Ferguson vs Crown Life and William Casteel - V3of23 - 239p

  • [(p649-) - Judge - Lawyers]
  • 649 - these exhibits were offer and received: 117, 118, 119 and 120. 172, 175, 176, 177, 178, 179, 180 and 181.
  • 650 - MR. BECKER: I did want to point out
    these are -- we are into -- with the exception of 117 and
    120, all of these are confidential.
  • 650 - "Produced pursuant to protective order," signed by Judge
    Dietz. And so theoretically, if the jury was watching
    anyway, they saw that.
  • 652 - MR. BECKER: PX Plaintiff's
    Exhibit 176 is 70010 and 70011. PX 177 is 70012 through
    70013. PX 178 is 70015 through 70017. PX 179 is 70018
    through 70020. Plaintiff's Exhibit 180 is 70021 through
    70023. And finally Plaintiff's Exhibit 181 is 70024
    through 70026
  • [(p608-) - Witness by Deposition: Mr. Paul Strong (Chalke Inc - Consulting Actuary - Crown Life Insurance) - Tekell and Bostwick (Casteel)]
  • 608 - THE COURT: You may call your next witness.
    • MR. TEKELL: Your Honor, we call Paul Strong by deposition.
  • 608 - THE COURT: Let me give the jury an instruction about depositions....
  • 609 - MR. TEKELL: Mr. Bostwick will assume the role of Mr. Strong.
  • 611 - Work History
    • Current - Chalke Inc - 3+ years - Consulting Actuary
    • Crown Life - 2.5 years - Assistant vice president in product management.
  • 612 - Crown Life has designated you as a person
    that's able to testify on their behalf on certain
    subjects. And I suspect that I've identified that I
    wanted someone designated to talk on. Are they paying you
    to come here and give your testimony today? A Yes
  • ...
  • 641 - Letter - Strong to Ferguson - 1% Drop - Variable Loan Rate - Extra Payments
    • Q ... that there were six additional premium payments that were now being projected for him in order to achieve a vanish point. Four of those could be explained by the one percentage drop in the dividend credit rate and two of them . could be explained by the increase in the variable loan rate; is that a fair reading?
      "A That's a good summary of it, yeah, the summary of the condition.
  • 644 - "Q And, of course, you've got it there. On the back
    page of your letter back from Mr. Ferguson, I guess your
    Paragraph Number 6 and probably responding to his Question
    Number 6, you say, you're unable to answer his questions
    about why he was not told, in essence, of the role or
    nature of dividends in the situation.
    "And you said, you would be very surprised if this
    were the case due to the routine nature of this
    application and the professional expertise of the sales
    representatives with whom you dealt back in 1987. Did you
    know Mr. Casteel?
  • 645 - A No.
    "Q What is the basis of your statement that he, the
    sales representatives he dealt with had professional
    expertise?
    645
    11A I don't remember.
    for that comment.
    I don't remember what backup I had
    11Q Did you know Mr. Hicks, James Hicks?
    11A Hicks, I had spoken to and may have met. But I'm
    pretty sure I had personal contact with Hicks.
    "Q But you had never met Mr. Casteel before?
    11A I don't recall seeing him in the course of this, but
    I may have spoken to him on the phone, but if I did, I
    don't remember.
    "Q Do you remember if someone vouched for Mr. Casteel's
    professional expertise to you?
    "A No, I don't remember.
  • 646 - Exhibits 117, 118, 119 and 120.
  • 647 - "The Power of a Point" - to General Agents - by Paul Strong
  • Jury Excused 
  • [(p606-) - Judge / Lawyers
  • 606 - (Whereupon the jury was escorted out (of the courtroom and the following (proceedings were had:
  • THE COURT: All right. The letter that was let in before, which is Defendant's Exhibit 16, was let in because that contained some advice and was based on some information that the jury could infer Mr. Love had, both at the time he advised Mr. McCreary and at the time that he talked to Mr. Ferguson.
