Boone Blows $165MM Okie State Athletic Fund?

7,693 Views | 56 Replies | Last: 12 yr ago by PlanoGuy
obamaUT4ever
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Saw the following story on another sports website. Could not find the exact source but did find two other similar links at:

http://online.wsj.com/article/SB122221505732769415

and

Link: http://www.tulsaworld.com/business/article.aspx?ar

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Boone's Big $ 165MM Donation Trickles Down to the Nibbits - Future Facility Expansion in Doubt


STILLWATER -- OSU Regents were reportedly told Friday afternoon that the portion of the Boone Pickens donation in the BP Capital hedge fund was virtually wiped out by margin calls on the funds investments in the third quarter.

Pickens is the founder of BP Capital and is a principal of TBP and BPC. Mr. Pickens is active in the management of both the Equity Fund and the Energy Fund.

Almost every living fan has had to be reminded about the huge $165 million contribution that Pickens made to Oklahoma State's athletic department back in 2005. But that gift has been significantly suspicious, and under increasing scrutiny, since it's pledge date.

According to the New York Times, the funds were actually in the OSU Foundation bank account for less than an hour, before being 'invested' back into BP Capital.

On top of that, the donation was made with the stipulation that it be managed by solely by OSU AD Mike Holder, a hire of Mr. Pickens, and Mr. Pickens himself.

While it worked out well in '06 and '07, unfortunately Pickens has stumbled on oil all year. When it first hit $100 (going up) he shorted, losing a lot. Then he switched to being long, only to get hit again when it came down. Then, BP Capital had a rough July, where it was down almost 35%, causing OSU AD Mike Holder to announce that ground breaking on the indoor practice facility, and the athletic villiage had been put on hold.

When asked the reason, Holder replied, "Have you seen the price of oil lately?"

Hindsight, always 20/20, indicates that the Poke AD and Pickens should have cleaned out the closets and gone straight to the bank -- as oil was at $ 120 bbl at the time the 'hold' was put on. Since then, prices have dropped considerably more.

When the fund had nearly doubled the original gift, several OSU Regents had strongly suggested that the original $ 165MM be taken out of the volatile hedge fund and put in the bank.

However, Pickens balked at the advice, and suggested that stadium expansion be made with funds borrowed against the assets of the fund. Complicating the entire fiasco, the OSU athletic department was in the tank by more than $ 100MM in 2005, and it is unclear if that deficit has been made.

One disgruntled donor is reported to be Oklahoma City investor Sherman Smith, who made a $ 20MM donation to the indoor practice facility that now may be delayed for some time. Smith may wonder just where his $ 20MM went.

Through August. the BP commodity fund was down 84% since January 2008, and things have only worsened since.

Pickens said at the time,

"It's my toughest run in 10 years.... We missed the turn in the market, there's nothing fun about it. I'm not willing to accept that [the downturn] was due to a global slowdown. When there's deleveraging in markets it will affect everything."

Even those were heady days compared to mid October.

The mandated SEC release of BP Capital's holdings at the end of the third quarter should be forthcoming next week, and it is believed that the bad news given to the OSU Regents Friday was done in preparation for the potentially traumatic news.

Two weeks ago, Pickens said on CNBC that about 15 percent of people who held a position in his fund expressed that they wanted out by the end of the year.

With the Cowboys playing in Boone Pickens Stadium, that's clearly not an option for the Oklahoma State athletic department. Withdrawing the funds would be a slap in the face to their biggest benefactor, who only six months ago was being hailed as a genius, and the anointed savior of O-State athletics.
keysercade
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AG
OUCH.
morethanthreeyards
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no wonder that mother f'ker has been on tv pimping natural gas.

his f'cn check was going to bounce.

xaggie95
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AG
Article is today's USATODAY.
Meaty Hands
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Title should read "slush fund"
AgDotCom
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I heard Lehman was leveraged 20:1 on MBS and some commodity hedge funds have been leveraged as much as 30:1. Pretty unreal.

I wonder how much Pickens' fund is...or was...leveraged.

With this kind of leverage it's easy to see how easily oil prices can be manipulated.

