Oklahoma State University’s athletic fund and Lincoln National Life Insurance Co. are embroiled in a legal flap over a failed charitable-insurance-funding plan.
Last month, the athletic fund, Cowboy Athletics Inc., along with oil-and-gas magnate and OSU alumnus T. Boone Pickens, sued Lincoln National in Oklahoma state court, alleging fraud, breach of contract and misrepresentation. The suit also names Lincoln National agents John Ridings Lee, James Glenn Turner Jr. and Larry Keith Anders
The fund is seeking rescission of 27 $10 million life insurance policies it had purchased on the lives of OSU alumni, claiming that the agents had misrepresented the policy illustrations. OSU also contends that Lincoln failed to perform proper medical and financial underwriting, resulting in Cowboy Athletics’ overpaying premiums.
Late last week, Lincoln National countersued Mr. Pickens and Cowboy Athletics in the U.S. District Court in the Northern District of Texas. The insurer claims that the oil billionaire and former corporate raider encouraged the athletic fund to breach policy contracts.
The legal feud centers around Gift of a Lifetime, a philanthropic program Cowboy Athletics and Mr. Pickens established back in 2005. OSU claims that Lincoln National’s Mr. Turner and Mr. Lee pitched a funding strategy for the program. That strategy, the suit claims, involved creating a $350 million stream of income over the course of 25 years by purchasing life insurance on 27 OSU donors from 65 to 85.
As part of the strategy, the school would use a $20 million benefactor loan — with Mr. Pickens as guarantor — to help cover the cost of a premium-financing loan to cover the insurance policies. The suit claims that Mr. Lee and Mr. Turner said they would arrange the premium-financing deal to cover permanently the cost of the policies.
The plan supposedly began to crumble in 2007 when the coverage on the 27 individuals started. The athletic fund claims that it didn’t receive the actual policies until 2009. By then, it had paid $33.3 million on premiums that Cowboy Athletics claims were inflated and based on inaccurate underwriting and misrepresentations.
When the fund tried to cancel the policies within 10 days of having received them in 2009, Lincoln National refused to cancel the policies or return the premium. OSU claims.
In its countersuit, Lincoln argues that it had in fact sent the policies to Cowboy Athletics in February and March 2007 and that the fund had waited until April 2009 to demand rescission of the policies and return of the $33.3 million in premiums. Further, the insurer claims that Mr. Pickens had told officials at Cowboy Athletics to demand cancellation and a refund from the insurer.
In a statement, Cowboy Athletics said it “plans to aggressively pursue recovery of its damages on the matter.” Gary Shutt, OSU’s public information officer, would not comment beyond that statement. Ayele Ajavon, spokeswoman for Lincoln Financial Group, said the company does not comment on continuing litigation.