This is the one issue that still befuddles us. Brent refers several times in his book to a 1994 agreement with the State of Missouri that allowed the Cassity companies to value life insurance policies in their trusts at face value. Brent defended the practice and, from reading his book, he still thinks it’s a legitimate way to value a life insurance policy.
A quick example: You go out and buy a life insurance policy on yourself for $1,000,000. You make the first month’s premium payment of, let’s just say, $300 and the cash surrender value of the policy is now ~$100. Brent argues that you are now worth $1,000,000 more that you were worth yesterday before you bought the policy. It’s completely ludicrous. Your policy is only “worth” $100, not $300, and certainly not $1,000,000. It’s crazy that someone would think this is at all reasonable. We all could be instant multi-millionaires if this was how it worked.
Brent’s in good company though, because Missouri’s own Jay Nixon allowed the Cassity companies to use this practice as a part of the agreement in 1994. It allowed the scheme to go on another 14 years and cost taxpayers hundreds of millions in additional bailout funds.
The cost of this fiasco to taxpayers so far is a bit over $400 million. If the company would have been stopped in 1994, the cost would have been closer to $25-30 million. Jay Nixon should have been run out of the state for agreeing to such a ridiculous valuation method. Even with an inept politician allowing you to do something completely irrational, no reasonable business person would value a life insurance policy in such a manner.
In one instance, this practice allowed the Cassity companies to buy around $25,000,000 in life insurance policies. They made the first month’s premium payment of around $100,000 and then proceeded to say the trust was now “over-funded” by millions. Of course, once funds run out to pay premiums, the policies are only worth their cash surrender value which is usually a small fraction of face amount.
This entire website is hard to believe. I haven’t read his book – and I’m not going to. I can’t stand the though of him getting royalties just because of my curiosity. Thanks for putting this up! It sounds like he was a “chip off the old block.”
Holy Cow! I’m not commenting on this post as much as I am the main page of the site. I haven’t read the book, but I’ve seen enough to not order it even though I’m tempted just to see everything else. My wife worked for this company when we were dating and always thought they were “slimy.” Thanks for putting this up and please post more.
What the actual hell? I came here after doing some research on this man after listening to his podcast. What a fraud this man is. I can’t believe what I’ve read here and I don’t think I could have believed it if I hadn’t seen all of the back-up documentation. After listening to him, I was really intrigued. He’s just another Madoff.