University of Texas Investment Management Company

Collin Poirot, Plan II and communications studies senior, voices his opinion of the divestment legislation.
Photo Credit: Jack DuFon | Daily Texan Staff

Students debated a Student Government resolution that would support divestment of the University of Texas Investment Management Company (UTIMCO) from corporations that supporters said facilitate in the oppression of the Palestinian people.

The legislation, introduced Tuesday, states that UTIMCO’s investments in these corporations violate University values. The legislation asks UTIMCO to divest from five specific companies in which UTIMCO holds shares: Alstom, Cemex, Hewlett-Packard, Procter & Gamble, and United Technologies.

“UTS continues to hold securities in — and thereby profits from — companies which have an active role in the human rights abuse and institutionalized structural violence perpetrated against the Palestinian people, consequently making it a complicit third party,” the legislation states.

Collin Poirot, Plan II and communication studies senior and an author of the document, said the investments directly affect students despite the overseas distance of Palestine and Israel.

“This resolution has direct implications for a number of UT students,” Poirot said. “These companies that our tuition dollars are supporting are directly responsible for the persecution and oppression of family members of UT students.”   

Rebecca Hanai, an advertising junior who spoke in opposition to the legislation, said the issue is too divisive for SG to take a vote.

“A resolution proposing a divestment from Israel would indeed divide our campus for the worse,” Hanai said. “As a Jewish student leader on this campus, I can personally say that I attend a school that supports such a polarizing issue.”

The divestment resolution, which members of the Palestinian Solidarity Committee and other allied groups drafted, is part of a larger “boycott-divestment-sanctioning,” or “BDS,” movement that Palestinian civil rights organizations have started.

Hanai said BDS movements cut off dialogue between the two  groups.

“The notion of [BDS] movement coming to the Forty Acres is a regression to change of any kind,” Hanai said. “The AR resolution poses a threat to our campus, not only by demoting justice, human rights or peace at UT-Austin, but also by repressing any opportunities for open dialogue.”

Amy Nabozny, College Republicans president and history and government junior, said she thinks the resolution would target Israel. 

“This piece of legislation would be responsible and deliberately singles out and demonizes the only Jewish state and few democracies in the Middle East,” Nabozny said.

Law student Mohammed Nabulsi, a law school representative and author of the resolution, said Unify Texas, an organization opposed to divestment, has misrepresented UTDivest, the movement that supports the resolution.

“It’s not asking for a divestment from businesses who do business in Israel; rather it’s asking for divestment from a little, limited amount of companies … all whom do business in the Occupy [Palestine] territories, participating in illegal activity and also participating in a violation of human rights,” Nabulsi said.

Student groups at other universities, such as UC-Davis and DePaul University, have been successful in passing similar legislation. UT’s SG also passed a resolution last session asking for UTIMCO to divest from companies that facilitate in genocide in Sudan.

The legislation will be sent to the Government Affairs Committee this week. 

Photo Credit: Caleb Kuntz | Daily Texan Staff

Student-led movement UTDivest will propose legislation to Student Government asking for the University of Texas Investment Management Company to pull investments from corporations the group believes facilitate the oppression of Palestinians. 

Unify Texas, another campus movement, has expressed disagreements with UTDivest and has garnered support through social media and an online petition. UTDivest, which the Palestinian Solidarity Committee founded, is part of a larger boycott-divestment-sanctions (BDS) movement started by Palestinian civil society organizations.

Katie Jensen, SG graduate student representative, sociology graduate student supporter of UTDivest, said the movement is fighting for human rights and equality.

“I don’t want my tuition money going to the corporations that have produced the infrastructure that enables the segregation, inequality and painful uncertainties that subjugate Palestinian people,” Jensen said.

Brandon Mond, government senior and one of the founders of Unify Texas, said divestment divides pro-Israel and pro-Palestine groups and cuts off dialogue.

