Heated litigation between oil tycoon T. Boone Pickens, Oklahoma State University's athletic development arm, and Lincoln National Life Insurance Co. over a failed charitable insurance funding scheme seems to be nearing an end —finally.
On March 18, the 5TH U.S. Circuit Court of Appeals decided against Cowboy Athletics Inc., OSU's athletic fund department, and its benefactor, Mr. Pickens.
The outcome affirms a June 2012 decision made in U.S. District Court in Dallas permitting Lincoln National to keep $33 million in a flopped fundraising plan that involved insurance policies that covered the lives of donors. Mr. Pickens and Cowboy Athletics had originally sued Lincoln and a trio of insurance agents.
“The district court dismissed all of Cowboy's claims on summary judgment,” the judges in the appellate court wrote. “We affirm for essentially the reasons set forth by the district court.”
“We believe that the decision by the Fifth U.S. Circuit Court of Appeals to dismiss the claim speaks for itself and we look forward to putting this matter behind us,” said Lincoln National spokesman Michael Arcaro.
Gary Shutt, a spokesman for OSU, and Charles Strecker, an attorney representing Mr. Pickens and Cowboy Athletics, did not immediately return phone calls requesting comment.
The legal battle centers on a program called The Gift of a Lifetime, a funding program developed in 2005 by Mr. Pickens, representatives of Cowboy Athletics and the three agents. The plan aimed to drum up as much as $350 million in future income through the purchase of insurance coverage on the lives of 27 OSU alumni donors aged 65 to 85.
OSU used a premium finance loan to cover the $16 million annual premium payment, expecting that the loan would be repaid with death benefit proceeds and that anything left over would go toward building the program's income stream.
The program ran into trouble in 2007 when coverage on the 27 benefactors started. Back then, Mr. Lee faxed the policy delivery receipts to J. Mike Holder, president of Cowboy Athletics, to confirm the organization had received the policies. Mr. Holder signed and returned the receipts but never read them.
Cowboy Athletics didn't get the actual policies until 2009, after the school's president asked an OSU alumnus in the insurance industry to study the contracts. At that point, the fund had paid more than $33 million in premiums. Cowboy Athletics ended up receiving the policies on March 24, 2009 — after making several requests to the insurance agents — and asked April 3 to cancel the coverage under the 10-day free-look period and to get a refund.
Last June, U.S. District Court Judge Jorge A. Solis in Dallas ruled in favor of Lincoln and the brokers, defeating allegations from Cowboy Athletics that the agents had misrepresented information on the policy's net return. That call permitted Lincoln to keep the $33 million in premiums.
Mr. Pickens and Cowboy Athletics subsequently appealed the decision. That appeal was shot down this week as the judge ruled Lincoln's agents did not misrepresent future returns.
Through its own due diligence and the disclosures the agents made, Cowboy Athletics was aware of the risks and assumptions behind the investment program, according to the court's opinion.
“With respect to fraud, the record reveals no triable misrepresentations,” the appellate judges wrote. “A fraud claim also fails if the aggrieved party 'could have ascertained the truth with reasonable diligence.' This was not Cowboy's first rodeo.”