Yale President Richard Levin has agreed to donate an estimated $15 million in University investment profits from the sale of its interest in the 100,000-acre Baca Ranch to aid the creation of a national park in Colorado, Sen. Wayne Allard, R-Colo., said.
The announcement came less than 24 hours after Colorado residents and politicians criticized Yale’s involvement in a controversial water proposal at the ranch in a Denver Post report.
Yale will now donate its profits to the Nature Conservancy, which plans to buy the entire ranch and then sell it to the federal government for inclusion in the neighboring Great Dunes National Park. Congress had already earmarked $10 million for purchasing the land from the conservancy.
Yale’s ownership of the land was originally made public in a report by a researcher for Yale’s unions, published on YaleInsider, a Web site sponsored by the unions. The report comes amid a longstanding debate over Yale’s policy of secrecy regarding investment holdings, and weeks before Yale and its unions are expected to negotiate contracts for Yale’s nearly 4,000 clerical, technical, service and maintenance workers.
The report described Yale’s involvement in a limited partnership with Vaca Partners, a part-owner of Cabeza de Baca LLC and the ranch. Cabeza de Baca and San Francisco investment firm Farallon Capital Management each own half the ranch. Cabeza de Baca had proposed to tap the area’s underground water supplies and sell the water to growing cities on the other side of Colorado’s Front Range. Environmentalists said such a move would endanger the 700-foot high dunes in the adjacent national park.
Discovery of the Investment
University Secretary Linda Lorimer said that Levin and the other officers first heard of Yale’s involvement in the San Luis Valley water controversy last week. Allard contacted Levin last Thursday to discuss the issue.
Allard said he first discovered through the YaleInsider article that Yale was a major owner in the partnership with Farallon.
Allard said he contacted Levin, who told him that Farallon had attested that the project would not damage the environment.
“It would have hurt the valley environment and put a lot of ranchers and farmers out of business. In Colorado, where the water goes is where the wealth goes,” Allard said.
Levin was shocked to discover the potential harm to the environment and valley economy, Allard explained, and decided to do something to “make things right for the people of Colorado.”
Levin is on a business trip and could not be reached for comment.
Allard estimated that Yale purchased their interest for $15 million and the eventual selling price would be $30 million.
“We don’t know what exactly the cost for Yale will be, but I think it was a great gesture when Yale offered to return their profits backpeople,” said Allard. “I want to commend him and Yale University for doing the right thing when they got the facts, and they said they are an environmentally conscious university and try to do the right thing. I think they were practicing what they preach.”
University spokeswoman Helaine Klasky said a sale was already in the works to the Nature Conservancy.
“We decided just not to make any money off of the deal,” Klasky said. “It was a pretty unique way to handle a situation.”
Yale’s Investing Strategies
To reach a decision, Lorimer said Levin consulted on Thursday primarily with Yale Chief Investment Officer David Swensen and Allard. She said Levin also talked to various investment managers at Farallon.
Although some members of the Yale Corporation — Yale’s highest policy making body — serve on a Corporation Committee on Investor Responsibility, it is unclear whether Corporation members had any actual say in Levin’s decision.
Janet Yellen GRD ’71, chair of the corporation committee, would only comment that she was briefed on the water rights’ situation.
“I think that President Levin’s response was highly appropriate,” Yellen said.
William Goetzmann, a School of Management professor who heads a University-wide investment advisory committee, said his committee played no role in the decision to donate the profits.
“We are charged as the advisory committee to the Yale Corporation to recommend how Yale should vote its shares [for publically held corporations] when it comes to ethical issues,” Goetzmann said. “The decision by Yale to make a donation would not be a matter that would be brought up before the committee.”
Swensen never comments on Yale’s $10.7 billion endowment, but Lorimer said there was no effort to shroud the investment in secrecy.
“In this case, it wasn’t a case of keeping it secret, [Farallon’s] role was that of a limited partner,” Lorimer said. “Actually there was no issue of secrecy. By nature in a limited partnership you rely on the general partner.”
Klasky also said that due to the nature of the limited partnership Yale had no say over the operation of the funds.
“[Farallon] did their own surveys and studies and thought it was a good investment and that it wouldn’t be harmful to the environment,” Klasky said. “The senator and governor felt that it was.”
The Labor Connection
The Colorado investment was originally reported by a researcher for the Federation of Hospital and University Employees, which includes two of Yale’s recognized unions and two groups trying to gain recognition.
Federation spokeswoman Deborah Chernoff said the report, and the Web site it was posted on, were aimed at providing information about Yale.
“Anytime that you’re engaged in business or in a partnership, or at least trying to engage in a partnership, it is part of the strategy to learn as much as you can about the people you’re dealing with,” Chernoff said. “It’s obvious it doesn’t have direct bearing on negotiations, but it’s part of engaging with the people figuring out who you’re dealing with.”
Rose Murphy, a union researcher who investigated and wrote the report, said the Web site received 10 times as many hits the day the story was first reported in the Denver Post as the day before.
The Web site also includes a report critical of the role of the biotechnology industry in New Haven, articles on the union-backed candidacy of the Rev. W. David Lee for a seat on the Yale Corporation, and the response by campus groups to a report on slavery, published this summer by three other union researchers.
“We are at a point where I think that there is more of a demand for information,” Local 34 President Laura Smith said.
Smith added that the demand was likely in part because of the negotiations, and in part because of general interest.
But Chernoff said the report should not be viewed only in the context of the negotiations.
“There’s a tendency to view everything right now that the union does, or says, or looks at, or talks about as trying to boil it down to ‘where does this fit into with contract negotiations?'” Chernoff said.
“It’s too narrow a question. The real question is where does this fit into our relationship, and when there are sort of factual or informative issues raised, is this good information, is it accurate, now that we sort of know it. If you can say yes, how do we assess that information, what do we do with it?” he added.
–The Associated Press contributed to this story.