New Gift Bolsters Oklahoma State After Risky Bet Sinks Original Donation

T. Boone Pickens gave $63-million to Oklahoma State University athletics last month to allow the university to complete renovations to its football stadium, after a prior gift he had made for that purpose dropped sharply while invested in his own hedge fund.

Oklahoma State University officials applauded the latest gift from the billionaire oilman.

“We just continue to be overwhelmed by Mr. Pickens’s generosity,” says Gary Shutt, a university spokesman.

But at least one professor on the campus says that university administrators were reckless in risking the funds they needed for construction by putting Mr. Pickens’s gift and $31-million from others into his volatile hedge fund.

“If Oklahoma State University is going to take your gift and gamble it away, what does that say about your willingness to make another gift?” says Bob Darcy, a political-science and statistics professor who has served as head of the university’s Faculty Council.

Investing a Gift

Mr. Pickens’s initial gift — $165-million in January 2006 — was the largest donation ever made for an athletics program, according to Oklahoma State.

The university put the entire gift — as well as an earlier $6-million gift from him, and $31-million that had been raised by the golf program — into BP Capital, Mr. Pickens’s energy-focused hedge fund.

“We felt like investing it with him was a smart thing to do,” Mr. Shutt says.

The fund rode the commodities boom to strong returns, and the value of the athletic department’s original $202-million investment peaked this July, above $400-million.

Then the fund plummeted as markets fell sharply. The athletic department’s investment lost more than two-thirds of its value in just three months, and was worth just $125-million when Oklahoma State cashed out this month.

Oklahoma State had been borrowing money to finance the football-stadium renovations, so that it could leave Mr. Pickens’s gift in the hedge fund.

But the university decided to withdraw the money this month to ensure that it would be able to finish the final part of its renovation, an area around the west end zone that will include offices, locker rooms, and weight rooms for the football team.

The university expects to complete that work before the start of the 2009 season.

“The university made the decision to take the money out of the fund because of the current financial climate and in order to fund the completion of the west end zone,” Mr. Shutt says.

All together, the football-stadium renovations will cost $260-million. Mr. Pickens’s gifts for the project will not fully cover those costs.

Projects on Hold

When Mr. Pickens’s 2006 gift was announced, he envisioned earning strong returns on the gift in his hedge fund so that he could pay for both renovations to the stadium, plus the creation of an “athletic village” that would include practice fields and facilities for soccer, tennis, track, baseball, and equestrian sports.

Amid grumbling by some landowners, the university bought and leveled homes and rental properties to clear several city blocks for the athletic village.

Those projects are now on hold. Mr. Shutt says an indoor practice facility for several sports team, at a cost of $60-million, would be the first priority when funds are available.

“We certainly still have the vision and the plans to move ahead with those projects,” Mr. Shutt says. “It’s just not happening as soon as we had hoped.”

In a statement, Mike Holder, the university’s vice president for athletics, made clear that the university would need support from other donors to make up the gap in simply completing the stadium.

“With Boone’s support and the continuing involvement of other donors, we are able to continue working toward the completion of our stadium project,” the statement said.

Mr. Shutt declines to say how much the university borrowed to pay for the portions of the renovation that have already been completed.

Oklahoma State has less than 5 percent of its foundation assets — which were worth $448-million at the end of June, not including the gifts to athletics — still invested in BP Capital, according to Mr. Shutt.

He points out that the foundation also has benefited in recent months from holding 15 percent of its assets in cash.

“These are unsettling times for all investors, but we are confident in the long-term performance of our investments and the long-term stability of the U.S. economy,” Mr. Shutt says.

Mr. Darcy, the professor, says the university made a mistake in investing alongside Mr. Pickens in the first place.

Now, Mr. Darcy says, the university faces a triple whammy — steep investment losses from BP Capital’s plunge, increased wariness by other donors about how the university might invest their gifts, and the challenge of maintaining solid relations with the institution’s most-generous donor.

“Once you’re in, it’s very hard to cash out,” Mr. Darcy says. “You’re basically telling the guy who gave you the money, and the guy who you expect to give you more, that you don’t trust him anymore.”

$100-Million Grant

But Mr. Pickens is showing no signs of losing interest in Oklahoma State.

His $63-million gift to the athletics department last month was his second major donation to the university this year.

In May, his foundation pledged $100-million to endow professorships at the institution.

Mr. Pickens’s spokesman, Jay Rosser, didn’t return phone calls. But in a statement released by Oklahoma State, Mr. Pickens alluded to the strong performance of the football team, which is currently ranked in the top 10 nationally.

“I’m excited at the performance of our coaches and players,” it said, “both on and off the field.”