T. Boone Pickens, the oil billionaire who has courted controversy when both making money and giving it away, has given $50-million apiece to two Texas medical institutions, gifts that come with an unusual string attached. The money must be invested so it grows by at least 10 times, and the institutions cannot spend a dime of it until it does. If they don't reach that milestone within 25 years, any of the money they have made by that time from investments on the gift money will go to another nonprofit institution, though they will get to keep the original sum.
The T. Boone Pickens Foundation, created late last year by the former corporate raider who now runs a hedge fund, made the $50-million gifts to the University of Texas Southwestern Medical Center at Dallas and the M.D. Anderson Cancer Center, in Houston, which also is part of the University of Texas system.
According to the gift agreements, each of the institutions is required to deposit the cash in designated accounts that must grow to $500-million each within 25 years.
Once Southwestern or Anderson reaches the $500-million mark — each institution will have its own fund and be considered separately — it can begin to spend its money. The institutions may raise money from other sources to put in the fund in order to reach the goal.
If the $500-million milestone is not met within 25 years, the balance of the fund beyond the original $50-million gift and any other gifts raised will be donated to Oklahoma State University, Mr. Pickens's alma mater, for student scholarships.
Officials at Southwestern and Anderson say the $500-million goal is reasonable and achievable. Both institutions expect investment earnings to be sufficient in reaching the required mark, although the leaders do say that any potential shortfall would be covered by additional gifts.
"We are not worried, but if there is a stock-market crash or something else that affects our investments, I am confident that our community would respond to the challenge and we'd raise the money," says Kern Wildenthal, Southwestern's president. "One way or another we will get to $500-million."
Southwestern's money will be managed in a special fund set up by the Southwestern Medical Foundation, a charity with nearly $500-million in assets that raises and manages money for the medical institution. Anderson's gift will be managed by the University of Texas Investment Management Company, which has assets of almost $23-billion, representing the endowments and operating funds of the Texas and Texas A&M University systems.
Randa S. Safady, a spokeswoman for the Texas system, says that before accepting the Pickens gifts and their conditions, investment officials at both asset-management organizations analyzed investments and historical rates of returns and determined that the $500-million goals were achievable.
Plack Carr, president of the Southwestern Medical Foundation, says his organization has averaged earnings of about 10 percent annually over the last dozen years, and that he expects even better returns on the $50-million fund because the money can be invested more aggressively than regular endowment money.
"There's no distribution allowed, so there's no short-term horizon during which we have to minimize swings in the market the same way we have to on other parts of the portfolio," Mr. Carr says. He says, for example, that while up to 18 percent of the regular portfolio is invested in bonds, which are less volatile but typically have lower rates of return than stocks, he expects little if any of the new money to be put into bonds.
Officials at the two institutions say they are pleased that the new gifts have the potential to establish more financial security for their institutions. And Mr. Wildenthal, at Southwestern, says the gifts' built-in challenge is in keeping with what he calls Mr. Pickens's "far-sighted and innovative" way of doing business and, now, approaching philanthropy.
Still, it is likely that some charity watchers will question Mr. Pickens's tactics. He has given away hundreds of millions of dollars in recent years, but he has been criticized at times for retaining too-cozy relationships with his recipients, and too much control over the donated money. In one case, first reported by The New York Times, a $165-million gift to an Oklahoma State athletics charity was immediately invested in the hedge fund controlled by Mr. Pickens, BP Capital Management.
The transaction was apparently legal, but it raised questions of control, improper benefit, and conflict of interest.
Southwestern and Anderson officials say they do not expect that any of the money they received today from the foundation will be invested in BP Capital.
The gifts are the biggest so far from Mr. Pickens's new foundation, which he started last year with a $160-million contribution. The 78-year-old oilman and investor, who has amassed a fortune that Forbes estimates at $1.5-billion, has announced his intentions to give away the bulk of his money in his lifetime.
Mr. Pickens ranked No. 9 on The Chronicle's list of the 60 most-generous donors of 2006. He donated $171.5-million to charity last year.