STILLWATER — Oklahoma State University's unique fundraiser was expected to bring in hundreds of millions of dollars to fund school sports, based on the idea of purchasing $10 million life insurance policies on about two dozen boosters with the university as a beneficiary.
Article Gallery: Oklahoma State University loses bid to regain millions in insurance premiums
Instead, the so-called “Gift of a Lifetime” program created on the advice of T. Boone Pickens has ended with Oklahoma State having spent $33 million with nothing to show for it.
A federal judge has ruled against OSU's bid to get back the money it spent on premiums as part of the fundraising idea launched in 2007 with 27 boosters agreeing to have life insurance policies taken out that would pay the school when they died. Judge Jorge A. Solis in Dallas ruled Friday that Lincoln National Life Insurance Co. should keep the premiums it received from Oklahoma State as the first two yearly payments for the policies.
The university still has a state lawsuit pending in Payne County.
Oklahoma State claimed in court filings that it was told it could make as much as $350 million through the program. Instead, OSU disbanded the program about three years ago and then sued to try and regain premiums it had already paid.
The university argued that it had a right to cancel the policies and get its money back because Oklahoma law provides for a 10-day review window after policies are purchased and Lincoln did not provide actual copies of the policies until 2009.
However, athletic director Mike Holder signed policy delivery receipt forms two years earlier and didn't ask to see full copies from Lincoln, which had kept them.
Solis ruled that Holder technically had received the policies on behalf of Cowboy Athletics Inc., the private foundation run by OSU's athletic department.
They really thought that insurance companies intentionally lose money on policies. How stupid! The premiums were going to be way too much unless the people died very fast and before their life expectancy.
They really thought that insurance companies intentionally lose money on policies. How stupid! The premiums were going to be way too much unless the people died very fast and before their life expectancy.
That's flat out wrong. The IRR's were there to make money. Actuarilly it was priced right. As a CLU I know what I'm talking about. The problem was that T Boone lost a billion dollars on hedging and simply didnt want to fork over the required premiums. Almost every permanent life insurance policy has high surrender charges in the first 3-5 years. That's how they are designed. The actual concept was sound, but not having the cojones to continue to fund them was stupid and a total ego trip to think he could get his money back. I knew way before this thing went to court that T Boone's case was weak at best.
They really thought that insurance companies intentionally lose money on policies. How stupid! The premiums were going to be way too much unless the people died very fast and before their life expectancy.
It is shocking that allegedly smart business men would have such a fundamental misunderstanding of how insurance works. Insurance companies have to get actuarial certification on policies. Actuaries design premiums such that on average they will be able to pay out all premiums and have a modest return (usually 10 percent or less). Shocking.
This post was edited by CobraKai on 3/13/2012 at 1:04 PM
OSU/T Bone/Lost Money!