  • 607 - [re: Exhibit 16 / 17]
    • Judge: Now, it's clear that this illustration is -- couldn't have been with that he got it couldn't fit in the same category and Mr. Love got it after. So the rationale for having it -- for its relevance is not the same. Why should -- why is it relevant?
    • MR. BECKER: Well, Your Honor, what you said is absolutely true in terms of it couldn't have done anything to change his state of mind, say, at the time of the Austin Club meeting because it came later. But we're examining him about his knowledge of these things. He says it's the same at all times. We have a claim for contribution against him because he should have known better on these things. And I think
      that the jury is entitled to see all of the illustrations
      that went through his hands during that entire period of time. And there were three of them: his own, Mr.
      Ferguson's and Mr. McCreary's.
      And if none of those three at any time alerted him to
      the things we say he should have been alerted to, I think the jury is entitled to consider that as .another piece of evidence in how he handles the things -- the affairs that are entrusted to him.
    • THE COURT: Okay. All right. The objection is sustained. And 17 is excluded.
  • [(p605-) - RECROSS-EXAMINATION - Questions by Mr. Deshazo (Casteel)]
  • 606 - Q Mr. Love, do you believe that -- let me start over.
    Based on your knowledge of Bill Casteel and your working
    relationship with he and Randy Ferguson over a number of
    years, do you believe that Mr. Casteel intentionally
    misled Mr. Ferguson?
    A No. I don't -- I don't think Mr. Casteel would even
    consider intentionally misleading Mr. Ferguson.
  • THE COURT: Any other questions?
    MR. BOSTWICK: No, Your Honor.
    THE COURT: You may step down.
  • [(p602-) - RECROSS-EXAMINATION - Questions by Mr. Becker (Crown)]
    • 602 - Q Mr. Love, if you choose not to read a credit card
      agreement or a rental car contract or something, you're
      not saying you're excused from the obligations that are init because you choose not to read it, are you?
      A No, I'm not saying that.
    • McCreary's Illustration
    • 603 - Exhibit 17 - the illustration dated January 18th, 1988 prepared by Bill Casteel for Jack and Dot McCreary that you reviewed?
    • 604 - Tax Advice vs Investment Advice
    • Objection to Exhibit 17
  • [(p581-) - REDIRECT EXAMINATION - Questions by Mr. Bostwick (Ferguson)]
  • 581 - Whole Life, Premiums Vary
  • 582 - I want you also to explain your understanding of the impact that investments could have on premiums, to the extent that you understood it.
    A Investment earnings could play an impact in setting the amount and number of premiums that -one might pay on a specific type policy.
    Q And is it your understanding that that is on the front end as opposed to midway through or at some point later on?
    A I .think generally that -- when that product is developed, that premium is established at that time.
  • 582-583 - Work for Mccreary - Difference between McCreary and Ferguson
  • 591 - Q In Mr. Ferguson's case, there were essentially three
    professionals working together; is that right?
    A That's correct. Q Okay. Who were they?
    A Well, they were Mr. Casteel.
    Q Okay. And he is the what?
    A The insurance agent.
    Q Okay.
    A There was myself, who was the CPA, or certified
    public accountant.
    Q
    A
    And what -- okay. And who else?
    And Mr. Steve Saunders, who was an attorney, an
    estate planning attorney with Shapiro, Edens & Cook.
    Q
    A
    And what was Mr. Saunders supposed to do?
    Mr. Saunders' role was to put together the trust
    instrument that would own the life insurance policy?
    Okay.
    And what was your role?
    592
    Q
    A My role was to ascertain that -- that we were going
    to have the proper tax accounting treatment and that the
    structure of the trust was certainly under the rules and
    regulations of the Internal Revenue Code and we weren't
    going to have any- problems with the estate issue -- with .
    the estate tax issue. And I was also asked to be trustee
    by Mr. Ferguson, co-trustee.