“Dialogue and the free exchange of ideas is sacrosanct at a university,” Mond said. “Where the people who are bringing this divestment movement refuse to engage in dialogue with groups that have opposing ideologies, we think that’s wrong, and we oppose that.”

Mohammed Nabulsi, SG law school representative and supporter of UTDivest, said Unify Texas does not understand the BDS movement.

“Unify Texas relies on a mischaracterization of BDS and our goals here on campus in order to make a straw man argument,” Nabulsi said. “BDS is a step towards leveling the negotiating playing field so that the Israeli government is forced to take Palestinian demands seriously.”

The BDS movement has gained traction at other American universities, such as DePaul University and University of California-Davis. Student groups at these schools have been successful in passing student legislation asking for the divestment of their universities from corporations that the groups believe help to oppress Palestinians. 

Nabulsi said UTDivest plans to introduce its legislation in support of divestment at the SG Assembly meeting Tuesday. The legislation states that investing in corporations which, according to UTDivest, participate in illegal activities or facilitate in oppression of the Palestinian people compromises the University's core values.

“The University of Texas fails to uphold its values of ‘improving the human condition at local and global levels through programs that advance equality’ by investing in companies that facilitate and profit from the illegal occupation of Palestine and systematic human rights violations,” Nabulsi said. 

Mond said their cause has no political affiliations.

“You don’t have to be of a certain mind-set to oppose BDS in the Israeli-Palestinian conflict,” Mond said. “We have pro-Israel students who are against it for obvious reasons. We have pro-Palestinian students who are against divestment also because they don’t think it’s the place of Student Government to decide this.”

University spokesman J. B. Bird said the Office of the President is aware of the two groups, although they have not been approached about the situation. The UT System Board of Regents would make the ultimate decision to divest, according to Bird.

“We have not been formally approached about this question, and we do not have any formal response,” Bird said. “It hasn’t been brought up, so we don’t have a position on it.”

Correction: This article has been amended since its original publication. UTDivest's proposed legislation says investing in corporations that participate in illegal activities or facilitate the oppresion of Palestinian people is contrary to the University's core values.

Decreasing international crude oil prices may affect the money available to the UT System, according to Bruce Zimmerman, CEO and CIO of the University of Texas Investment Management Company.

From June 2012 to June 2014, the market value of the Permanent University Fund, or PUF, increased from $13.1 billion to $17.2 billion, according to reports from UTIMCO, the organization that invests money for the System.

The PUF is an endowment containing 2.1 million acres in West Texas that was created by the Texas Constitution to benefit the UT and Texas A&M University systems. The proceeds from the sale of oil, gas, sulfur and water royalties are invested in the form of stocks, bonds and equity interest to establish the Available University Fund, or AUF. Two-thirds of these funds go toward the UT System, and one-third goes to the Texas A&M system.

Scott Kelley, executive vice president for business affairs at the UT System, said the PUF’s market value grew as a result of increased oil production in West Texas.

“The new technology and horizontal drilling and the ability to extract oil and gas from some of the shale that’s out there has just created a whole new wave of production,” Kelley said.

In August, United States crude oil production averaged an estimated 8.6 million barrels per day, the highest monthly production recorded since July 1986, according to a report from the U.S. Energy Information Administration. The report also said demand for oil in industrialized economies is weakening, which may be causing oil prices to drop.

As the price of oil declines, Zimmerman said the revenue contributed to the PUF is also affected.

“Rising oil prices means more money coming into the endowment,” Zimmerman said. “Falling oil and gas prices mean less revenue.”

While the government report shows declining prices, Kelley said the market price for oil has remained steady for a number of years between $80 and $100 a barrel, allowing for an increase in production.

“If it were to drop to $50 a barrel or do something dramatic, then the drilling would likely be curtailed and even some of the production may stop,” Kelley said.

Zimmerman said even though the revenue from West Texas oil affects the PUF, UTIMCO does not invest heavily in natural gas and oil companies, making it less susceptible to the volatility of oil prices.

