The Wall Street Journal, in a Nov. 26 Page One story, reports that Larry King got conned into trading two life insurance policies with a combined worth of $15 million for $1.4 million in after-tax cash. Whether the con was legal is a matter currently before the U.S. District Court in Los Angeles, where King lives. But King's legal complaint (posted last month on the Smoking Gun) should put to rest any lingering doubt that the most popular TV interviewer in America is also the most credulous.
The deal was a flip. In 2004, King, apparently at the urging of an insurance brokerage called the Meltzer Group, purchased two life insurance policies worth $10 million and $5 million. King then sold the $10 million policy plus a $5 million policy that he'd taken out two years earlier to one or more third parties for $550,000 and $850,000, respectively. In the jargon of high finance, this is known as a "sucker deal."
In his lawsuit, King maintains that he should have received "millions of dollars more." Even if King is right about that, the flip would have been a terrible investment. As the Journal piece amply demonstrates, it is almost never a good idea to engage in "life settlement," as the practice of buying and selling life insurance policies is known, and purchasing a life insurance policy for the sole purpose of selling it is an especially bad idea. We must therefore assume that King was experiencing liquidity problems. That in itself would seem remarkable, given that at the time of the deals CNN was reportedly paying King somewhere in the neighborhood of $14 million annually, were it not for the fact that King had five ex-wives to support—not to mention a sixth wife to whom he remains married—and approximately five children (a formal tally is difficult because one child is illegitimate, a second is a stepson, and a third was adopted by Wife No. 3's subsequent husband).
In his complaint, King alleges that the Meltzer Group got him involved in "highly complex life insurance transactions of which both [King] and his then attorney lacked knowledge and expertise." King further alleges that Meltzer never "considered [King's] then current financial condition, health condition, and the insurance needs of his family, including the likelihood of his future uninsurability." King also registers shock that the new insurance policy that Meltzer persuaded him to buy came with sky-high premiums. But the central puzzle here is why King imagined he was in any position to profit by gaming the life insurance industry, of all things. At the time these financial transactions took place, King was 70 years old. He'd had quintuple coronary bypass surgery at 53, and he'd been diagnosed with diabetes at 64. That anyone was willing to sell King life insurance under such unpromising circumstances would appear to be a minor miracle; that King believed a fast buck could be made by buying one boggles the mind; and that King believed the purchase of additional life insurance would be possible down the road—by rough calculation he needs, at bare minimum, $75 million in coverage—beggars imagination.
Then again, this is the same Larry King who regularly plays host on Larry King Live to psychics, mediums, and UFO enthusiasts; who peppered his former USA Today column with insights like "The revamped Beverly Hills Hotel is just beautiful" and "Aren't those Save the Children ties the prettiest around?"; and who, when his name is paired on Google with the word credulous, yields 73,800 hits. Love him or hate him, no insurance broker would waste his time trying to interest Mike Wallace in life settlement.
[Update, Nov. 27: Today's Washington Post quotesa court filing from Meltzer that states, "Larrry King pretends that he was interested in purchasing additional life insurance. ... During each of the transactions complained of, [we] expressly told Larry King's advisers that Larry King was better off keeping the new insurance rather than selling."]