I thought Pickens was a smart businessman. Betting on oil is not the issue. Borrowing your stadium expansion costs against a such a volatile asset, on the other hand, is damn near flat out nuts.

Anyone wonder how much sheet OSU might be in right now? Most likely they're in a hole they can dig out of, but there's a possibility it could be really bad.
morethanthreeyards
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I feel a rather inspired "THAT'S NOT TRUE, I'M A MAN" speech on the horizon.

And don't think it was coincidence that this came out on the week of the Texas game.
Yersinia pestis
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techs main rival is in trouble
morethanthreeyards
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quote:
I heard Lehman was leveraged 20:1 on MBS and some commodity hedge funds have been leveraged as much as 30:1. Pretty unreal.


about the same ratios as subprime mortgage lending market?

out ***ing standing.

DOES ANYBODY HAVE ANY F'KING MONEY ANY MORE?



[This message has been edited by morethanthreeyards (edited 10/21/2008 10:59p).]
obamaUT4ever
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Obama does...
Theo
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So, if I have this right....

Pickens donated $165 million to the school and got whatever perks were associated with that donation.

Then he ordered it to be reinvested in a hedge fund he founded and basically controlled.

quote:
Boone Pickens got a special tax break when he donated $165 million to the sports program at Oklahoma State University, his alma mater, last year, and the school then turned around and invested the money with Pickens' own hedge fund, according to a published report.



http://money.cnn.com/2006/02/24/news/newsmakers/pickens_donation/index.htm

Then:

quote:
When the fund had nearly doubled the original gift, several OSU Regents had strongly suggested that the original $ 165MM be taken out of the volatile hedge fund and put in the bank.

However, Pickens balked at the advice, and suggested that stadium expansion be made with funds borrowed against the assets of the fund. Complicating the entire fiasco, the OSU athletic department was in the tank by more than $ 100MM in 2005, and it is unclear if that deficit has been made.


This strikes me as a very common little...well, for lack of a better word, scam. You "donate" money, collect your tax break, then mandate that the money be kept in your control where it can be invested to continue to earn you money?

I'm not an accountant...am I missing something here?

I guess you don't want to kill the tax breaks for fear that it might also kill donations even in this form. But it seems like there should be some strings attached.
AgDotCom
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I wouldn't call it a scam. Pickens could make (or lose) MUCH more dough if he had kept the money himself and invested it in his fund rather than donating it, writing off the equivalent of approx. 36 cents on the dollar (or applying the loss to future earnings), and then charging management fees.

What he did do was maximize his donation along multiple fronts...booster stroke / naming rights / writeoff / fund leverage and management fees.

That's my quick, passing glance take on it anyway. Perhaps our resident Baylor Longhorn CPA can weigh in on this and give us his perspective.

[This message has been edited by AgDotCom (edited 10/22/2008 2:04a).]
Theo
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quote:
I wouldn't call it a scam. Pickens could make (or lose) MUCH more money if he kept the money and invested it in his fund than donating it, writing off the equivalent of approx. 36 cents on the dollar (or applying the loss to future earnings), and then charging management fees.

What he did do was maximize his donation along multiple fronts...booster stroke / naming rights / writeoff / fund leverage and management fees.

That's my quick, passing glance take on it anyway. Perhaps our resident Baylor Longhorn CPA can weigh in on this and give us his perspective.


Scam might be too harsh a word...or maybe not. I would be interested to see what an accountant had to say about this.

But the bigger picture is that Pickens got a certain amount of additional notoriety that a lot of philanthropists like him seem to relish. I'm just wondering, for all of that, is oSu in bad position here as a result; are they overextended?
AgDotCom
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When I say "I don't think it's a scam" I don't want to imply that there also wasn't a lot of bad judgement (apologies for the double negatives). Maybe that's what we're mostly observing.

Like I indicated in my first post on this thread, I agree that this thing could be really bad. I have to think OSU has a way out of this, even if it's difficult, but it sure looks like that in a worst case scenario they could be royally screwed.

I had no idea that Pickens' donations came with these strings. I thought they were straight up cash donations or pledges. Had I known, I wouldn't even have considered them donations until they were banked into cash or a similar capital preservation asset.

Hopefully Dub will see this thread and weigh in. He's pretty sharp for and old guy. And for a Baylor Sip, for that matter.

