At the School of Forestry, where I am a Master’s student, we spend our time thinking about things like how to reduce pollution and keep our rivers and faucets flowing clean. We know that a good water supply should be clear and transparent — no one wants to consume murky water. As consumers and environmentally conscious citizens, we want to know where our water comes from and where it goes.
We should ask the same of our University’s money. A truly healthy cash flow should also be transparent. As a paying consumer at Yale, I want to know where the money that makes this school run comes from and where it goes — and why, as a citizen of Colorado, I must now bear the costs of cleaning up the murkiness created by Yale’s secretive investment policies.
In 2002, residents of Colorado found out that Yale endowment money was behind a water-marketing scheme they had spent over $1 million and three years fighting. Yale’s money, invested by the mega-hedge fund Farallon in creating a company called Vaca Partners, was used to purchase a stake in the 100,000-acre Baca Ranch in the south-central San Luis Valley. The intent of this partnership was to sell and export the ranch’s groundwater to distant urban areas — a scheme destined to have serious repercussions for the adjacent Great Sand Dunes National Monument. Not only are the Monument’s wetlands — key resting grounds for migratory birds like sandhill cranes — fed by this water, but the famous dunes themselves are held in place partly by the aquifer.
Vaca Partners’ funds were also used to fund two cynical 1998 ballot initiatives designed to limit water use by the Valley’s ranchers and farmers and enable the private marketing scheme. In this poor and heavily Hispanic rural region, agricultural water supply equates with livelihood. Pumping groundwater away for private profit would put severe stress on the already tenuous economic circumstances of communities in the San Luis region. Residents of these communities had to devote substantial time and financial resources to combating these initiatives.
I’d like to be proud to be a student here at Yale, even when I’m back home in Denver. But it’s hard to defend the actions of an institution whose closed-door investment strategies have cost Colorado residents millions of dollars, threatened to destroy a symbolically and ecologically important landmark, and nearly caused economic disaster for one of the poorest corners of the state. And it’s doubly hard when the University reneges on its commitment to make amends for this sorry situation, as it has done in the past week.
When YaleInsider.org discovered the endowment connection in 2002, the discovery sparked outrage in the San Luis Valley and the Yale community alike. President Levin emerged from a long phone call from Colorado senator Wayne Allard seeming contrite and generous. Stating that Yale “didn’t feel comfortable profiting on the sale” of the ranch — a transaction only being negotiated in the wake of the failure of the ballot initiatives — Levin promised to donate “100 percent of the proceeds of the sale” (Yale Herald 2/1/02) to The Nature Conservancy (TNC), which would purchase the property using public funds and ultimately annex the land to the National Monument. Levin also told the Herald that he would look into changing the way the University supervises its partners.
But two years later, what has happened?
As the smoke of public outcry cleared, the reported size of Yale’s “donation” to the Nature Conservancy has shrunk from Levin’s stated $4 million (Denver Post, 1/31/02, and others) to only $1.5 million, as reported last week by the Yale Daily News (1/28). Taxpayers like me will pay the more than $33 million price tag for the ranch and will make up the difference for Yale’s shrunken donation.
We are left to wonder where the promised profits have disappeared to. Perhaps even more troubling is that we have no reason to believe that this sort of scenario would not happen again today. Indeed, things have only gotten murkier. The University has since obscured its public tax disclosure documents so as to make it more difficult to identify investments like the Baca Ranch, removing the business addresses of its taxable subsidiaries despite written requests for complete tax returns from the Connecticut attorney general. It has introduced no new environmental or social standards to guide its investments. It has increased the percentage of its endowment invested in hedge funds and private equity assets that are not subject to standards of public disclosure.
The decision of where to put Yale’s endowment rests entirely with the Corporate Committee on Investor Responsibility. Corporation members Janet Yellen, Charles Ellis, Victoria Matthews, Susan Crown and Chief Investment Officer David Swensen are the sole arbiters of the social and ethical responsibility of Yale’s private equity investments (see www.acir.yale.edu). And David Swenson’s comment on the Baca investment was that “[w]e have no misgivings about what our partner did or how he acted. He behaved responsibly throughout the entire process.”
One of key lessons of the Baca Ranch investment, I believe, is that full disclosure helped Yale do the right thing. Next week the Baca Ranch sale will close. We, as members of the Yale community, need to ensure that this fiasco becomes an opportunity for positive change. First, we must call on Yale to fulfill its promise to contribute at least $4 million to the Conservancy, so that taxpayers won’t have to shoulder an even larger burden as a result of this investment than they already have. Second, we must call on Yale to simply fill out its tax disclosure forms completely. And finally, we must call on Yale — over and over again, it seems — to bring all of its private equity investments into broad daylight. Clean and clear is as healthy a policy for investments as it is for water.
Andrea Johnson is a graduate student at the School of Forestry and Environmental Studies.