Monday, March 15, 2010

The Sierra Club with strings attached

2008 was a bad year for hedge funds, according to Hedge Fund Review,
The hedge fund industry concluded 2008 with investors withdrawing a record $152 billion in capital in the fourth quarter of 2008, according to data released by Hedge Fund Research. The HFRI Fund Weighted Composite Index fell by 18.3% percent for all of 2008, only the second calendar year decline since 1990.

This capital outflow followed a record year of capital inflows in 2007, during which $194 billion of new capital came into the industry. When combined with the negative performance-based asset flow, total capital invested in the hedge fund industry declined to $1.4 trillion at the end of 2008, a decline of $525 billion from the peak of $1.93 trillion, recorded at mid-year 2008.
According to Market Folly,
Well, here's some overtly optimistic news about the hedge fund industry. That is, if you're a believer that consolidation is natural and healthy. "Only the strongest will survive."

693+ hedge funds were liquidated in the 3rd quarter of 2008 alone. That figure represents around 7% of the industry. When we first started to see signs of massive redemptions coming back in October, we knew it had the potential to get pretty ugly. It did.
Among those who suffered from the downturn was David Gelbaum according to a recent story in the New york Times,
A longtime anonymous donor to the American Civil Liberties Union has withdrawn his annual gift of more than $20 million, punching a 25 percent hole in its annual operating budget and forcing cutbacks in operations.

Anthony D. Romero, executive director of the ACLU, acknowledged in a written statement that a "family" had told the organization in September that it could not make its annual gifts, at least for next year.

"This family, that has sought to protect its privacy by arranging its gifts anonymously, notified us last month that due to market conditions it will be unable to make its expected sizable donations of over $20 million," Mr. Romero said.

ACLU board members, who insisted on anonymity because the loss of the gift was reported in an executive session of their meeting, identified the donor as David Gelbaum, who made a fortune as a hedge fund manager and is now better known as a major investor in clean technology.
The Times story continued,
Mr. Romero told the organization’s national board about the loss of Mr. Gelbaum's money at its last board meeting in October, breaking the news in executive session. Mr. Romero did not reveal Mr. Gelbaum's name, describing him only as "a donor," board members said

Still, it is hard to keep secrets with a board of more than 80 members, most of whom report to state affiliates. "As soon as he started telling us, anyone who had a laptop with them was busy Googling" and figured out who the donor was, a national board member said.

Mr. Romero told the board that the donor had also stopped giving to three "sister organizations," a phrase board members said he had used in the past to describe other groups with which the ACLU has collaborated, like the Sierra Club.

Mr. Gelbaum took a rare turn in the spotlight earlier this decade when environmental activists said he was behind the Sierra Club’s decision to adopt a neutral stance on immigration. Some people believe immigration has aggravated environmental problems.

He had given the organization a total of $101.5 million, according to The Los Angeles Times, which wrote what is perhaps the only major profile of him, in 2004. In the article, he is quoted as saying that he told Carl Pope, the Sierra Club’s executive director, in 1994 or 1995 "that if they ever came out anti-immigration, they would never get a dollar from me."
Readers of the times story might be shocked to learn that the fabled ACLU, a civil rights organization, regarded the 740,000 member semi-elitist Sierra Club was a sister organization.

According to a statement by Gelbaum, between 2005 and 2009 he had donated $94 million to the ACLU, and $48 million to the Sierra Club. It would appear that the sisterhood of the ACLU and the Sierra Club was in no small measure due to Gelbaum's financial influence.

ACLU Executive Director Anthony D. Romero said of Gelbaum,
David Gelbaum is one of America's greatest heroes – an unassuming man with a spectacularly generous spirit. Every American should be grateful for the selfless commitment to improving the lives of others demonstrated by this remarkable man.
An extensive account of Gelbaum appeared in the LA Times, in 2004. There is little doubt that Mr. Gelbaum is an extraordinary man, who has contributed somewhere between $250 million dollars to charitable efforts to aid military families impacted by Bush II era military deployments. The LA Times story quoted Gelbaum as saying,
I did tell (Sierra Club Executive Director) Carl Pope in 1994 or 1995 that if they ever came out anti-immigration, they would never get a dollar from me.
There seems little reason to doubt that Gelbaum was passionately committed to the protection of the rights of undocumented aliens. But when Gelbaum pledged to donate $200 million to the Sierra Club, there was an overt string to the donation, the threat to withdraw unfulfilled parts of the pledge, if the group deviated from his stipulation about immigration rights. The LA Times explained,
Gelbaum, who reads the Spanish-language newspaper La Opinion and is married to a Mexican American, said his views on immigration were shaped long ago by his grandfather, Abraham, a watchmaker who had come to America to escape persecution of Jews in Ukraine before World War I.