  • 595 - APL - Automatic Loan Provision
  • Dividends - Uses
  • 599 - [Bonk: Duty to Read]
  • 599 - Q Mr. Becker has inferred that you have done something strange in not reading that policy.
  • [(576-) - CROSS-EXAMINATION - Questions by Mr. Deshazo (Casteel)]
  • 576 - Q Mr. Love, did you hear Mr. Ferguson yesterday testify that these illustrations that are in question here were in fact produced by Mr. Hicks' office here in Austin on
    behalf of Crown Life?
    A Yes, sir.
    Q Do you know for a fact this attachment to your memo
    was likewise not produced by Mr. Hicks on his computer? - [Bonk: Misprint / Typo]
    A I don't know for a fact. I received that directly from Mr. Casteel.
    Q Does it seem reasonable to you that if Mr. Hicks had the software to produce this type of financial information, that it was in fact produced by him, given to Casteel and given to you?
    A That seems reasonable.
  • 577  - summer 1987 seminar
  • 577  - Austin Club Lunch
  • 579 - Casteel's Income, Tax Prep
  • 580 - Q I want to be sure what your position is on this
    because this is what I'm hearing. Your testimony is that
    Mr. Ferguson paid -- or bought this policy, which
    eventually cost about $91,000, based on a 10 to 15-minute 1
    meeting in which you had no input. Is that your
    testimony?
    A I think Mr. Ferguson bought that policy based on the
    sales presentation that was provided him and the
    illustration that he was given.
    Q Without any input from you. I'm just trying to find
    out.
    A No. I didn't give him any input on whether or not to
    buy the policy.
    Q Is that to say then that you believe that Mr.
    Ferguson primarily bought the policy based on the two-page
    illustration that's been identified as Plaintiff's Exhibit
    236?
    A I believe so.
  • 581 - Q Now, with regard to the policy you bought, is it true
    or not that you have not been called upon by Crown Life to
    pay any additional premiums after you paid the ones that
    were set out in the illustration?
    A That's true.
    Q
    A
    Thank you very much.
    Yes, sir.
  • [(p464-) - CROSS-EXAMINATION - Questions by Mr. Becker (Crown)]
  • 465 - I see. So as far as you know, your certification by
    the state of Louisiana just kind of fell out of the sky?
    A I guess you could say that.
  • Accounting Continuing Education - Life Insurance Courses.
    • A Very few. Maybe one, maybe two.
      Q All right, ,sir. And is it correct that at one point you wrote a little course in life insurance audits?
      A I wrote -- I was asked by the firm's continuing
      education department to write a section, maybe a four-hour section on reinsurance, and that's it.
  • 466 - A It's when an insurance company reinsures their limit
    above what they're willing to retain.

    • Q What kind of insurance are you talking about?
    • A Life insurance. It could be accident and health
      insurance, property and casualty insurance.
  • 467 - E&O - Errors and Omissions Insurance
  • 479 - Q All right, sir. Now, while you were doing audit
    work, you did some work for insurance companies.
    A Yes, sir.
    Q
    A
    Q
    A
    Which ones?
    The names?
    Yes, sir.
    I did work for National Western Life Insurance, and I
    also did work for American Founders Life Insurance. And I
    also did some work for a company in Phoenix one -- one
    time and a company in Houston one time.
    Q You don't remember their name offhand?
    A No.
    Q Phoenix and Houston. That's four. Wasn't there
    another one? Could have been another one?
    A Could have been. I'm not exactly sure what you~re
    referring to.
  • 480 - Q All right. Now, what do you need to know about a
    life insurance company or the life insurance business in
    order to perform an audit of such a company?
  • 482 - A And that they do -- insurance companies make
    investments.
    Q All right. Do you need to know if they have a
    consulting actuary?
    A Most life insurance companies would have an actuary
    of some form. Either they would be a consulting actuary
    or they would be a internal actuary. And let me explain.
