Sept. 26 (Bloomberg) -- George B. Kaiser, a billionaire oilman whose foundation has the biggest stake in failed solar-panel maker Solyndra LLC, might have had more than money tied up in the venture.
He may also have been angling to bring jobs to his hometown of Tulsa, Oklahoma.
A bankruptcy filing Sept. 6 by the Fremont, California-based company, which had a $535 million U.S. loan guarantee, has spurred inquiries from Republicans in Congress who say President Barack Obama’s administration may have rushed the support in part because of Kaiser, a campaign donor.
Kaiser, 69, hasn’t commented on his family foundation’s involvement with Solyndra or the controversy created by its collapse, which may leave taxpayers on the hook for as much as $528 million. Some clues can be found in the hometown of the oil and banking executive with a passion for alternative energy, early childhood education and, especially, helping Tulsa.
A Solyndra regulatory filing suggests the $340 million invested in the company was viewed by the charity partly as a way to bring jobs to a city where Kaiser’s wealth has underwritten projects from parks to preschools. The company said that following a July 2009 financing involving Kaiser foundation funds, it agreed to give preference to Tulsa for a new factory.
Providing Tulsa Jobs
“George saw Solyndra as an investment and as something that could provide jobs in Tulsa,” said Mayor Dewey Bartlett, a Republican who said he learned from Kaiser last year of Solyndra’s potential expansion in his city. “He’s the best thing that’s happened to Tulsa.”
Kaiser wanted Solyndra to put a plant in the city’s economically ailing north side, Bartlett said. The $4 billion George Kaiser Family Foundation helped start the National Energy Policy Institute, based at the University of Tulsa, to promote U.S. energy independence. The oilman also has spoken out publicly both to urge support for alternative power sources and ending tax breaks for fossil-fuel producers.
“He’s challenging the federal government to get smarter about what it is doing to reduce its dependency on what he profits from most, oil and gas,” Steven Dow, the executive director of the Community Action Program of Tulsa, said by telephone. “It’s utterly contrarian, which is consistent with how he thinks.”
Kaiser’s generosity has supported endeavors from riverfront parks and the University of Tulsa to early-childhood education programs. He also donated $2,300 to Obama’s 2008 presidential campaign during a fundraiser he hosted at his home that brought in $50,000 to $100,000 for the candidate in 2007. Kaiser has been to the White House 16 times since 2009, according to official visitor logs.
“Kaiser’s meetings at the White House were about not-for-profit initiatives,” Ken Levit, executive director of the family foundation, said Sept. 21 in a telephone interview. Levit said he attended some of the meetings.
“George Kaiser is not an investor in Solyndra and did not participate in any discussions with the U.S. government regarding the loans,” Levit said.
Republicans in the U.S. House of Representatives probing the taxpayer support Solyndra received have questioned Kaiser’s role, in part because of his support for Obama. The company was the first to win a loan guarantee to solar manufacturers in September 2009, as the administration sought to help U.S. producers against subsidized Chinese competitors.
Two days after Solyndra sought bankruptcy court protection, FBI and Energy Department agents raided its offices.
The Kaiser foundation owns almost 36 percent of Solyndra, mostly through its Argonaut Ventures I investment fund. Investors including Argonaut and Boston-based Rockport Capital Partners moved ahead of taxpayers earlier this year in exchange for new loans to the company in a deal sanctioned by the U.S. Energy Department, according to congressional documents.
The philanthropist, who is also chairman and majority owner of BOK Financial Corp., a Tulsa-based bank holding company, has also given aid to imprisoned mothers and to the medical schools of both Oklahoma State and the University of Oklahoma. His family charity is set up as a “supporting organization” to the Tulsa Community Foundation, which Kaiser helped start in 1998.
Because of his family charity’s supporting role to the community group, Kaiser’s tax bill may be lower, according to Paul Streckfus, a former tax-law specialist in the Internal Revenue Service’s Exempt Organizations Division. U.S. tax law lets individuals deduct as much as 50 percent of adjusted gross income for gifts to supporting organizations, the same as for public charities, he said. Deductions on gifts to private foundations are typically limited to 30 percent.
“It’s a statutorily created loophole that allows organizations that certainly smell like and look like private foundations to be treated as public charities,” said Streckfus, who edits the online EO Tax Journal in Pasadena, Maryland.
The Kaiser family foundation and the Tulsa civic group have some overlaps in staff: Levit also is on the board of the community charity, while Phil Lakin, the chief executive officer of the Tulsa foundation, is one of three board members of the Kaiser entity.
The family charity is structured differently than private foundations, which must hand out at least 5 percent of their assets annually to retain their tax-exempt status, Levit said. The foundation expects to meet or exceed the 5 percent threshold depending on the success of the programs it supports, he said.
Seeing What Works
“This approach is very consistent with our overall philosophy that all charitable investments must be scrutinized for effectiveness before they are expanded, he said. “We’ve started a lot of things and we’re going to see what works.”
