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A technology not-for-profit is suing Indianapolis-based Phi Kappa Psi Fraternity for allegedly withholding funding designated through a life insurance policy.
The lawsuit was filed in Marion Superior Court on June 13. Phi Kappa Psi Foundation and PKP McMahan Finance Engine LLC are listed as defendants.
Representatives for the defendants did not respond to The Indiana Lawyer’s request for comment.
According to the lawsuit, the founder of the National Cristina Foundation, a not-for-profit providing access to technology to individuals with disabilities, invested several million dollars in a life insurance policy that would be used to fund NCF’s mission after his death.
Attorneys for NCF also did not respond to The Indiana Lawyer’s request for comment.
The founder, Bruce McMahan, and his friend Henry Marvin were both members of the Phi Kappa Psi Fraternity. McMahan funded the insurance policy in coordination with Phi Kappa Psi, and proceeds from the policy would pay out on the death of the survivor of him and Marvin, and that $3 million of the proceeds would be paid to NCF.
The rest of the policy would go to the Phi Kappa Psi Foundation.
The Finance Engine is a subsidiary of the Foundation and owns two life insurance policies: the McMahan/Marvin Policy, and a separate policy on the life of Jerry Nelson, which McMahan funded.
After McMahan died in 2017, the CEO of the Foundation and Finance Engine emailed a member of NCF’s Board of Directors about Finance Engine’s intention to allocate money from the McMahan/Marvin Policy to NCF.
Included in the email was a document created in 2016 that memorialized the plan for how to distribute the McMahan/Marvin Policy. The document stated that $3 million would go to NCF and $13.1 million would go to the Foundation.
When Marvin died in 2023, NCF contacted the Foundation to coordinate the receipt of their share of the life insurance policy, but NCF was told that their share of the money would be used by the fraternity, according to court documents.
When asked for documentation to support the decision, counsel for the defendants sent NCF a donation agreement with McMahan dated June 2004, which defendants claimed governed the McMahan/Marvin Policy. The agreement, however, references the policy on the life of Nelson but does not mention the McMahan/Marvin Policy, court documents stated.
The foundation believes the June 2004 agreement was superseded by a donation agreement with McMahan dated August 2016. The 2016 agreement also does not mention the McMahan/Marvin Policy or the NCF’s portion of the money, according to the lawsuit.
NCF states that while neither the 2004 nor the 2016 donation agreements address the NCF’s portion of the money, neither document formed the basis for the information sent by the foundation after McMahan’s death stating that $3 million would go to NCF and $13.1 million would go to the Foundation.
Despite several demands, defendants have not produced documentation to refute that NCF is entitled to the funds, court documents stated.
NCF is suing defendants for promissory estoppel, fraud, and conversion in accordance with Indiana Code Section 35-43-4-3, and requesting declaratory judgment.
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