"I asked, 'Abe, what do you think about all of these Mexicans coming here?' " Gelbaum said. "Abe didn't speak English that well. He said, 'I came here. How can I tell them not to come?'

"I cannot support an organization that is anti-immigration. It would dishonor the memory of my grandparents."
Here we have a sticky issue of language, money offered in an attempt to influence behavior or opinion can be legitimately be called a bribe. It is not illegal to make an offer to give money to a non governmental organization, with stipulations about that organization's conduct, but not all bribes are illegal. And thus there was nothing illegal about David Gelbaum's threat to not give money to the Sierra Club unless certain conditions about the Club's official position on immigration were meet, and Gelbaum's subsequent offer to give the Club $200 million.

Pope and other Sierra club leaders were aware of Gelbaum's other interests. Through his Venture capital firm, Quercus Trust. Quercus Trust is the second or third largest "green" venture capital firm, and it is heavily invested in solar technology. A business that was heavily invested in Green Technology:

I doubt that Gelbaum would have stipulated to Pope that the $200 million also depended on he Sierra Club's protection of his green investments, but Pope could infer that if Gelbaum would have stopped donating his $200 million to the Sierra Club over immigration, adopting policies that undermined Gelbaum's solar investments was a no-go. A tacit bribe is one that need not be acknowledged, or even understood by either party, under the circumstances of the Gelbaum pledge to the Sierra Club neither not only was the condition not discussed, but neither Pope nor Gelbaum was probably aware of the string, but if the thought of altering the club's stance toward nuclear power ever came to Pope's mind, the possible effect on Gelbaum's gift, and its consequences for the Cub would have also been a consideration. No one could ever say that David Gelbaum had bought the Sierra Club's conscience on energy issues, but in a way, subtly and probably without thinking, he had. Without thinking about it, Gelbaum had rendered a change in the Sierra Club's position on energy, and in particular nuclear energy unthinkable.


Anonymous said...

Great bit of investigative work. It is of utmost importance to know who is financing groups who oppose nuclear power and expose their agenda, which usually turns out to be manipulating energy policy to benefit financially.

LarryD said...

This is probably an example of locking-in an existing attitude.

Gelbaum's Venture capital firm invests in "green" in no small part because of the prejudice that green is good, and avoids investing in nuclear because of the prejudice that nuclear is evil. Because of the tacit strings on his donations, the Sierra Club will not re-consider those prejudices, which help's maintain them. At least among Gelbaum's social set.

I wonder if Gelbaum would ever consider investing in fusion technology.

Kirk Sorensen said...

I wouldn't be so sure that Gelbaum wouldn't be receptive to the thorium message. I have a few friends who know a few of his friends and might be able to get the message to him.

Charles Barton said...

Kirk, I did not intend to criticize Gelbaum, who emerged from my reading as a good guy. But I wanted to call attention to the way he may have influenced the Sierra Club about nuclear power without intending too.

SteveK9 said...

I think this might be a bit of a stretch. I think it is a general characteristic of humans that beyond some formative years they are incapable of changing their minds. Too many environmentalists grew up 'anti-nuke' and it is now a religion for them and no fact can overturn it. I heard a radio interview with Stewart Brand the other day and he made the comment that he learned some things about nuclear power and changed his mind. The interviewer asked him if he realized how few people he had ever met that could admit (or do) that.

Charles Barton said...

Steve, I have changed my mind on a number significant matters, and I will probably do so in the future. I saw my Father undergo significant shifts of values and beliefs after he was 90. I know lots of other people who change their minds during their mature years.

Frank Jablonski said...

I suspect that Mr. Gelbaum is the kind of generous person indicated. One whose generous donations have contributed to an enourmous amount of good work, even if it is mixed with some actions that may turn out be deeply uninformed, in error, and even harmful to environmental values and people. This kind of consequence is virtually unavoidable if you are a large institution such as the Sierra Club, or have a lot of wealth and are generous with it, such as Mr. Gelbaum. By your nature, you have big footprints. Because we are all imperfect, you mis-step, and because of the size of your footprints, your mis-steps have consequences.

