- 26 -
policy loans. Thus, the interest rate credited on the portion of
the account value that had been borrowed was 10.66 percent.26
The balance of the policy account values would earn interest at a
rate guaranteed to be no less than 4 percent.
The policies provided for expense charges which would not
exceed 23 percent of the premiums paid. The expense charges were
comprised of premium expense charges of 17.8 percent and annual
expense charges of 5.2 percent. The negotiated PTO reduced
maximum expense charges from 23 percent to 8.934 percent of
premiums paid.
Mr. McCook approved the purchase of the 1993 COLI policies,
and on June 17, 1993, Mr. McCook, on behalf of petitioner,
executed the June 4, 1993, Letter of Understanding. On the same
day, petitioner remitted the net amount of $7,245,000 to AIG as
payment for the policies.
The 1993 COLI policy forms were registered and approved in
form and for sale by the insurance commissioner of the State of
Florida. Initially, the total number of lives included, subject
to eligibility, under the 1993 COLI policies was 36,191 as of
June 17, 1993.
percent.
26The 10.66 percent figure is arrived at by reducing the
loan interest rate of 11.06 percent by 0.40 percent.
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