OBU Withstands Madoff Scheme Loss
January 22, 2009
As reported in The Oklahoman's Jan. 22 issue, Oklahoma Baptist University lost approximately $600,000 of its endowment holdings through the Bernard Madoff investment scheme. However, university officials said the loss will not have a significant impact on OBU's operating budget.
"While we certainly were saddened by the scam, it is a very small part of the overall investments of the University," said Randy L. Smith, OBU senior vice president for business affairs. "The loss does not weaken our overall financial stability."
OBU's endowment stood at $89.8 million at the start of the 2008-09 academic year. The majority of those funds are managed by the Baptist Foundation of Oklahoma. On Dec. 12, 2008, the BFO learned that it had lost $1.4 million - including the OBU funds - through the elaborate Madoff scheme. The foundation, which manages more than $234 million in assets, employs an array of third-party fund managers. Two fund managers working with Asset Strategy Consultants of Baltimore had invested in two hedge funds managed by Madoff.
Smith said BFO President Robert K. Kellogg immediately informed OBU of the Madoff-related loss. OBU officials then informed their 33-member board of trustees.
"We have full confidence in the Baptist Foundation of Oklahoma and in Mr. Kellogg," said OBU President David W. Whitlock. "They have been wonderful partners as we seek to fulfill our mission of Christian higher education."
Smith serves as an advisor to the BFO's board of directors, and also participates with board members in crafting the foundation's investment strategies.
For the 2008-09 academic year, OBU's operating budget totals $38.6 million. The university has achieved a balanced budget, without an operating deficit, for 17 consecutive years.
"Our fiscal health is strong," said Whitlock. "Sound financial stewardship is part of our mission. As an institution we collectively are called to represent Christ and His kingdom. Therefore, we seek to operate with financial integrity. We have been blessed with a strong legacy of sound financial management, which has helped our alumni and friends to invest in OBU's mission with confidence."
OBU is the largest client for the Baptist Foundation of Oklahoma. Kellogg, a 1983 OBU graduate, regularly attends OBU board meetings. He and his administrative team make frequent reports to the university's trustees regarding BFO investment strategies.
In 2007, BFO officials presented an overview of its investment plan to OBU trustees, highlighting an effort to diversify beyond traditional stocks and bonds. BFO and OBU officials say the diversification has helped to dampen the impact of the markets' recent downturn, as well as the losses through the Madoff scheme.
The BFO currently employs 34 fund managers who are charged with investing the foundation's holdings.
"We are disappointed by the loss of funds, but at the same time, we believe the exposure to the scheme was lessened by the BFO's concentrated efforts to protect clients' resources while maximizing investment returns," said Whitlock.
"The Madoff fraud was undetected by the Securities and Exchange Commission, and a myriad of investors and auditors," noted the OBU president. "It in no way reflects upon the management of our endowment funds by the BFO. I cannot imagine a more capable leader than Robert Kellogg to guide us through these trying times and am thankful the BFO has a godly man who seeks to serve Christ and the Kingdom through his work."