UT investment boss quits in flap over pay, losses UTIMCO chairman resigns as legislators criticize board

State Sen. Kevin Eltife, R-Tyler, is among the lawmakers criticizing UTIMCO for paying bonuses to its staff despite heavy losses in Texas' higher education investments. State Sen. Kevin Eltife, R-Tyler, is among the lawmakers criticizing UTIMCO for paying bonuses to its staff despite heavy losses in Texas' higher education investments. Photo: LES HASSELL, AP Photo: LES HASSELL, AP Image 1 of / 1 Caption Close UT investment boss quits in flap over pay, losses 1 / 1 Back to Gallery

AUSTIN — An influential businessman resigned as chairman of the agency that manages higher education investments Thursday amid questions about why fund managers received $2.3 million in performance bonuses when the investments lost $2.5 billion last year.

Republican and Democratic members of the Senate finance committee accused the University of Texas Investment Management Co. board of directors of “shattering” the public trust for a $1.05 million bonus given to UTIMCO President Bruce Zimmerman plus another $1.3 million given to the rest of the staff.

“When I go home to my district, I visit with people who no longer have a job; people who are scared of losing their job,” said state Sen. Kevin Eltife, R-Tyler. “Now the headlines all across the state will be that state government gave $2.3 million in bonuses to administrators of a fund that is down 27 percent. It shatters the trust in government.”

When Eltife told UTIMCO Chairman Robert Rowling, a university regent, that the board should have negotiated a smaller bonus for Zimmerman or fired him for taking the larger bonus, Rowling quit on the spot.

“You know what, you can have my job. I resign. I’m out of here,”’ Rowling said. “You come here and you abuse him (Zimmerman). We did what was right. We felt like we had an obligation.”

Rowling explained that the bonuses were based on annual performance in staff contracts that ended in June. And in June, Rowling said, the Permanent University Fund and the General Endowment Fund were both in the black.

The board in November voted for the bonuses, he added, despite more recent losses because there was a feeling UTIMCO had a contract obligating payment of the bonuses. The value of UTIMCO investments on Nov. 30, 2008, was $18.3 billion.

How contract interpreted

State Sen. Royce West, D-Dallas, said he read the contract to mean the board had to consider giving bonuses, but was not obligated to do so.

Rowling is the founder of TRT Holdings, owner of the Omni Hotel chain. A major Republican campaign donor, he was appointed by Gov. Rick Perry as a UT regent. Fellow regents appointed him to the UTIMCO board, which elected him chairman.

Zimmerman told senators university investments were down 27 percent through Dec. 31, but he said the Standard & Poor 500 was down 35 percent and non-U.S. equities were down 45 percent.

“We were very disappointed with a 27 percent loss. But in the context of the market place, we feel like we did our job in protecting capital to the extent that it could be protected,” Zimmerman said.

Finance Chairman Steve Ogden, R-Bryan noted that executives at the Teacher Retirement System of Texas, because of losses in that fund, did not receive bonuses they were due this past year.

Perry and Lt. Gov. David Dewhurst sent a letter to the UTIMCO board objecting to the bonuses.

“We find it hardly defensible to issue bonuses of this size during a time when state agencies are being asked to tighten their belts, and Texans across the state are facing difficult personal budget decisions,” the joint letter said.

r.g.ratcliffe@chron.com