By: R.G. RATCLIFFE
Houston Chronicle Austin Bureau
March 30, 1999, Tuesday

AUSTIN - University of Texas officials told the Legislature on Monday that they will remove at least part of the veil of secrecy that covers the management of more than $1.7 billion in investments of public higher education money.

At a House Appropriations Committee hearing, UT System Chancellor William Cunningham said the University of Texas Investment Management Co. will respond to a Houston Chronicle story about the investments by publicly releasing the annual rate of return on each of its private investment funds.

Cunningham also said UTIMCO will release the names of private fund managers before making future investments of public money and will ask current fund managers for permission to release their names. Such information would help the public know if there was a conflict of interest between the fund managers and UTIMCO board members.

The Houston Chronicle reported March 21 that almost a third of the $1.7 billion UTIMCO has invested in private funds since 1995 has been given either to friends and business associates of UTIMCO Chairman Tom Hicks or to major Republican political donors.

The story noted that UTIMCO attempted to keep secret the names of the private fund managers. UTIMCO had obtained rulings from the attorney general's office that also allowed it to keep secret the financial information needed to know whether any individual investment made or lost money for the state.

State Rep. Sylvester Turner, D-Houston, who had demanded greater accountability on higher education investments after reading the Chronicle article, said he is pleased with Cunningham's statement.

"This is a major step forward. They are more sensitized to the public's right to know and have taken a major step to address that," Turner said.

UTIMCO has published the annual return on its total private investments, but did not release performance information on the individual investments.

Turner said he met twice with Cunningham last week to discuss the issue. Turner said that while he was pleased with UTIMCO's actions, he said he wants to look further into what is actually being released to make sure the public can have trust in public investments.

"I'm going to take another look at what they are doing to make sure there is enough information to make sure potential conflicts of interest are addressed and there is enough information to assess performance of the funds," Turner said.

Suzy Woodford, executive director of Common Cause of Texas, said the public disclosure announcement is "a baby step forward" by UTIMCO.

Woodford said the UT System and UTIMCO has fought full public disclosure of its investments ever since UTIMCO was authorized by the Legislature in 1995. She noted the state auditors' office had to fight UTIMCO officials to get the minutes of meetings, which are closed to the public.

Woodford said UTIMCO should hold public meetings and the UT system should help reverse a law passed at its request in 1997 that keeps draft audits private.

UTIMCO is a nonprofit corporation set up by the University of Texas Board of Regents to manage most of public higher education's investments.

Cunningham issued a news release about his statements on increased public accountability of the UT investments. Efforts to reach him and other UTIMCO managers later were not successful.

Cunningham said UTIMCO's board of directors reviewed its public information policy and made changes "after recent media reports raised questions about UTIMCO's practices."

Cunningham said UTIMCO had sought to keep the information secret because private investment managers use closely guarded investment strategies that they would not want made public to their competitors.

"We believe that the new policy of requiring public disclosure of the names of individual principals will not result in a more limited array of private investment opportunities and will not be detrimental to the performance of funds managed by UTIMCO," Cunningham said.

He said investments will not be made with a private fund whose manager objects to the disclosure.

UTIMCO President Tom Ricks said in the university's news release that he will write the managers of the current investment funds asking that UTIMCO be released from nondisclosure sections of their current contracts relating to the release of managers' names.

Tom Hicks, the UTIMCO chairman, said in the release that he was pleased by the actions of the UTIMCO board that will disclose additional information.

"I believe it is in the public interest that the news media and other interested parties know who is managing UTIMCO's private investments and that we publicly disclose the rates of return that individual private investments earn on a yearly basis," Hicks said.

Several issues that the Chronicle raised in the March 21 report were not addressed by UTIMCO's actions. Those include potential conflicts of interests between UTIMCO board members and university regents with the limited partners of the money management funds and potential conflicts that arise from board members doing business with an investment fund after voting to award the contract.