A large segment of the environmental movement is not anti-immigration, and I believe you to be in error if you meant to imply that an anti-immigration stance is some kind of environmental litmus test that the Sierra Club was willing to fail because of the amount of Mr. Gelbaum's contribution. (I am not sure you were implying this) It is quite possible that they were aligned on the issue anyway, and that Mr. Gelbaum, being passionate about the issue, simply made an emphatic statement.

Luckily, being anti-nuclear may be becoming less and less of a litmus test in the environmental movement. I have the sense that some, perhaps many, leading environmentalists might (very quietly) be happy to see nuclear advocates succeed and turn out to be right about, for example, things like Gen IV Nuclear, because they are smart enough to recognize the enormous clean air and carbon avoidance benefits of nuclear energy. They may just not feel free enough (we all move within communities, after all) or courageous enough to break with the reigning anti-nuclear perspective that is still the norm in many parts of the environmentalist community.

I read where a spokesperson for the Sierra Club referenced "the base" when asked about the Club's anti-nuclear stance. This is hardly a ringing attack on nuclear (though you will still find them, of course).

The Sierra Club has been doing very good work recently to knock back coal fired power plants and their enormous emissions - - work of a type not being done by anyone else, so far as I can tell. It should be praised for that, and its supporters as well.

SteveK9 said...

Charles, I didn't mean to imply that no mature person changes their mind (I'm one myself). Some other prominent 'converts' in the nuclear energy area are Patrick Moore and James Lovelock. However many people, maybe the majority, are unable to do so.

I'm reminded of the famous quotation by Max Planck:

'A new scientific truth does not triumph by convincing its opponents and making them see light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.'

I don't think it is pessimism to recognize that no amount of logic or fact is going to convince some people.

Anonymous said...

Frank Jablonski said...
"The Sierra Club has been doing very good work recently to knock back coal fired power plants and their enormous emission ..."
It's not enough for me. I need solutions. When I first heard about the LFTR that was the first time I really believed there was a solution. I never could see how solar panels or windmills would be nearly enough. (Subsequently, I found Bernard Cohen's estimate about uranium from seawater and felt better again).
It's not enough to identify problems. The Oil Drum does that incessantly. Good solutions must be offered.
And of course we know they can be.

Charles Barton said...

Frank, I am working on possible solutions for some "Oil Drum problems.

Anonymous said...

No I was quoting Frank, not channeling him.

Anonymous said...

Just to follow up on my anonymous demand for solutions, I was attempting to express an opinion about psychology, possibly needlessly.
If the future contains some threat, and there is not a clearly worthwhile solution, I wonder if people generally tend to react badly. Personally, I get depressed. Others may react in even more destructive ways.
If OTOH there is a genuinely good solution, maybe one that can even make things better than before, then maybe people will react well.
My point is that, unlike the Sierra Club, to really get the majority of people onside, I guess the message should have a good solution not just a problem.
I like this site because I think it does just that.

Duncan said...

It's very difficult to tell an extremely successful person that continuing the things that made them successful is a bad idea. Or maybe it's difficult for successful people to hear that when you tell them.

He sounds like a great guy, but a great guy with a crazy amount of money and effort invested in solar technology. That's a strong incentive to discount anything positive people tell him about nuclear.

LarryD said...

Duncan, all too true.

By this point, Gelbaum is probably not just financially invested in solar, but psychologically invested as well. To back out of solar would not be merely a neutral investment decision, but a repudiation of deeply held beliefs and self image.

LarryD said...

If Patti Villacorta's article at American Thinker is even only half right, Gelbaum isn't even the tip of the iceberg.

There are a lot of "green" investors who helped bankroll Obama, selected members of which are now in policy influencing positions in his administration.

Rod Adams said...

@LarryD - yes, you are right about green investors backing Obama. However, black investors - those who like selling coal, oil and natural gas - were strong backers of Regan, George H. W. Bush, Clinton, and George W. Bush.

Notice how many new nuclear power plants the US build during the years covered by those administrations? Sure, there might have been some reasonably positive messages coming from the top of those administrations, but words do not affect markets like actions do.

Every time a new large nuclear plant starts up, it displaces 4-5 million tons of coal from the energy market. If the alternative supply is not coal, then it displaces about 250 million cubic feet of natural gas per day. Since coal and gas together represent about 90% of the power market that is NOT served by nuclear energy and hydro has about 70% of the market remaining electricity market, no other comparison is worth making.


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