    Do you want me to explain the difference?
    Q Sure do.
    A Consulting actuary would be someone that they would
    pay a fee outside -- they would be like with a -- an
    actuarial firm, just like Mr. Becker is a lawyer who has a
    firm and he gets paid for his services just like a
    consulting actuary would get paid for his services,
    because he would be outside of the -- of the firm. He
    wouldn't be an inside actuary.
    Q Okay. But you're familiar obviously you have to
    be familiar with those concepts and the concept of an
    actuary in order to be able to audit an insurance company.
    A
    Q
    You don't have to understand what an actuary does.
  • 482-483 - Q What does an actuary do?
    • 483  - They -- they do product development for life
      insurance companies.
      Q What's product development, sir?
      A I guess they determine the policies.
      Q Determine --
      A I mean, determine the nature of the policies, what
      kind of policies they're going to sell.
      Q Okay. What else?
      A They determine what the liabilities of a insurance
      company would be.
      Q Okay. What do you mean by the liabilities?
      A
      Q
      A
      Q
      The liabilities on its policies.
      All right.
      And -- and I think they set premiums on policies.
      We know what premiums are. That's money paid for
      life insurance.
      A
      Q
      A
      That's the money you pay, yes, sir.
      Okay. What else?
      Well, there are actuaries who do pension
      calculations.
      Q All right.
      A I'm sure they do a lot of other things, which I don't
      know what all they do.
      Q
      A
      They calculate reserves?
      I'm sure they do.
    • 48 - [Bonk: More]
  • 486 - Q All right. Mr. Love, do you remember giving your
    deposition in this case on May the 1st, 1992?
    A I do.
  • 488 - Q  (By Mr. Becker) At Page 148, right there, will you
    read my question to the jury, please?
    A "My question was did you at that time know that there
    were whole life insurance policies that were written, the
    premiums for which might vary according to investment
    income earned by the company or dividends paid by the
    company?" My answer was, "I probably did."
  • 488 - MR. BECKER: One more question. Do you recall that answer now?
    A I just read it. Yes, sir.
    Q All right. And that refreshed your memory?
    A Yes, sir.
    Q And that answer was correct in 1992?
    A Yeah. I think so.
  • 488 - {By Mr. Becker) Mr. Love, if in 1987 and 1992 you
    knew that premiums could be affected by dividends and
    invested in insurance companies, we can assume you know that today, too, can't we?

    • A Yeah.
    • Q And you haven't -- throughout this litigation, I
      assume you haven't lost any knowledge of insurance
      companies that you may have previously had, as far as you know?
  • 491 - A Well, I did the tax work on National Western.
  • 492 - Okay. But you were responsible for it?
    All I did was review the return.
    Did you sign off on it?
    Yes, sir.
    Q Okay. Well then, you were responsible for it,
    weren't you?
    492
    A Well, I guess you can say responsible. I reviewed
    it. I signed off on the return.
    Q Well, do you have a problem with saying that you're
    responsible for --
    A No, I don't have a problem with saying I was
    responsible.
    Q
    A
    Q
    A
    Okay. What kind of company was National Western?
    A life insurance company.
  • 493 - LBJ Company
  • 493 - Q And what .kind of company was American Founders?
    A A life insurance company.
    Q And I think you also did work for other insurance companies, too, that you haven't mentioned.
  • 494 - Olympic Life Insurance Company, NAP Life (National Annuity Programs)
  • 494 - Q All right, sir. I want to return - a little bit - to what you knew in 1987 about life insurance companies, how
    they work. And we mentioned investments and dividends and premiums. On investments, you knew that life insurance
    companies make investments, didn't you?

    • A Yes, sir.
      Q Okay. And in fact, just tell the jury what does -- what does a life insurance company do when it takes your
      premium? What's it do with your money?
