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What's the deal with T. Boone Pickens' $165 million donation to Oklahoma State?

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okst.jpgYou've probably noticed that our economy is in a bit of a slump right now. If you haven't, then allow me to congratulate you on an amazingly blissful existence.

Sooner or later, this "crisis" or "mild depression" or whatever the experts are calling it these days was bound to trickle down to the level where it would really make an impact.

College athletics.

Three years ago, oil tycoon T. Boone Pickens made a $165 million donation to Oklahoma State University, which was to be used to improve the athletic facilities. But, as the New York Times reports, things have gotten a little complicated.

"Those funds, along with $37 million from other donors, were invested in BP Capital Management, a hedge fund controlled by Pickens. At the time, it looked like a windfall that would keep on giving. Instead, Pickens recently acknowledged that his investments had lost $1 billion this year amid the financial crisis.

Now, building on Oklahoma State's athletic village has been held up, and the athletic director, Mike Holder, said the project would have to wait until Pickens's financial situation improved. Holder and a spokesman for BP Capital declined to disclose the current value of the university's investment in Pickens's hedge fund.

More is sure to develop in this story as we found out just how bad things are in Stillwater, or if it's a non-issue. Rumor has it (from some commentators) that there will be more news on this on Monday.

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Well, there was one problem with Boone’s donation. He left the donation in the hedge fund, which initially seemed to be a good idea 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 by fund managers, who were managed by Pickens.

Anyway, Pickens resisted pleas by some OSU Regents to bank a good deal of the balance out of the fund when it exceeded $300 million, which was only 14 months ago. Instead Pickens decided on borrowing almost $200 million needed to expand and renovate Boone Pickens Stadium on the Stillwater campus, despite the fact that the donation was dropping in value.

Now, here’s the bad news. Yesterday all indications were that OSU Regents had been told last Friday afternoon that a large portion of the Pickens donation in the BP Capital hedge fund was virtually wiped out by margin calls on the funds investments in the third quarter.

Well, that’s not actually the case. It seems that ALL of the money is gone (the link provided is for a members site, but you can read the full article here).

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 ‘gone.’

And just so you know, the school has already made a lot of those improvements to the football field . That’s because the school borrowed almost all funds used in the stadium expansion plans using the $300 million balance in BP Capital as collateral.

Yikes. So, um, Oklahoma State is now in debt of close to $300 million dollars.

I have no idea how in God’s name they’re going to get out of this. State schools don’t exactly have an extra $300 million sitting around.

Has a college ever actually declared bankruptcy? I’m not sure, but we’re probably about to find out.

For a skeptical view of a huge tax break Pickens got as a result of his donation, see the Tax Policy Foundation’s blog here.

Another version of the story appears on texags.com.

Your story is goofy and inaccurate. Wait until Monday and you will see.

Kyle responds: The New York Times is known for being goofy and inaccurate.

Wow! Your story is way off base. OSU still is in possession of the original $165 million Pickens donation and then some. Your comment about further developments is dead on right -- on Monday, October 27th (tomorrow), Pickens and OSU will announce another donation to OSU athletics of at least an additional $65 million!

OSU's total debt: Absolute Zero!

The author of the New York Times article is a former writer for a University of Oklahoma sports website who has it in for Oklahoma State University athletics. You guys need to check your sources.

I don't know that I've ever seen a groups of stories so totally off-base and without facts.

Unbelievable.

How is the New York Times not a credible source? I hope this happens, and everything turns out great for OK State.

Only Rednecks would think the NY Times was not a credible source.

Of course rednecks were dumb enough to let a redneck named T BOONE Pickens lose all of their money.

That it so incredible. Spending money on the nonsense one is really not practical. Nowadays, to help our economy, we have to learn how to repair our credit if we have the chance. Hopefully, you'll never have to repair your credit, but chances are that you'll have to at one point or another. You don't want to make minimum payments unless you absolutely have to, as you want to pay things off as quickly as possible. Your creditors won't like it, but it's not as if they can punish you from saving money later in life. If you fall short, you can always use quick payday loans if necessary. It's better to dig your own way out as soon as possible than need debt relief while trying to repair your credit.

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This page contains a single entry by Kyle Koster published on October 22, 2008 1:46 PM.

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