeks later, Serene decided they should sell the company, a response that initially upset Mark. But documents and trial testimony showed that Serene believed Ken had earlier made the decision to sell and that she was simply siding with him.

Within weeks, the family found a buyer for the core generic assets of Upsher-Smith, striking a $1 billion deal with a Japanese company in early 2017. Serene reaped about $128 million in the transaction.

The remaining Upsher-Smith assets were placed in a new holding company called Acova, with the share ownership still spread equally among the four family members and Mark in charge of finding buyers. That May, he told Serene if she didn't want to wait for the transaction processes to play out to propose terms for the company to buy out her stake.

A year later, Serene filed suit, saying the family's estate lawyer Rubin restricted her rights at the time Acova was set up and the rest of the family was trying to freeze her out. Over the next four years, the family went through two mediation processes and had at least two settlement offers on the table. In that time, Acova continued to sell off former Upsher-Smith assets, delivering hundreds of millions more to the quarreling family.

In June 2019, Ken sent word that he was resigning from Acova and declared the family conflict over. Serene sent him an e-mail the next month thanking him for "all of the resources that have come to us."

But she added that he let her get "stomped on" by Mark.

"You have allowed a dynamic of mistrust and mistreatment to run wild in our family," she wrote.

During the trial, Mark described a portion of his last conversation with his father before his death. He said, "He made me give my word to him that my sister would be notified that he forgave her for everything."