Baseball Articles
Oklahoma State: Another Financial Boone-Doggle
Posted by NateHeupel on February 8th, 2010 under Baseball, Basketball, Football, Recruiting
When you skip steps on the way up/ It has a way of catching up
-The Donnas, “Fall Behind Me”
For those of you who don’t keep up with our unintentionally hilarious friends in Stillwater, they have gotten themselves into yet another financial pickle.
First, it was the brilliance of T Boone Pickens’ hedge fund management. While the entire OSU Board of Regents were essentially screaming for Randolph Duke and Mortimer Duke Mike Holder and T. Boone Pickens to appreciate that they’d magically turned 165 million into 407 million and cash in the chips while everyone was ahead. Boone decided this was a bad idea. He then proceeded to go short on oil futures during the summer of 2008 when oil prices proceeded to spike. After this mishap, he then decided to go long on oil futures during the fall of 2008. Remember when gas fell down to the 1.50 a gallon range nationwide? Yeah, that’s when ol’ T-Bone decided to bet that oil prices would go up.
As a result, the hedge fund was completely wiped out by margin calls, and OSU was stuck with a million dollar a month interest payment. How did OSU end up with an interest payment that huge? Because Boonie thought it would be smart to build the stadium with borrowed money using the hedge fund value as collateral.
Slim Pickens ended up having to “donate” an additional 65 million to OSU just so they could finish the stadium. Since then, construction on OSU’s Athletic Village has come to a complete standstill. It’s five acres of gravel parking at this point. What’s worse is that OSU pissed away their money to build an indoor practice facility, leaving them to practice at elite training facilities like the Ponca City High School Football fields.
Let me be clear. Of the 12 teams in our conference, including perennial doormats Iowa State and Baylor, only one team doesn’t have an indoor practice facility for their football team, and that is Oklahoma State.
You’d think OSU would decide to be more conservative with future donations as a result of this utter and complete travesty. You would think that even Boone’s swollen ego would’ve been sufficiently deflated to stop making stupid investments.
You would be wrong.
Shortly after the first financial meltdown on the Plains, OSU announced it’s “Gift of a Lifetime” program. Through this program, 27 major donors would have 10 million dollar life insurance policies taken out on them. The annual premium payment would be around 16.5 million. After two years of payments, OSU has filed suit against Lincoln National Life Insurance Co. to recover the payments.
The heart of OSU’s pleadings is that OSU staff were hustled by falsified actuary tables and misleading projections. In a word: fraud. When OSU finally got their hands on the terms of the policy (two years and 33 million dollars paid in later), they realized just how badly they had been screwed, and now they’re trying to cut their losses. Mind you, OSU appears to have signed a document two years ago acknowledging receipt of this policy.
So, let’s try and get this straight. Boone University started out successfully beating the odds and doubling their investment. Instead of doing the smart thing, they let Pickens continue running the show unchecked. He promptly pissed away 407 million dollars like he was passing another kidney stone. After that, Boone State proceeded to try to cut corners again. Instead of taking their money straight to a conservative investment, T Boone Kramden decided it was time for another get rich scheme via profiteering from life insurance companies.
This is no less than an attempt to turn a buck out of a business that makes billions by specifically minimizing payouts and maximizing the income from premiums via investment. As Trips would say, think about that for a moment.
What lessons can we all take from Oklahoma State’s series of mistakes?
1) When your net worth is 400 million and you’ve doubled an investment of 165,000, it’s understandable that you would take a risk to try to redouble it. When your net worth is 400 million thanks to an investment of 165,000,000 and some good betting on the market, it’s time to call it a day.
2) When you have precisely one big money donor, that donor is the de facto athletic director. Anyone else is a puppet responsible for handling the press and micromanaging day to day affairs.
Thoughts?
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NorthDallasSooner said:
February 8th, 2010 at 7:31 pm
They never filled their stadium before expansion and they sure don’t now. Doubly dumb is that Holder won’t sell single game tickets for home football games against Oklahoma or Texas, assuring that his stadium will be 1/4 empty on national television.
I’m not from Oklahoma, so I never have had any real animosity to OSU. My wife grew up in Stillwater and her parents taught there. But their gut wrenching passion to try to catch OU is even more pronounced, and futile, than A&Ms is toward UT.
Soonervino said:
February 9th, 2010 at 3:29 pm
(In best Randall ‘Tex’ Cobb voice from Raising Arizona)
Why I myself recall in 1982 when an oilman named Saxon donated 30+million of Saxon Oil stock to OU to build the energy center. Oil goes bust, stock goes to $3 mil and I never so much saw the ground broken in my rather illustrious, and long, student career. I believe we got much more conservative in managing our nut from there. Lesson learned.
TaylorTRoom said:
February 10th, 2010 at 6:02 am
Nice article. One takeaway, that most fans don’t get, is that there is a lot of diversity in the manner that different colleges organize and manage their athletic departments. This is unlike pro sports, which all seem to follow a model of owner/GM/coach. Some colleges are run by an autonomous athletic director, others have the president involved actively, others have committees that oversee things, and some have a key booster calling shots. This last model never works.