Theo
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quote:
When I say "I don't think it's a scam" I don't want to imply that there also wasn't a lot of bad judgement (apologies for the double negatives). Maybe that's what we're mostly observing.

Like I indicated in my first post on this thread, I agree that this thing could be really bad. I have to think OSU has a way out of this, even if it's difficult, but it sure looks like that in a worst case scenario they could be royally screwed.



What suggests to me that there might be something more than bad judgment is this:

quote:
When the fund had nearly doubled the original gift, several OSU Regents had strongly suggested that the original $ 165MM be taken out of the volatile hedge fund and put in the bank.

However, Pickens balked at the advice, and suggested that stadium expansion be made with funds borrowed against the assets of the fund. Complicating the entire fiasco, the OSU athletic department was in the tank by more than $ 100MM in 2005, and it is unclear if that deficit has been made.

One disgruntled donor is reported to be Oklahoma City investor Sherman Smith, who made a $ 20MM donation to the indoor practice facility that now may be delayed for some time. Smith may wonder just where his $ 20MM went.

generalpatraeus
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Its rumored that the New York Times has some ongoing, behind the scene, investigative reporting going on this story. This may only be the beginning of bad news for the Pokes.

At the minimuum, however, it would appear that OSU not only has lost all of the gains which were to be used to fund its ambitious plans - far worse, the original investment used to fuel those costs - is gone.

Boone could choose to fund that all over again at some point in the future, but who knows how long it may take for him to have a big run up of success in the market again. If that happens, it doesn't appear it will be through a hedge fund.

A very slippery slope OSU finds itself upon right now.
Furlock Bones
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AG
there's a story behind this that i cannot post here
tamuags08
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AG
PM? I'd be interested in hearing it.
generalpatraeus
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Can you provide a hint?
yoshi
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quote:
I'm not an accountant...am I missing something here?


Probably need an accountant type working in law to answer a lot of this. Im not a tax guy so I am not much help on this.
Fatty Carmello
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The $57MM donated by Malone Mitchell will still come in handy.
Sensei John Kreese
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AG
My in-laws are OSU graduates and were very leery of the Pickens donation/association when it was announced a few years back. They mentioned that Pickens had screwed West Texas State many years ago over a donation and that it was likely to happen to OSU, as well. It was made public that OSU was not fully in control of the funds at the time of the donation. They could earn it back in the future but they sure are in a big black hole at the present moment.
annie88
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AG
what a mess...
BohunkAg
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AgDotCom
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60 Minutes was in Stillwater filming Pickens at the A&M game a few weeks ago.

That story just got a lot more interesting. I wonder how deep they'll dig, and I further wonder what Pickens now thinks about having the story air, whenever that may be.
Dannyman
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quote:
there's a story behind this that i cannot post here


Why even post that?

[This message has been edited by Dannyman (edited 10/22/2008 11:36a).]
Frank White
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Oil is now at 67 dollars a barrel. If Pickens was not already so rich some would compare him with Brandi and his predictions.
morethanthreeyards
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He became an alternative fuel fan over night!

This explains everything.
RK
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AG
he's going to need a sh*tload of wind in the panhandle to offset this little issue.
SirLurkAlot
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If he could just harness all the hot air on this board.
obamaUT4ever
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Here is the latest...

STILLWATER -- "It can't get any worse," that's what one Oklahoma State Regent said Tuesday morning, after getting another dose of bad news regarding funds earmarked for OSU athletics.

Yesterday all indications were that OSU Regents were reportedly told Friday afternoon that a large portion of the Boone Pickens donation in the BP Capital hedge fund was virtually wiped out by margin calls on the funds investments in the third quarter.

Today the news was a little more grim, as officials were told that actually, the entire $ 165 million donation, and the earnings, which once inflated the gift to over $ 300 million, had recently been eliminated by margin calls due to drastically falling oil prices.

As of Monday OSU's gift had flat-lined completely and was declared virtually 'gone.'

Ironically Pickens will become both the hero and the goat in the drama of high stakes energy gambling, and of forunes won, lost and regained. Pickens made his historic gift in 2005, declaring "I'm tired of losing," when asked why he donated the huge amount to OSU athletics.