    • [Bonk: More]
  • 496 - Q All right. Do life insurance companies invest in
    commercial paper?

    • A Maybe. Possibly.
    • Q What -- what is commercial paper?
  • 497 - Q All right. How else do life insurance companies get
    income?
    A Well, they collect premiums.
    Q Yes, sir. How else?
  • 500- -Tell Inc - Board, Trips with Church Members, Construction Company, doing taxes for other people - Ferguson and Casteel, 
  • 503 - Involvement with other people buying Crown Policies
  • 505 - Defendant's Exhibit 11 - a letter that you wrote to William E. Casteel on May 1st, 1984?
  • 507 - (By Mr. Becker) May 1st, '84. What is this letter
    all about, Mr. Love?
    A This is a letter to Mr. Casteel telling him that we
    wanted him to look at some proposals that has to do with
    Mr. McCreary and the buy-out of the law firm, as well as
    Balcones Management Services.
    Q Well, you're writing this letter to Mr. Casteel.
    You're writing it on behalf of Mr. McCreary's law firm,
    aren't you?
    A Yeah. They had asked me to write this letter, that's
    correct.
    Q All right. And the name of that law firm was
    McCreary, Veselka, Beck & Allen, wasn't it?
    A Yes, sir.
    Q And what they'd asked you to do on their behalf is
    submit to Mr. Casteel a request for proposal of insurance,
    wasn't it?
    A That's correct
  • 506-507 - A Yeah. Mr. Becker, I mean, as I've stated, this three million dollar policy was was the focus of this transaction, and that's what I referred to. I didn't recall back in '84 that we requested insurance on all this stuff.
  • 507-508 - Q All right. And you were involved with the purchase of insurance on the life of Mr. Veselka, weren't you?
    A I'm going to tell you that I was involved in getting the proposals requested. I didn't have any involvement in
    making a decision on the insurance.
    Q Okay. I --
    A
    Q
    A
    Q
    I don't know how plainer I can tell you.
    All right. Involved to some limited extent.
    Yes, sir.
  • 517  - [College Funding]
    • A That's correct.
      Q Vanishing premiums?
    • A That there would be no more additional premium after you paid your premiums.
      Q Right. And Mr. McCreary's policy was a vanishing
      premium policy, too, wasn't it?
  • 520 - Q Anything else that happened before September
    of 1987 that conveyed to you any knowledge or information
    about his vanishing premium policies?
    A Well, Mr. Becker, I'm sure you're referring to the fact that Mr. Casteel requested to have a seminar in my office.
    Q When was that, sir?
    A It was in -- . I think it was in the late summer of 1987.
  • ..............
  • Defendant's Exhibit 12 - a Crown Life Insurance Company Custom Ledger Statement that says at the bottom "Prepared on April the 27th, 1987, by Bill Casteel"
    • illustration that you received from Mr. Casteel?
  • 550 - [Bonk: Contact, Rights Obligations, Duty to Read]
    • Q All right. This is the actual contract, correct?
      Yes, sir.
      This is the document that controls the rights and
      obligations of the parties, correct?
      A
      Q
      A
      Yes, sir.
      And you didn't think it was important to read it?
      I didn't read it. I mean, I've never read any
      insurance policy I bought.
      Q Okay. And I guess you didn't because you didn't
      think it was important.
      A Because I relied -- I bought the policy based on this
      illustration, and that's what I expected it to be. And
      that's what I knew it was going to be. I'd already paid
      for this policy. This policy was not here when I saw this illustration. They were in two different points in time. So I bought it on the basis of what these numbers say on Defendant's Exhibit 12.
  • 552 - Dividends determine premium
  •  
  •  
  • ...........
  • 552 - [Bonk: Prudent / Reasonable Person, Duty to Read. LOOK]
    • Q Do you think it would be prudent to check to make
      sure that the policy itself, the contract accurately
      reflected what your understanding was of what it was going to be?