In 2009, the Kaiser foundation distributed $46.4 million in grants, or about 1.2 percent of assets, according to its latest publicly available federal tax return. If it had faced the giving requirement of a private foundation, it would have had to distribute about $150 million more that year, according to Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy in Washington.
“We have urgent problems in the world,” Dorfman said. “If people have received a tax deduction for their gifts, those assets ought to be put to use sooner rather than later.”
Kaiser’s giving has drawn Obama’s attention. One nonprofit group, Tulsa Educare, started by organizations including Kaiser’s family charity, got $302,779 from the Tulsa Community Foundation in 2007, and shares the same address as its two benefactors. Candidate Obama visited a Tulsa Educare Center in March 2007, when he traveled to the city for a fundraiser at Kaiser’s home, according to Levit, the family foundation head.
The Oklahoman and his charity are unrelated to the Henry J. Kaiser Family Foundation, based in Menlo Park, California.
Talking about the need for early childhood development programs, George Kaiser described himself as “a robber baron from Red State America” in a 2005 speech at a Chicago conference. The text was printed in the New York Times in 2007.
Tulsa Educare’s two centers provide full-day services to more than 350 at-risk children in the community, according to the organization’s website. It lists the Kaiser and Tulsa civic foundations among its creators.
“He is a passionate philanthropist who is dedicated to the cause of eliminating the cycle of poverty of our citizens and serving the highest aspirations of his community and the state,” V. Burns Hargis, Oklahoma State University’s president, said in a statement. Hargis was vice chairman of BOK Financial’s Bank of Oklahoma before taking the academic post in 2008.
Kaiser built his fortune on the Tulsa-based Kaiser-Francis Oil Co., started by his father and an uncle. His family fled Nazi Germany in 1938, settling in Oklahoma. George took over the drilling and prospecting firm from his ailing father in 1969.
Under his management, Kaiser-Francis has become the 23rd largest nonpublic energy exploration company in the U.S., producing the equivalent of 6.5 million barrels of crude oil last year, according to researcher IHS Inc. in Houston. The company’s 1,348 wells produced more than $217 million in oil and gas last year, based on Bloomberg calculations and prices for benchmark oil and gas futures traded in New York.
As his oil company thrived, Kaiser acquired a failing bank in Oklahoma City in 1991 for less than $100 million, which has grown into today’s BOK Financial, with assets of $24 billion. His 61.5 percent stake in the bank-holding company has grown to about $1.9 billion, based on its market value on Sept. 23.
While he is BOK Financial’s chairman, Kaiser maintains a low profile in the Tulsa financial community.
“I’ve never run into him at a banking-related meeting and I’m out and about a lot,” said Roger Beverage, president of the Oklahoma Bankers Association.
The graduate of Harvard College and Harvard Business School has an estimated net worth of about $10 billion, according to Forbes magazine, which ranked him 31st on its list of the wealthiest Americans on Sept. 21. He lives in Tulsa, in a $1.6 million two-story home behind gated walls in the city’s South Lewis Park neighborhood. In July 2010, Kaiser joined a group that includes Bill Gates and Warren Buffett in pledging to give away at least half his assets.
“I suppose I arrived at my charitable commitment largely through guilt,” Kaiser said at the start of a “Giving Pledge” letter. “I recognized early on, that my good fortune was not due to superior personal character or initiative so much as it was to dumb luck.”
Kaiser, who is married to Myra Block Kaiser, a curator and consultant specializing in fiber art, credited his good fortune to being born of talented and caring parents in a country dedicated to opportunity for all. He said he would focus his giving largely on helping children in their earliest years to provide “the greatest opportunity for self-fulfillment for each child.”
Kaiser-Francis today fills two five-story buildings behind a small retail development in south Tulsa. Three blocks away, his family charity shares a sixth-floor office with the Tulsa foundation. The civic group has become the wealthiest of its sort in the nation, according to its 2010 annual report.
On at least two occasions in previous years, the financier has made public statements about how his foundations helped bring $40 million in extra federal economic-stimulus funds to Oklahoma in 2009.
Winning Federal Aid
“There’s never been more money shoved out of the government’s door in world history, and probably never will be again, than in the last few months and the next 18 months, and our selfish parochial goal is to get as much of it for Tulsa and Oklahoma as we possibly can,” Kaiser said in a recorded portion of a July 2009 speech to the Rotary Club of Tulsa.
“We made multiple trips to Washington to tell the story in education, in health care and energy to the respective cabinet secretaries in each of those areas and almost all the key players in the west wing of the White House,” Kaiser said.
Yet the philanthropist tends to stay out of the limelight in Tulsa.
“I’ve never seen him at a business or political event,” said Terry Simonson, Mayor Bartlett’s chief of staff.
