Author Archives: sebastian

Tilghman, Alimta, Commencement: Only Half the Story

Princeton’s President praises the lifesaving drug but neglects to mention how the University is seeking to block cheaper generic versions.

By Sebastian Jones

Several weeks ago I wrote an article for our sister publication, the Nassau Weekly, about Princeton’s corporate relationships, the potential problems they present and the fact it is extremely difficult for interested students and faculty to figure out what exactly is going on.

One of the examples I highlighted dealt with Alimta, a lifesaving cancer medicine manufactured by pharmaceutical giant Eli Lilly under a license from Princeton University, who owns the patent for the drug’s key component. As I noted in the story, Alimta can be rather expensive– up to $11,000 a month– and while some patients are hoping for a cheaper alternative, they will have to wait longer because Eli Lilly and Princeton have filed a series of suits in federal court to prevent the production of a generic version. If these cheaper alternatives enter the market, Princeton and Eli Lilly claim they “will be substantially and irreparably damaged.”

Eli Lilly’s motivations and those of the generic drug companies involved are evident: they out to make a profit. But what is Princeton University, a non-profit institution of higher learning fond of saying it acts in the nation’s service, doing in the midst of the controversial fight over the price and accessibility of pharmaceuticals and the production of generics? Follow the money:

Eli Lilly has told the SEC their arrangement with Princeton ensures the university a “single-digit percentage” cut of the sales of the drug in exchange for exclusive license to produce Alimta. Net sales for the drug topped 1.15 billion in 2008, meaning Princeton scooped up somewhere between roughly $11 and $104 million from their partnership with Eli Lilly. Beyond the licensing agreement, Eli Lilly has given the University $500,000 for an endowed graduate fellowship.

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"Frightening" Investment Strategies Hit Harvard

By Sebastian Jones
WPRB News

The Harvard Crimson published a very interesting story a few days ago about Iris Mack, an analyst at the Harvard Management Company who brought attention to “frightening” trades involving derivatives via e-mails to the office of the university’s then-president, Larry Summers.  Like many other whistleblowers, Mack was promptly fired:

In an e-mail sent May 30, 2002 to Marne Levine, chief of staff for then-Harvard President Lawrence H. Summers, Mack detailed her concerns regarding what she deemed HMC’s “frightening” usage of derivatives and statistical modeling techniques, as well as the Company’s lack of a timely and portfolio-wide risk management system, high employee turnover rate, and low level of productivity in the workplace, specifically among managers…

Mack, a derivatives researcher for Enron before coming to HMC, says she was “shocked” by the mishandling and ignorance of derivatives at the HMC international equities division where she worked, led by Jeffrey B. Larson. At the time, Mack says, Larson’s group had only recently begun exploring more sophisticated financial instruments such as credit default swaps and capital structure arbitrage.

Larson left his job at Harvard in 2004 to start his own hedge fund, Sowood Capital Management, with $500 million worth of seed money courtesy of the university. What happened next?

Sowood collapsed in 2007 due to heavily leveraged investments in corporate debt—making national headlines as one of the first high-profile hedge fund implosions of the subprime mortgage crisis—costing Harvard $350 million.

Oops.

More broadly, that a university– not an investment bank or insurance giant– was fiddling around in credit default swaps up until very recently bears some serious consideration. Also worth thinking about: the $17,256,161 that Larson pulled in during FY2003 and the $35,099,300 that Maurice Samuels, a Senior Vice President for the Harvard Management Company, netted that same year, according to tax records. While salaries for HMC employees have dropped to less astronomical levels since 2004, some still rake in millions.  Here at Princeton, the three highest compensated employees all work for the Princeton Investment Company and a list of other educational institutions where the top earners are investment managers would be long.

A few years ago, when the money was pouring in, all of this might have been unsettling but excusable and perhaps that’s why Larry Summers apparently was not too interested in hearing about the trouble at HMC.  Today, however, with endowment losses at Harvard and Princeton both estimated to end up around 30%, it might be time to rethink how universities manage their billions while injecting a little transparency into the process.  Not that I’d get my hopes up.

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TPMMuckraker has a post up on the Mack story.

Universities cut back on spending

Over on NPR’s excellent blog Planet Money, Caitlin Kenney writes that public universities all over the country are struggling to find ways to cut their costs in the face of the economic downturn:

Universities around the country are bracing for massive cuts as states rethink their shrinking budgets. In preparation for expected budget cuts, many are asking their staffs to look for any way to save money. School officials say cutting a university budget is complicated by factors like tenure, which make it harder to lay people off.