      A I don't know that if I read all this policy that I
      could determine that it was consistent with what was here.
      Q All right. Well, let's get into that and see if we
      can.
  • 552 - A I know that dividends could be used. You know, they
    may have some impact in determining premiums. I don't
    know how they impact that calculation.
  • 552 - 10-day Free Look
  • 553 - A That -- a vanishing premium. That the premium would go away and you would pay no more premiums?
    Q
    A
    Well, yes, sir, whatever --
    That's my knowledge to the extent of a vanishing
    premium.
    Q Right. Whatever knowledge you had, it didn't
    increase between the time that Mr. Ferguson and you got
    your policies and the time Mr. McCreary got his?
    A No, it didn't.
  • 553-554 - Q And you didn't get any -- any dumber. You retained what knowledge you had of these policies when you considered Mr. McCreary's policy, didn't you?
    A I don't think I got any dumber, no.
  • 554 - A What I knew was this policy -- that there was a sales
    presentation by Mr. Casteel on this policy, that you would
    pay nxn number of premiums for 11 X" number of period of
    time, that you would pay no more premiums beyond those
    premiums that you were required to pay.
    Q
    A
    Q
    A
    Q
    I understand.
    And that was it. That's all I knew.
    Right. And you knew that about all of them.
    Yes.
    All right. Would you look at the second page,
    please.
    A Okay.
  • 555-556 - Q
    Yes, sir.
    And it says, "Annual dividends."
    That's correct.
    And then what does it say next?
    A "Premiums payable for life."
    555
    Q Well, didn't that plainly contradict what Mr. Casteel
    told you?
    A Yeah. I would say that contradicts what he told me.
    But that's not what I asked for. I bargained to buy -- it
    was represented by him and I guess through Crown Life, as
    their agent, that we were going to buy a policy that you
    paid a specified number of premiums on. And that's all it
    was.
    Q So this statement here directly contradicts what
    Casteel had told you.
    A Well, it merely says that premiums are payable for
    life, and I think that means that they're payable for
    life, you know.
    Q
    A
    . Right.
    At that time, I didn't read that. But even if I
    would have read it at that time, I don't think I would
    have thought anything differently.
    Q Well now, that phrase, "premiums payable for life,"
    is at variance with what Mr. Casteel told you when he sold you this policy.
    A Yes. He never represented that I was going to pay
    $6,102 for life.
    Q
    A
    Q
    A
    So it's at vary contradicts --
    If he had, I would have never bought the policy.
    Right. And so it does contradict what he told you.
    I think that's what I said.
    Q So if you read this when you received this policy,
    what would you have done?
    A I didn't do anything.
    Q What would you have done had you seen this?
    A I don't know that I would have done anything, because
    I believed what I was buying.

    • [MORE]
  • 558 - A I didn't have this to read prior to the time I bought
    the policy.
    Q Do you agree with me that if you had read that at
    that time, that that would have been a red flag to you and
    that you wouldn't have bought the policy?
    MR. BOSTWICK: Your Honor, the
    question has been -- is redundant and has been asked and
    answered two or three times at this time. He's asked is
    it a red flag. He has stated that it is not a red flag.
    THE COURT: That wasn't the question.
  • 559 - (By Mr. Becker) Do you remember me asking you that
    question in your deposition on May 1st, 1992?
    A Possibly. I don't remember if you asked it. I
    assume you did, if you've got the deposition.
    Q All right. Well, on Page 149, starting at Line 22,
    will you read, please, my exact question to the jury?
    A "And do you agree with me that if you had read that
    at that time, that would have been a red flag to you?"
    You understand that I am
    Q And what is your statement?
    A Says nr may not have. I may not have bought the
    policy. n
  • 560 - Yes maybe, or yes?
    Yes.
  • 563 - Fergusons Bill to Love
  • 569 - (Defendant Exhibit 16 -  a letter from you to Jack
    McCreary, dated January the 19th, 1988?