While Kaiser is publicly an “invisible man,” his influence transcends political parties, said state Senator Judy Eason McIntyre, a Tulsa Democrat who said she has received campaign contributions from Kaiser.
There to Help
“Anything involving progressive programs that are helping people in Tulsa, George Kaiser is going to be there,” McIntyre said. “He doesn’t just ramrod things, he researches issues, talks to people and then acts.”
Kaiser attended a fundraiser in Tulsa last year for Nevada Senator Harry Reid’s re-election campaign, McIntyre said. Reid leads the Democratic majority in Congress’s upper chamber.
“That’s the kind of high-level event that he might attend,” McIntyre said. Kaiser gave $2,400 to Reid in June 2010 and $30,400 to the Democratic Senatorial Campaign Committee in October 2010, according to the Center for Responsive Politics in Washington, which tracks political giving.
Kaiser also showed up at the state Legislature in 2009 to push for limits or repeal of various tax breaks for the oil and gas industry, calling for the additional revenue to be directed to schools, said Cody Bannister, a spokesman for the Oklahoma Independent Petroleum Association. Lawmakers didn’t respond to his pleas, which the industry opposed.
The philanthropist declined to comment on Solyndra, his foundation’s investment in it or the probe of the federal loan guarantees by Congress, according to Renzi Stone, a spokesman for Kaiser based in Oklahoma City.
The loan guarantee was used to finance construction of a 300,000 square-foot (28,000 square-meter) factory in California that shut down Aug. 31 as Solyndra prepared to seek bankruptcy court protection. In exchange for additional investments in July 2009 by Argonaut Ventures I, a fund controlled by Kaiser’s family foundation, Solyndra agreed to give preference to Tulsa for its next manufacturing site, a regulatory filing shows.
Republican lawmakers sought to question company managers on Sept. 23 about the loan guarantees. Brian Harrison, Solyndra’s CEO, and Wilbur G. Stover Jr., the chief financial officer, claimed their Fifth Amendment rights in declining to respond at a hearing of the House Energy and Commerce Committee’s oversight and investigations panel.
Investor Testimony Sought
The panel also should hear from major Solyndra investors, according to the senior Democrat on the full committee, Representative Henry Waxman of California, and his party’s leader on the oversight panel, Diana DeGette of Colorado.
In a Sept. 19 letter to Representative Cliff Stearns, the Florida Republican who leads the subcommittee, the two Democrats asked him to invite Steven R. Mitchell, a managing director of Argonaut Private Equity LLC in Tulsa, and Jameson McJunkin, a managing member of Madrone Capital Partners LLC in Menlo Park, California, to testify on why they invested in the company.
Both investors sit on Solyndra’s board. Mitchell oversees the Kaiser foundation’s Argonaut Ventures fund, while McJunkin’s fund owned at least 11 percent of the solar manufacturer, according to a March 2010 regulatory filing.
A Sept. 14 Republican report from the subcommittee said “political pressure to approve the Solyndra deal appears to have caused” administration officials to have missed or disregarded signs of the company’s financial difficulties. The report cited visits to the Fremont plant site by Obama, Energy Secretary Steven Chu and a speech to workers by Vice President Joe Biden via satellite.
Supported Republicans Too
Representative John Sullivan, a Tulsa Republican on the oversight panel, declined to comment on the Kaiser foundation’s investment in Solyndra. Kaiser gave $1,000 to Sullivan’s campaign last year, according to the Responsive Politics group.
Kaiser’s “philanthropic work is well known throughout Tulsa and the state of Oklahoma and he has been a benefactor to several organizations,” Sullivan said by e-mail. “We will follow wherever the investigation leads to find out why the administration chose to green-light this questionable loan guarantee in the first place.”
Since 2008, the Kaiser family charity has given more than $16 million annually to Tulsa’s Community Action program, a 550-employee agency that provides 2,000 low-income, pre-kindergarten children with seven hours of care for 50 weeks a year, according to Dow, the executive director. Before that, federal funding paid for serving 104 children, Dow said.
Must Show Effectiveness
Kaiser has pledged similar support as long as the program shows effectiveness, Dow said. The two men meet every three months or so, he said.
“The implication that George is somehow benefiting personally from this transaction is incomprehensible to people like me who know him,” Dow said, referring to Solyndra. “He’s the most-powerful person in the state, yet what is at the top of his agenda is the interest of the least-powerful people in Oklahoma.”
Tulsa residents such as Rosalea Sudlow remain grateful for Kaiser’s philanthropy. Sudlow walks her two dogs along the Arkansas River as many as four times a day through a riverfront park and trail project that Mayor Bartlett said has received $75 million from the oilman.
“This used to just be one little dirt path,” said Sudlow, who wasn’t familiar with the Solyndra controversy when interviewed Sept. 15. “Now it’s hard to find a parking space here on Saturdays because there are so many people.”
To contact the editor responsible for this story: Mark Tannenbaum at email@example.com.