Seeing as the Challenge funds are currently in negotiable bonds at Goldman-Sachs, and hearing the news about all the bank buyouts, what does this mean for the million dollars? I know the Challenge will be retired soon, but I was wondering what would happen if the current value of the bonds falls below the million dollar level.
The Professor said:
No one has really answered this yet.
I am going to set out to do so and beg you or anyone else who still has questions when I am finished to either ask in this thread or PM me all questions that may remain.
I fear that the initial question has been perverted throughout most of the thread. Instead of asking "what will become of the money?" (which is answered about as well as can be expected by Jeff Wagg, while the JREF's documents showing that the money is invested at Goldman Sachs are public, Goldman Sachs' documentation of how exactly the money is invested is understandably not. Startz' opinion upon this matter is probably the most accurate one proffered by a non-employee, Startz is generally right when he speaks), it has become "can the money be paid if won?"
The answer to this question is determined by the nature of the contract stipulated between the JREF and the applicant. Viewing the rules of the application, it is perhaps most significant to note this:
Challenge Application said:
I, James Randi, through the JREF, will pay US$1,000,000 [One Million Dollars/US] to any person who can demonstrate any psychic, supernatural or paranormal ability under satisfactory observing conditions.
Mind you, this paragraph in no way specifies where the money will come from - considering the changeable nature of the markets (as we've witnessed, reversals can come quickly), this is the best way to go. Wisely the JREF has set up a primary account for the purpose of paying out this money (to put this more into the purview of most of the forum readers, a business that repairs computers would have an expense account set up labeled 'parts', whenever they buy new computer parts to repair computers with, they take the money from this account if it's possible) where the million can safely reside.
However, in no way does this lack of specificity in the nature of the payment serve as an out for the JREF to avoid paying - in fact, quite the opposite. If the contract stated, for example, that the million dollars would be paid from the JREF challenge account, then the applicant would be forced to take whatever amount happened to be in the account at the time of winning, regardless of whether or not it was less or more than a million (one could argue that a "million dollar challenge" that doesn't have a million dollars as a prize is a deliberate misdirection in court, but there are many viable defenses to this claim that could be used to reobtain most of that million if employed properly).
Indeed, according to the terms of the contract now, if the money in the prize account should be below one million dollars at the time of someone winning, then the JREF would be forced to make up the difference somehow - how they do this really isn't an issue so long as they do. As an example, say if the prize funds dipped to exactly $990,000 - ten thousand dollars less than the million required when the money was claimed. The JREF would then be required to make up the remaining ten thousand from any legal avenue - taking out a short-term loan, for example, for the ten thousand would certainly work. Selling office furniture or used computers would be another way to raise the money. The contract in its current state is more advantageous to the applicant than it is to the JREF for these reasons.
Startz said:
Goldman Sachs isn't a bank. I believe none of the money is FDIC insured. The JREF statement doesn't give details about how the money is invested.
The banking arm of Goldman Sachs (called, conveniently, "Goldman Sachs Bank") is a member of the FDIC (certification number 57485), but the money is not held at Goldman Sachs Bank so far as I can see, so no it is not FDIC-insured. FDIC regulations only insure quote-unquote "deposit accounts", a complete list of which can be found at
http://www.fdic.gov/consumers/consumer/information/fdiciorn.html along with a list of what they do not insure, also described at the same convenient address. As the JREF's money is in bond form, it would not qualify to be insured by the FDIC at all.
How the money is invested is covered in the statement in a very general form (under the heading "Portfolio Asset Allocation"), but information on how the money is currently being managed (as the JREF has effectively subcontracted Goldman Sachs to do this for them) is proprietary to Goldman Sachs and not to the JREF. Getting this information from Goldman Sachs would most probably require a subpoena from a judge, which would require you to prove that the information was both necessary and relevant.
shadron said:
I would like to see this assertion backed up.
It's enforced through the IRS, hence why neither Wikipedia nor About knew much about it. Try searching for "transparency" instead of "disclosure", it got me closer to the crux of the matter. Essentially, it's the IRS making public the 990 forms of non-profit organizations. I think both sites you mentioned got confused by the word "disclosure", it seems to imply that the NPO itself was disclosing this information (many of them do upon qualified request) instead of the IRS.
I was able to find the JREF's 990 form through GuideStar for the 2007 year, it clearly lists and defines the financial status of the JREF throughout the 2007 year. The information is there for those desiring to find it.
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If there are any further questions, please leave them in the thread or shoot them to me via PM.
~ MattC