    • MR. BOSTWICK: Your Honor, we would
      object to the admission of this letter because it is
      advice given essentially nine months after the fact to
      another individual, and we therefore believe it to be
      irrelevant to what -- to advice that he could have given
      to Mr. Ferguson.
      THE COURT: The objection is overruled. And Defendant's 16 is received.
  • p571 - Q Did you also evaluate the cost of converting the
    existing term policy to a whole life product?
    A
    Q
    Yes.
    And how did you investigate that cost?
    A I asked Mr. Casteel to provide me with some -- an
    illustration by a -- this same sort of policy that we've
    been discussing, to see what the cost would be by --
  • Equity
  • 572-573 - Q Are the statements in this letter truthful?
    • A Mr . Becker, I'm not -- I'm not denying that the
      letter is not truthful. I'm just saying that that's not
      the principal issue that was being addressed by this letter. That's all I'm saying.
  • 573 - MR. BOSTWICK: Your Honor -- wait a
    minute, wait a minute, wait a minute.
    Your Honor, I'm going to object. Counsel is clearly
    being argumentative at this point when he's -- in that
    last statement., which was not a question and didn't appear
    in the form of a question. And secondly, Mr. Love, as a
    responding witness, is entitled to give an explanation to
    the answer that he makes to the question.
  • 573-574 - Q (By Mr. Becker) Second page, last paragraph of the
    letter. You make the statement, "I'm including an
    illustration on the policy and would like to explain thi·s '
    to you. n
    A
    Q
    A
    Q
    Yes, sir.
    Is that correct?
    Yes, sir.
    I take it you felt like at the time that you understood this if you were going to explain it to him? Is that a fair statement or not?
    A I understood it based on what I'd been told to me.
  • 575-576 - Q Is it your testimony that Mr. Casteel would have had the knowledge himself to type this letter? 
    • A Absolutely.
      Q And are you saying furthermore that by passing it on
      to him in a memo to Jack McCreary from Bill Love, becauseit was prepared by Bill Casteel, that you're not
      responsible for it?
      A I didn't prepare it, Mr. Becker. Mr. Casteel prepared it. He prepared it in his office.
  • [(p431- ) - WILLIAM CURTIS LOVE - witness in behalf of the Plaintiff- Direct Examination by Mr. Bostwick]
  • certified public accountant
  • 442 - Start of estate planning discussion
  • 448 - Austin Lunch
  • 448 - Q Okay. Tell us a little bit about your recollection
    of what took place during that meeting.

    • There was very limited talk about the insurance proposals. And that was at the end of the meeting.
  • Q Okay. And tell us what you recollect of the discussion about the Crown Life illustration and how that came about.
    • Crown Life, Vanishing Premium
  • Limited Payments - A Well, he -- he didn't tell me as to why that was.
    But I will tell you that he's a conservative individual.
    He had probably determined that he didn't want to pay but
    a certain amount of money on this policy. And he wanted
    to -- to get an adequate enough amount of insurance that
    he deemed it appropriate for his estate. And I think he
    had already sort of determined that to be about five
    million dollars, and that may have been through
    discussions with me and estimates, .or something ..
  • 451 - Just Listened
  • 452 - Q What was your understanding of what a vanishing
    premium policy was at that time?
    A At that time, the way I understood it, you paid your
    specified number of premiums and then there would be no -there
    would be no more premiums to be paid on the policy.
    Therefore, I guess by default, the premium vanished
    because there are no premiums to be paid after that point
    in time.
  • 453 - Q And it's my understanding you -- you, in fact,
    purchased a -- a life insurance policy from Mr. Casteel
    shortly after this meeting, or at l ,east several months
    later.
  • 455 - Life Insurance Trust
  • 456 - Steve Saunders of Shapiro, Edens & Cook.