Of course, the same problems apply here at Princeton University and the other Ivies– per The Wall Street Journal, earlier this month:

Princeton said its endowment supports 45% of its roughly $1.25 billion budget — far more than most universities, making budget cuts necessary. Dr. Tilghman said the best-compensated employees would have their raises capped at $2,000 and administrative budgets would be reduced by 5%. Princeton said it would scrutinize all new hiring, including new faculty searches and defer new capital projects to save more than $300 million over 10 years.

And it appears the worst is yet to come, with the Journal reporting that “none of the schools gave data on performance to date of their holdings of more exotic and illiquid investments, such as real estate, commodities and private equities. The expected losses in those categories have led to the bigger, full-year loss estimates.”

Question of the day: when will universities make the pilgrimage to Capitol Hill to request a bailout?

The lighter side of investment ethics

In its annual joke issue, The Daily Princetonian reports on the University’s latest international investment:

Following significant endowment losses in 2008, the University will be investing in a joint venture with Somali pirates, Princeton University Investment Company (PRINCO) president Andrew Golden said in an interview Friday.

However, they save the best for last. As seen in Tina Fey’s comedic approach to the Palin-Couric interviews, sometimes the true content requires very little manipulation. Do any of these faux-quotes sound familiar? You be the judge:

The University seems unfazed by what some have called the “questionable ethics” of the investment.

Golden explained that the University performs no regular ethical review of its investments and instead focuses only on maximizing financial returns.

“Fundamentally, the instructions we give to our investment managers is that they should invest with the goal of maximizing return over the long-term,” University Vice President and Secretary Bob Durkee ’69 said. “A strong presumption is that the University as an institution will not take a position or play an active role with respect to external issues of a political, social or moral character.”

Students should not really care about the ethics of the University’s investments, University spokeswoman Cass Cliatt ’96 said.

“Members of the campus community with interest in these issues typically would not need to know whether the University is invested in a Somali pirate band today to know whether they feel the University should be invested in such an organization,” Cliatt said. “If a group of people have a question or concern about something taking place in the world, that belief would exist regardless of whether the University is invested there.”

Golden agreed that interest in ethical investment practices should not stem from knowledge of how the University invests its money, but instead from a broader interest in the world at large. Examining a list of University holdings for the purpose of raising ethical questions would be “the tail wagging the dog,” he said.

“Why would you focus first on those companies we’re invested in as opposed to looking out and thinking ‘what do I care most about in the world?’ ” he explained. “I care more about the engagement of the entire community in social issues, in ways that go far beyond the investment portfolio, especially because the investment portfolio may be a particularly cost-ineffective way of making change.”

Foreign Policy 101

Should WPRB be the first radio station worldwide to air this single?
You betcha dog on it:

Update: Reader Allie writes with some tragic news: Boris and Vlad are, in fact, from New York City. “Boris” can be seen in this photograph from an article in The New York Times Sunday Magazine back in September. I suppose our only consolation is that New York City, while not foreign per se, may lie outside the borders of “real America”. In fact, for what it is worth, New York City is not even visible from Governor Palin’s window.

Late Update: Ouch…

Campaign Volunteer Pulls a Francisco Nava

By Sebastian Jones- WPRB News

If you’ve tuned into cable news in the past few days, you’ve no doubt heard about how a young woman named Ashley Todd from Texas, who had been in Pittsburgh, PA working for the McCain campaign, claimed she had been assaulted by a “6’4″ black male”, who upon seeing her McCain/Palin bumper-sticker proceeded to scratch out a “B” (for Barack, we must presume) on her cheek.

Turns out she made the whole thing up. KDKA in Pittsburgh reports on what will probably go down as the most flagrant case of race-baiting this election cycle, if not in recent memory:

“Police say a campaign volunteer confessed to making up a story that a mugger attacked her and cut the letter B in her face after seeing her McCain bumper sticker; now she’s facing charges.

At a news conference this afternoon, officials said they believe that Ashley Todd’s injuries were self-inflicted.

Todd, 20, of Texas, is now facing charges for filing a false report to police.”

The whole incident is eerily similar to the Francisco Nava affair last December here at Princeton, which wound its way into the national press. From Time: Continue reading →