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Oklahoma state loses $33 million!

  • http://espn.go.com/college-sports/story/_/id/7678962/oklahoma-state-cowboys-lose-bid-regain-33m-fundraiser

    The athletic department now has $165 million - $33 million!

    Major Kong

  • Sounds like a morbid way to raise money.

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    GetHooked

  • that's one hell of a default swap.

    Endust

  • GetHooked said...

    Sounds like a morbid way to raise money.

    That's what I was thinking. That's pretty strange/odd, no matter how you spin it.

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    Blake Munroe

  • Where not to go to school for education in financial management.

    "Oklahoma State claimed in court filings that it was told it could make as much as $350 million through the program. Instead, OSU nixed the program about three years ago and then sued to try and regain premiums it had already paid."

    Oh, sure. I can picture the snake oil salesman of an insurance agent sitting in the office of the OSU representative, patiently explaining how the university need only pay a little money now to an insurance company, and the insurance company will gladly pay it back "hundredfold" when a few old fogies croak in a couple of years.

    Too weird.

    bierce ●

  • GetHooked said...

    Sounds like a morbid way to raise money.

    not all that unusual in the business world. I don't know if I would call it a fundraiser though so in that sense its bizarre. Sounds like OSU screwed itself by not reading the policy. I doubt they'd be willing to return the money received if some of the boosters has passed away. Seems like they paid the premiums and the boosters were covered so Lincoln did its part. Maybe OSU doesnt want to pay or have the money to continue paying the premiums. You'd have to take a close look at the health/age of the boosters to make sure you weren't overpaying for coverage that you might not get for potentially many years.

    The irony is TBone suggested it

    JeezGuy ●

  • The irony is TBone suggested it

    Gotta wonder if there's more to the story here...

    The Dog ●

  • So they don't have money to buy out Ford's contract?

    bierce ●

  • bierce said...

    Where not to go to school for education in financial management.

    "Oklahoma State claimed in court filings that it was told it could make as much as $350 million through the program. Instead, OSU nixed the program about three years ago and then sued to try and regain premiums it had already paid."

    Oh, sure. I can picture the snake oil salesman of an insurance agent sitting in the office of the OSU representative, patiently explaining how the university need only pay a little money now to an insurance company, and the insurance company will gladly pay it back "hundredfold" when a few old fogies croak in a couple of years.

    Too weird.

    There are many such programs for churches, seminaries, hospitals, etc. If one works with a good financial adviser and/or attorney who practices in this field, it could be a sound way to contribute. Like many "transfer of wealth" ideas, however, there are many unethical and/ or ill informed advisers who are looking for fees. I can not imagine any university allowing their AD to directly receive the documents.

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    You shall know the truth and the truth shall make you free. Never trust a man who only knows how to spell a word one way. Andrew Jackson

    JFrankWebb

  • J. Frank Webb said...

    There are many such programs for churches, seminaries, hospitals, etc. If one works with a good financial adviser and/or attorney who practices in this field, it could be a sound way to contribute. Like many "transfer of wealth" ideas, however, there are many unethical and/ or ill informed advisers who are looking for fees. I can not imagine any university allowing their AD to directly receive the documents.

    But don't such programs usually depend on the premiums being paid by donors? That is, the organization benefits from donors who choose to make a donation of premiums that later become policy benefits to the organizaion. In the alternative, the organization might chose to take policies out on its biggest donors as a hedge against risk of losing the donor someday (though it might just as reasonably anticipate some bequest), but surely it wouldn't do that as a high risk income generating scheme rather than as a risk avoidance mechanism, would it? At best, such a program would be in the nature of a combination of reasonable interest over a long period of time (but less than what would be given by a safe investment product without a contingent payout) and a contingent early payout.

    The article seems to describe a situation in which the university already had a large amount of money it was looking to invest, was given anticipation of more than doubling its investment in a relatively short amount of time, and was paying the premiums. (I doubt acturial tables give the biggest OSU donors an average 20 year life expectancy. T Boone himself is nearly 84.) Perhaps the article was poorly worded or I poorly interpreted it, but if my interpretation is close to the situation, it seems so much jiggery-pokery that I don't see how a large institution with any kind of proper financial oversight would go for it.

    This post has been edited 2 times, most recently by bierce on 3/14/2012 at 10:16 AM

    bierce ●

  • "Well, that didn't work."--What I imagine Pickens said to OSU President after the ruling, only I suspect the language was more colorful.

    http://www.tulsaworld.com/sportsextra/OSU/article.aspx?subjectid=93&articleid=20120620_93_0_OKLAHO306063

    bierce ●

  • Unless those donors were fitting the bill on their own life insurance, I don't see how that could have ever truly been a big win for OSU.

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    BobbyBurton ●

  • bierce said...

    But don't such programs usually depend on the premiums being paid by donors? That is, the organization benefits from donors who choose to make a donation of premiums that later become policy benefits to the organizaion. In the alternative, the organization might chose to take policies out on its biggest donors as a hedge against risk of losing the donor someday (though it might just as reasonably anticipate some bequest), but surely it wouldn't do that as a high risk income generating scheme rather than as a risk avoidance mechanism, would it? At best, such a program would be in the nature of a combination of reasonable interest over a long period of time (but less than what would be given by a safe investment product without a contingent payout) and a contingent early payout.

    The article seems to describe a situation in which the university already had a large amount of money it was looking to invest, was given anticipation of more than doubling its investment in a relatively short amount of time, and was paying the premiums. (I doubt acturial tables give the biggest OSU donors an average 20 year life expectancy. T Boone himself is nearly 84.) Perhaps the article was poorly worded or I poorly interpreted it, but if my interpretation is close to the situation, it seems so much jiggery-pokery that I don't see how a large institution with any kind of proper financial oversight would go for it.

    The article didn't go into a lot of detail, but some of your assumptions may be in error. You earlier mentioned a "hundredfold" return, but the anticipated return of $350 million was only 10X the premiums already paid. Clearly, the policies called for additional premiums, which is why OSU cancelled them. The policies probably called for substantial upfront premiums, with the expectation that the premiums could be invested, would grow over time, and eventually would reach a point where the earnings would cover future premiums.

    The hardest thing to grasp about the whole process is why supposedly sophisticated financial people, led by Pickens himself, would start down this road without a full understanding of their obligations and a reasonable expectation that they could fulfill the contract by paying required premiums. Of course, the timing could not have been worse, since they bought the policies just as the stock market was going into the post-financial crisis meltdown.

    texaztom

  • texaztom said...

    The article didn't go into a lot of detail, but some of your assumptions may be in error. You earlier mentioned a "hundredfold" return, but the anticipated return of $350 million was only 10X the premiums already paid.

    I'll have to let you decide whether I had stumbled on the secret involvement of RW Schambach or was simply using a rhetorical flourish.

    bierce ●

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