I’ve been watching the career of oilman T. Boone Pickens since I picked up coverage of his Amarillo, Texas-based Mesa Petroleum as a rookie analyst in 1979.

Always a showman, Mr. Pickens was, in my view, at best a middling oilman, but he was a brilliant user of financial engineering.  For example, when Mesa had bought a large swath of Gulf Coast drilling rights that turned out not to contain much oil and gas–only enough to recover costs–Pickens borrowed an idea from nineteenth-century steel companies and spun the dud properties off to shareholders in a royalty trust.

Placing them in the hands of income-oriented investors gave them a value they would never have otherwise had.  The action spruced up the financial metrics of the slimmed-down Mesa, to boot.  And Pickens successfully cast the move as the caring response of a powerful oil company to shareholder needs–which, in a sense, it was.

His latest foray into fund-raising for athletics at his alma mater, Oklahoma State University, however, is a little weird.  According to the Wall Street Journal, Pickens and OSU decided to insure the lives of 27 elderly alumni for $10 million each, in a program named “Gift of a Lifetime.”  OSU would pay the premiums and be the beneficiary.  The idea was apparently that if the participants died faster than the insurance company actuaries figured, OSU athletics could gain up to a quarter-billion dollars.

A fly in the ointment   …those old Cowboys refused to die.  (Actually, if the WSJ figures are correct, the entire group would have had to pass away within two years for the fundraising effort to have a $250 million “profit.”)

After two years and $33 million in premiums paid, the program ran out of money and allowed the policies to lapse.  Then Pickens and OSU sued the insurer, Lincoln National Life, claiming fraud and demanding its premiums back.

The whole odd story came to light when a Federal Appeals court last week upheld the verdict of a lower court in favor of Lincoln.

Strange   … and how the mighty have fallen.