But the gift came with a stipulation, as Pickens insisted that he and appointee Mike Holder, who he later named Athletics Director, be given total authority over how the funds were to be spent, and by whom.

And the move appeared to be a stroke of genius as oil prices soared in a post Katrina economic climate, swelling the initial gift to over $ 300 million. That was before things began to turn in 2007, as international demand for oil failed to meet projections, causing the fund to come to a sudden standstill, and then dropping on mistakes made, and repeated by fund managers, managed by Pickens.

As oil prices started to slide in early 2008 Pickens increasingly found himself on the wrong side of the volatile oil futures game, betting 'short' as prices rose to $ 100, and then long as they began to fall, wiping out much of the two year gain in just four months, and causing AD Holder to announce that OSU's future 'Athletic Village' facility expansion had been put on hold in July.

Now the project looks like it will be shelved, as O-State Regents try to just keep their heads above water while swimming in debt.

The school had borrowed almost all funds used in the celebrated stadium expansion, using the almost $ 300 million balance in BP Capital as collateral.

Some OSU Regents are livid that their pragmatic warnings were not heeded when the fund was flush with cash.

Pickens and Holder apparently both resisted pleas by some OSU Regents to bank a good deal of the balance out of the fund when it exceeded $ 300 million, just 14 months ago. Instead both endorsed a plan of borrowing almost $ 200 million needed to expand and renovate Boone Pickens Stadium on the Stillwater campus.

Ironically, the stadium had been re-named after Pickens following his generous donation in 2005. But now that stadium sits as a drain of over $ 1 million per month in interest payments alone, on an already strapped athletic budget, which annually ranks between 8th and 9th in the Big XII conference.

Today, the problem is how to fund the surprise interest that is expected to top $ 13 million annually, when just months ago the school was going full steam ahead on an aggressive expansion of facilities that it believed were already paid for.
AgDotCom
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*If* that is true, OSU is most likely in some deep shjt.

Unless Pickens steps up with some more of his own dough to ease the pain, which most of me thinks he would. Or would he.
StupidisMe
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He's a scammer. Google turns up a ton of crap on him.

http://www.freerepublic.com/focus/news/2075363/posts

quote:
This column previously discussed the plan’s technical and economic shortcomings and marketing ruses. Today, we’ll look into the diabolical machinations behind it.

Simply put, Pickens’ pitch is “embrace wind power to help break our ‘addiction’ to foreign oil.” There is, however, another intriguing component to Pickens’ plan that goes unmentioned in his TV commercials, media interviews and web site — water rights, which he owns more of than any other American.

Pickens hopes that his recent $100 million investment in 200,000 acres worth of groundwater rights in Roberts County, Texas, located over the Ogallala Aquifer, will earn him $1 billion. But there’s more to earning such a profit than simply acquiring the water. Rights-of-way must be purchased to install pipelines, and opposition from anti-development environmental groups must be overcome. Here’s where it gets interesting, according to information compiled by the Water Research Group, a small grassroots group focusing on local water issues in Texas.

Purchasing rights-of-way is often expensive and time-consuming — and what if landowners won’t sell? While private entities may be frustrated, governments can exercise eminent domain to compel sales. This is Pickens’ route of choice. But wait, you say, Pickens is not a government entity. How can he use eminent domain? Are you sitting down?


At Pickens’ behest, the Texas legislature changed state law to allow the two residents of an 8-acre parcel of land in Roberts County to vote to create a municipal water district, a government agency with eminent domain powers. Who were the voters? They were Pickens’ wife and the manager of Pickens’ nearby ranch. And who sits on the board of directors of this water district? They are the parcel’s three other non-resident landowners, all Pickens’ employees.

A member of a local water conservation board told Bloomberg News that, “[Pickens has] obtained the right of eminent domain like he was a big city. It’s supposed to be for the public good, not a private company.”

RaiderAde
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Word on the street is that this is much worse, as in 10-20% of the university endowment was in the hedge fund along with just about every major donation since 2005, and now it appears like it may all be gone...
BohunkAg
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AG
Why in the blue hell would you put the University endowment in a hedge fund of all things? Sounds like terrible mismanagement!
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