“We have a very diversified portfolio,” Zimmerman said. “It’s diversified globally. It’s diversified across stocks, bonds and real assets. It’s diversified across private equity and public equity [and] hedge funds. We have a relatively small amount of the endowment invested in oil and gas.”

Zimmerman said about 10 percent of PUF funds are invested in natural resources across the globe. He said UTIMCO tends to invest most heavily in stocks, since the System endowments are meant to last for an indefinite period of time.

“The biggest impact on the investment returns is whether the stock markets are going up or down,” Zimmerman said.

As The Daily Texan reported Friday, a former UT System chancellor, R.D. Burck, serves on the Executive Committee of the University of Texas Chancellor’s Council, an advising board to the current chancellor, Francisco Cigarroa. Cigarroa serves on the board of directors for the University of Texas Investment Management Company, an independent company that manages the investments of both the UT and Texas A&M systems. Among UTIMCO’s many investments is a $1.5 million stake in American Campus Communities, a student-housing company, of which the chairman of the board of directors is none other than
R.D. Burck.  

Absent any new information, it seems that the relationship isn’t entrenched enough to cross the bounds of legality. Burck isn’t actually an employee of ACC, although, as the chief representative of its shareholders, he would have considerable influence over the company. And the investment was made in 2008, three years after Burck left the UTIMCO board of directors, although admittedly, his time on the boards of ACC and UTIMCO overlapped for a period of a year.

UTIMCO spokeswoman Christy Wallace told the Texan that the company maintains a restricted list of businesses that are off-limits for investment, and that no money would have been invested in ACC while Burck served on both boards.

“[American Campus Communities’] public equity securities were on the restricted list when Mr. Burck was on the UTIMCO board, so none of UTIMCO’s investment managers held any of their securities at that time,” Wallace said. “As Mr. Burck is no longer chancellor or on the UTIMCO board, [American Campus Communities] securities are no longer on the restricted list.”

It’s also worth noting that UTIMCO has seen a good rate of return on the money; ACC’s stock has risen by approximately 75 percent in the five years since the investment. And $1.5 million isn’t even a drop in the $21.7 billion bucket that is the UT System’s endowment.

On the other hand, this isn’t the first time UTIMCO investments have been linked to high-profile members of the System leadership. In 2011, the company invested $200 million in a different private investment firm, Post Oak Energy Capital, which in turn invested $60 million in an oil and gas company tied to UT System regent Alex Cranberg that drills on land owned by the University.

It’s impossible to tell whether the investment in ACC happened because of Burck’s involvement. But his and Cranberg’s multi-faceted relationships with UTIMCO are a predictable phenomenon. With such large quantities of money invested in such a large number of businesses, it’s unsurprising that some of it ends up going near the System’s leaders — many of whom are prominent businessmen in their own right.

UT System endowment assets hit a new high at the halfway point of the current fiscal year with a combined worth of $21.7 billion on Feb. 28, according to documents from the University of Texas Investment Management Company’s most recent meeting.

The Permanent University Fund, a public endowment made up of 2.1 million acres of land located in West Texas, earned 8.4 percent in investment returns in the latest 12-month period ending in February. Meanwhile the General Endowment Fund, largely made up of donations from alumni and others, earned 8.5 percent in investment returns over the same period, according to UTIMCO CEO Bruce Zimmerman. UTIMCO is the nonprofit corporation that oversees the UT and Texas A&M systems’ investments. 

Zimmerman said he hopes investment returns on the endowment continue to increase, but stressed the importance of taking a long-term view when gauging the returns’ success.

“We certainly hope there will be gains, and we actually hope to make more than what gets distributed [to the System],” Zimmerman said. “Specifically with respect to investment returns, what we will expect is ups and downs, because we are in a period of volatility in capital markets.” 

According to figures Zimmerman provided, the various funds managed by UTIMCO have grown overall in the last 10 years. For the 10-year period ending Feb. 28, the Permanent University Fund’s returns hovered at an average of 9.1 percent growth annually, while the General Endowment Fund had an annual average return of 9.2 percent over the same decade. 

