THE LATEST ON RALPH REED….GQ has a profile of Ralph Reed in its current issue that begins with a description of a scam that Jack Abramoff came up with when he discovered that one of his clients, the Tigua tribe, was apparently too broke to pay his fee:
Abramoff came up with a way for his marks to continue paying him: the Tigua Elder Legacy Project. Abramoff would arrange, at no cost to the tribe, a life-insurance policy for every Tigua 75 or older. When those elders died, the death benefits would be paid to Eshkol Academy, a private school Abramoff had founded near Washington. Eshkol, in turn, would then pay Abramoff?s fee to continue lobbying on behalf of the surviving Tiguas. Morbid opportunism disguised as charity: Each dead Tigua would be cash in the lobbyist?s pocket.
The Tiguas declined the offer. ?It felt uncomfortable,? a Tigua official told the Senate committee last November.
A few months later Abramoff was pitching a similar concept, this time aimed at black churches, to the reptilian Ralph Reed. It didn’t go anywhere, but apparently Reed was interested: ?Yeah,? a former associate of Reed?s says, ?it sounds like Jack approached Reed about mortgaging old black people.?
Fine. Reed’s a dick. But the Tigua story was originally reported two years ago, and I still don’t get it. It doesn’t appear to involve a crooked insurance company, but this scam wouldn’t work with an honest one, would it? I’m not the insurance industry’s biggest fan, but I have confidence that their actuaries are smart enough to price policies so they make a profit on them, not a loss.
What am I missing?
UPDATE: Apparently the answer is that this is a tax arbitrage scheme. In comments, Paul explains:
It’s the tax writeoff that makes dead-peasant policies profitable. There would have been a deduction when the money went out to premiums, and then the “Academy” would have been tax-exempt when it got the money, as long as it spent/laundered it appropriately. So you essentially end up making a profit in the amount of the tax saved minus the insurance-company cut.
A more detailed explanation is here.
UPDATE 2: Oh, and I apologize for my coarse language in this post. Describing Ralph Reed as “reptilian” was indeed unfair to reptiles.