Oklahoma State University is suing a life-insurance company that promised to raise hundreds of millions for the university's athletics programs through life-insurance policies on about 27 leading donors.
In the lawsuit, filed in the District Court of Payne County, Okla., university officials allege that the Lincoln National Life Insurance Company and John Ridings Lee, a Texas-based agent for the company, predicted they could raise $350-million in 20 to 25 years and charged the university inflated premiums. Oklahoma State seeks to recover $33-million in premiums. The university is also suing a handful of other Lincoln National agents who were involved in the deal.
The fund-raising plan, called "The Gift of a Lifetime," got considerable attention when it was announced, in 2007, not least because it was backed by the billionaire oilman T. Boone Pickens, who has been a major donor and sports booster at Oklahoma State. Mr. Pickens joined the university as a plaintiff in the lawsuit. He had contributed $10-million to guarantee the university's line of credit to pay premiums.
Oklahoma State paid two $16-million premiums before it even saw the terms of the policies, in March 2009. At that point, the university decided to cancel the deal.
Interest From Other Colleges
According to the complaint, Mr. Lee and the other agents had proposed setting up policies to cover at least 25 donors age 65 to 85 for $10-million each in death benefits, at no cost to the donors. Under the deal, when the donors died, the university would receive the proceeds.
But the complaint alleges that Mr. Lee and the other agents misrepresented details of the deal and even forged signatures on documents that they were required to show to university officials and the donors.
Mr. Lee did not respond to telephone calls on Thursday. A statement issued by the Lincoln National Life Insurance Company did not comment on the litigation, but it noted that the company had filed its own lawsuit, in the U.S. District Court for the Northern District of Texas, alleging breach of contract and seeking a summary judgment validating the policies.
Larry Reece, a fund raiser for athletics at Oklahoma State, would not comment on the case. But he did note that, over the past few years, he had fielded calls from 40 to 50 colleges that were interested in Oklahoma State's plan.
"I don't know of any that actually got it done," he said.
Mark Mullady, executive vice president of Collegiate Financial Services, a company in Lexington, S.C., that provides financial services to colleges, said he had met with representatives of some 50 colleges — including Duke University and the University of Notre Dame — that were interested in setting up fund-raising deals through life-insurance policies like Oklahoma State's.
But, he said, the colleges discovered that if they sank the money into their endowments, they would get the same rate of return — but with less risk. The insurance idea "kind of died on the vine," he said.