The flow of investments between five companies links an oil and gas production company that drills on university land to the UT System’s investment company and to UT System Regent Alex Cranberg.

In 2011, the University of Texas Investment Management Company committed $200 million to a private investment firm that has a financial stake in an oil and gas production company that operates on University land — B C Operating Inc. Cranberg, an energy investor, is chairman of a holding company that is partially owned by another investor with a financial stake in B C Operating. 

UT System spokeswoman Jenny LaCoste-Caputo said UTIMCO CEO Bruce Zimmerman confirmed UTIMCO is aware of the connection to B C Operating, but it presents no investment conflict.

UTIMCO’s $200 million commitment was to Post Oak Energy Capital, a private investment firm. Post Oak then committed $60 million to oil and gas company Crown Oil Partners IV, LP. The owner of Crown Oil owns half of B C Operating. B C Operating drills on part of the 2.1 million acres of land that make up the Permanent University Fund and has transferred ownership of some of its leases to Crown Oil.

Mark Warner, UTIMCO’s managing director of natural resources investments, said UTIMCO is involved in its partners’ investment decisions, but he would not elaborate on Post
Oak’s investments. 

“I will say in any of these partnerships there is a very thorough discussion on strategy and approach,” Warner said. “We certainly had that discussion with Post Oak. This is an
ongoing conversation.”

UTIMCO, a nonprofit corporation established by the System, invests profits from leasing the land for projects ranging from oil and gas production to cattle herding. Through the Available University Fund, the UT System receives two-thirds of profits from those investments and the Texas A&M University System receives one-third. UT-Austin received $200 million from the fund, which made up about 9 percent of the University’s 2012-2013 operating budget.

B C Operating is a long-time University land lease owner, with records of oil production dating back to the 1950s, according to University Lands Office records. Through the lease sales, B C Operating has contributed more than $921,000 to the Permanent University Fund, not including production royalties. 

Post Oak was two years old when it entered a limited partnership with UTIMCO. Limited partnerships are one of multiple investment arrangements UTIMCO makes.

Warner said Post Oak presented an opportunity to create a private equity partnership with a smaller, middle-market company that invests specifically in the energy sectors.

“They were well known to many people known by us,” Warner said. “It was easy to do diligence on them.”

Warner said UTIMCO’s portfolio had a gap that Post Oak’s market could fill.

Cranberg, appointed by Gov. Rick Perry to the UT System Board of Regents in 2011, is connected to Crump Energy Partners, whose owner also owns the other half of B C Operating. Like Crown Oil, Crump Energy has partial ownership of some land leases originally obtained by B C Operating from University Lands. Crump Energy received a $100 million commitment from energy equity company Quantum Energy Partners.

In a statement to The Daily Texan, Cranberg said Quantum Energy Partners owns 11 percent of his company, Aspect Holdings. Aspect Holdings, a private exploration and energy investment company, is also an investment portfolio company for Quantum Energy Partners, according to Quantum Energy.

However, Cranberg said he does not receive any compensation from Quantum Energy Partners. Quantum Energy continues to have a financial stake in Aspect Holdings. Cranberg also has other connections to the founders of Quantum Energy through the creation of a hybrid investment fund and an oil and gas operating company called Quantum Resources Management, but it does not have investments in B C Operating or its affiliated companies. 

The UT System recently laid out a new disclosure system to avoid conflicts of interest by requiring faculty, administrators and staff who serve on boards of other organizations or participate in businesses beyond their university to disclose their involvement.

LaCoste-Caputo said this policy does not apply to the regents because they are governed by state conflict of interest laws.

As a regent, Cranberg is required to file a personal financial statement with the Texas Ethics Commission, which was obtained by The Daily Texan. But the financial statements do not require public officials to report who has financial ties to their businesses.

Published on March 8, 2013 as "Web of investments". 