The key mistake OSU made was that it used booster money for revenue sports. You don’t need to do that. If the demand is there, you issue bonds to pay for football and basketball facilities, and let the revenue make the bond payments. You use donated funds to pay for non-revenue sports.
NateHeupel said:
February 10th, 2010 at 8:15 am
Taylor,
That’s exactly right. The problem is that OSU is attempting to manufacture in 5-7 years what OU and UT built over 50 years. They have to cut corners on the way, and that’s why you’ve seen so many of their ridiculous policies like the “premium” game (either OU or UT) that they don’t sell single game tickets to. OSU didn’t have a choice here, because there was no demand. They couldn’t sell out a 50k seat stadium without UT or OU fans coming in droves, so they…expanded it and locked out the OU/UT fans?
LittleBigMatt said:
February 12th, 2010 at 9:55 am
Nice, except you’re forgetting oSu averaged over 50K the entire season. Texas was not a premium game last year and it still didn’t “sell out”. There were around 1500 tickets still available to any of those deep-pocketed Texans who wanted to pay for the suites. What, no takers? And Rick Perry says there’s no recession in Texas!
I do love the concern for your little brothers up north here. I understand that you guys are bitter about the cash infusion we received all at once. It took 50 years of donations to build the monster in Norman. We got it all at once. What’s the difference?
Red Baron said:
February 14th, 2010 at 11:13 am
Little BigMatt-
What I find extremely amusing is that Okie Lite is constantly trying to “copy” & “steal” what every other team in the Big 12 has built. Let me give you some examples, let’s start with the “Gun’s Up” sign that we’ve had at Tech for well over 40 years that Okie Lite just decided one day a few years ago that that was going to be their “sign” as well. Need I list ALL of the examples that the other posters have made about copying the whoren’s & OU??
Bottom line is this, all you fans in Stoolwater, by letting that tool, T Bonehead Pickens come in and literaly run your University & Athletic Department, all of you are trying to instantly copy & have what the rest of us in the big 12 have earned & built over the years, and you’re trying to do ALL of this, I believe as you said, “in 5-7 years”. Here’s the biggest key & something you don’t seem to get, you have to “earn” what the rest of us have in football. You can THINK you are going to become the premier team of the Big 12 by just adding on to a stadium, or your basketball gym, but you have to “earn” it on the field/court, which you haven’t come CLOSE to doing, nor will you. As much as you hold on to the fact that T. Booneheads money can get you there like grim death, the cold hard fact is, he cannot “buy” you victories, period. So, good luck in making a few dollars and actually holding on to them, as well as finishing out whatever facility is not finished today…….& OU, UT, Tech & the rest of the Big 12 will be waiting for you on the field or gym floor where we’ve all “earned” our success. Maybe one day little brother, you’ll learn that it’s all about hard work over time that leads to success, not having the best shoes, pants, or helmets, it’s about who’s wearing them.
I will say that I do sincerely appreciate the laughing stock y’all have become over almost literally bankrupting your University & Athletic department, it makes for good banter for the rest of us Big 12 schools. So, just keep on living with your heads in the ground like Ostrich’s b/c it’s very entertaining for the rest of us!
parlin said:
February 14th, 2010 at 11:40 am
This is no less than an attempt to turn a buck out of a business that makes billions by specifically minimizing payouts and maximizing the income from premiums via investment.
Let me get it straight: this is a bad thing?
NateHeupel said:
February 14th, 2010 at 4:23 pm
parlin,
I would say that the results speak for themselves, wouldn’t you?
NateHeupel said:
February 14th, 2010 at 4:52 pm
I understand that you guys are bitter about the cash infusion we received all at once.
Right up until you pissed it away in 4 months, then we were just laughing at you.
It took 50 years of donations to build the monster in Norman. We got it all at once. What’s the difference?
The difference is that we annually average 100+% capacity year in and year out while maintaining a waiting list for season tickets, that we are on our 2nd indoor practice facility instead of relying on better drainage and trips to Ponca City, and that we have the ability to raise significant capital almost at will because we’re not reliant on one guy being up or down in the market.
parlin said:
February 14th, 2010 at 5:12 pm
I would say that the results speak for themselves, wouldn’t you?
Just wait till this wind turbine stuff takes off. We’ll see who’ll control all the mortgages in Bedford Falls . . . er . . .Pickensville . . then.
Ag_in_TX said:
February 15th, 2010 at 4:43 am
The first response on this thread off handedly compared OSU efforts to A&M’s. That is an invalid comaprison. A&M, even in the last two seasons with season ending losing records, puts 80,000 people in the seats – many with the large donations to the 12th Man Foundation, thus effectively making those even more valuable seats.
There are four big money programs in the Big XII – A&M, Texas, OU and Nebraska. Kansas almost rises to that same level due to insane basketball income. The rest of the conference are the schools that will not make the next shake down. Remember – it’s ALWAYS about the money.
Soonervino said:
February 18th, 2010 at 9:56 am
I believe I would tap the brakes a bit on Tech being in the same conversation as OU & UT in the powers of the Big 12 conversation. Built what over the years, exactly?
And Parlin…last post…funny.