    Randy proceeded to go to -- to legal counsel to visit with
    him about it and get the trust document put together
  • 457 - asked to be Trustee
  • 458 - did Randy seek
    any advice from you concerning the particulars of the
    policy that ought to be bought?
    A No.
    Q Did he seek advice from you concerning the
    particulars of the particular policy that he started
    talking to Bill Casteel about?
    A No.
    Q Did you offer any advice to him concerning the
    particulars of this Crown Life policy that -- that Mr.
    Casteel was selling to Randy on behalf of and as agent for
    Crown Life?
    A No.
  • 459- - Q Okay. What kind of policy was that or for what
    purpose? However you want to describe it.
    A The purpose -- I bought a policy for a completely
    different purpose. It was just a college funding policy.
    I bought a policy that I was going to pay I think it
    was seven or eight premiums, and those funds would be, I
    guess, invested by the insurance company. It would have
    accumulated value such that at the time my children
    started to college, that I could withdraw funds out of that policy to fund their college education.
  • [Bonk: Negotiating a Contract, not Buying]
    • Q Okay. At the time that Randy was buying his policy
      or not buying it, but negotiating to buy it -- and I
      guess maybe we need to make clear at this point,
      essentially, a deal was struck or an agreement made
      verbally, as you understand it, between Randy and Bill
      Casteel to buy a Crown Life policy, the one that was
      illustrated to him, probably by April or May of 1987.
      A Yes, sir.
  • [Bonk: Vanishing Premium History]
    • Q Okay. Prior to March of 1987, what did you know about vanishing -- the concept of vanishing premium as it relates to a life insurance policy?
    • A I -- I don't think I knew -- knew a lot about it. It was a -- I understand a fairly new concept.
  • 461 - A Dividends, 4 payments only
  • 461 - [Bonk: Policy Mechanics / Works] 
  • 462 - [Bonk: Policy Mechanics / Works]  
    • Q Was there any explanation of, for instance, some
      concept of arbitrage going on under the hood of this
      policy?
      A No.
      Q Was there any explanation about how dividends figured in to the -- the premiums of this policy?
      A No.
      Q Was there any explanation of the fact that there
      was -- that there were internal loans going on under the hood of this policy?
      A No.
  • 463 - [Bonk: Role of Trustee]
    • Q Just so we're clear, Bill, did you offer or were you
      requested by Mr. Ferguson to give him any advice
      concerning the particulars of the purchase of this CrownLife policy?
      A No, sir.
      Q
      A
      Did you perceive that at all as your role?
      No, sir, I didn't.
  • 463 - Q (By Mr. Bostwick) Mr. Love, based on what you knew
    then, did you have any advice that you. could have offered
    to Randy about the particulars of this policy, even if he -- if he had asked? About how this policy Worked or functioned or what sort he ought to get.
    A No.
  • 1995 0815 - 
  • WITNESSES:
  • WILLIAM CURTIS LOVE
    • Direct Examination by Mr. Bostwick----------------- 431
    • Cross-Examination by Mr. Becker-------------------- 464
    • Cross-Examination (Contd.) by Mr. Becker----------- 544
    • Cross-Examination by Mr. Deshazo------------------- 576
    • Redirect Examination by Mr. Bostwick--------------- 581
    • Recross-Examination by Mr. Becker------------------ 602
    • Recross-Examination by Mr. Deshazo----------------- 605
  • PAUL JOSEPH STRONG (By Deposition)
    • Direct Examination by Mr. Tekell------------------- 611
  • ATTORNEYS FOR THE PLAINTIFFS - DAVID G. TEKELL and RICK BOSTWICK
  • ATTORNEYS FOR THE DEFENDANT - CROWN LIFE INSURANCE COMPANY - DOUGLAS M. BECKER and BRUCE HARDESTY
  • ATTORNEYS FOR THE DEFENDANT - WILLIAM E. CASTEEL - GARY F. DeSHAZO and JEROME J. SCHIEFELBEIN