On Nov. 19, UT students and Austin community members marched through campus chanting, “Not another nickel, not another dime, no more money for Israel’s crimes.” (A separate protest with many of the same protesters took place on Nov. 17 in downtown Austin.) Speakers, including UT journalism professor Robert Jensen and Saif Kazim, the president of UT’s Society for Islamic Awareness, explained the current crisis in Gaza and the necessity for a domestic campaign to end U.S. funding of the Israeli occupation, bombardment and economic suffocation of the Palestinian people. The Nov. 19 march intended to show UT students that the campaign could begin here on campus.   

Public action is necessary because of the United States government’s complicity in the occupation. Both the protest on campus and downtown saw a broad base of supporters come out in opposition to Israeli occupation, which was deemed illegal by United Nations Resolution 242 and the International Court of Justice ruling in 2004. These two protests are following a global outcry against the newest act of Israeli aggression.

UT students must understand that not only their federal government, but also their University is complicit in Israeli war crimes. UT’s investment company, University of Texas Investment Management Company (UTIMCO), invests in the industry built around the Israeli occupation of Palestine. UTIMCO profits from investments in companies like United Technologies, which produces UH-60 Blackhawk helicopters for the Israel Defense Force. These UTIMCO investments follow the U.S. government’s lead, which, according to Amnesty International, sells attack aircraft and missiles to Israel.

Social movements have traditionally flourished on college campuses. In April 1986, 42 UT students protesting apartheid refused to surrender a shanty they had constructed on the West Mall and were arrested by UT police. The following Friday, 182 students were arrested during a successive, much larger West Mall rally in protest of apartheid in South Africa at that time. The protesting students had a specific demand: They wanted the University to divest, or strip itself of its financial interests, in South Africa. Today, UT students again have the power to shape the Israeli-Palestinian conflict.

Within hours of Israel’s launching Operation Pillar of Defense two weeks ago, President Obama voiced his support for Israel’s right to self-defense — a claim that ignores Israel’s disproportionate use of resources and force. Obama’s position represents only a fraction of the U.S. government’s pro-Israeli foreign policy, which provides Israel with $3 billion a year in foreign aid. Arguably, the U.S. policy violates the Foreign Assistance Act of 1961, which declared it illegal for the U.S. government to fund foreign governments that are consistent human rights violators.

Israel has faced a long history of criticism by various human rights organizations and official bodies of the United Nations.

In 2000, the United Nations Human Rights Committee reported “demolition of houses and closure of the Palestinian territories” and the “death of 127 civilians, including many children,” which constitute “war crimes.” In 2004, the International Court of Justice ruled that the wall built in the Occupied Territories breaches international humanitarian law by “imposing restrictions on the freedom of the inhabitants” and limiting “access to health services, educational establishments and primary sources of water.” An Amnesty International report titled “Operation Cast Lead: 22 Days of Death and Destruction” reports that Israeli F-16 combat aircraft “targeted and destroyed civilian homes … often while they slept” and that Israeli Hellfire missiles killed “children playing on the roofs of their homes or in the street and other civilians going about their daily business ... in broad daylight.” Though Israel’s countless war crimes have been well-documented, the U.S. government maintains its generous $3 billion a year in foreign aid to Israel.

The U.S. government’s recent acts of unwavering, bipartisan support of Israel demonstrate the normalization of endorsing Israel’s actions in our political system. We cannot depend on our political system to change current U.S. foreign policy towards Israel. Change must come first from social movements.

Challenging U.S. policy must begin on this campus with a call for the University to divest its interests in Israel. The Nov. 19 protest on the West Mall, like the one decades before, reminded University decision-makers that UT students can hold the University accountable for its actions. What unified the speakers and marchers was an understanding that UT students can effect changes. Join the movement to end U.S. support of Israel. Rather than being spectators to U.S.-endorsed occupation, we can start the path to peace here.

Noriega is a journalism sophomore from Irving and Orta is a Latin American Studies and international relations senior from Dallas.