The Daily O’Collegian

OSU and its governing board last year waived policies requiring competitive bidding so the athletic department could pay $220,000 for catering services at Boone Pickens Stadium to a nonprofit ultimately overseen by OSU athletic director Mike Holder, a five-week investigation by The Daily O’Collegian revealed.

With no discussion or documentation to support the request to waive bidding, the Oklahoma A&M Board of Regents in its Sept. 15 meeting approved the payment to OSU Cowboy Dining for catering in the football stadium’s suite and club-level seating.

But because the nonprofit didn’t have the necessary kitchen facilities, it contracted with an Oklahoma City catering company that Holder used to cater events at Karsten Creek when he was OSU golf coach.

The changes in catering began when Holder was promoted to athletic director in September 2005. To make way for the nonprofit OSU Cowboy Dining, several local restaurants were fired during the previous football season. Owners of Bad Brad’s Bar-B-Q and Freddie Paul’s Steakhouse said the change in the middle of the 2005 season was not only unexpected but also came less than a week before a game they were scheduled to cater. The Oklahoma Pork Council continued catering until the end of the season.

A spokesman said the university had not received complaints about the food the local restaurants provided.

The restaurants had no written contract with the OSU athletic department. University officials say a written contract also doesn’t exist with OSU Cowboy Dining. There is, however, a 10-page contract with the company that provides food and beverages throughout the rest of the stadium.

OSU Cowboy Dining was created in September 2005 as a subsidiary of Cowboy Golf Inc., the nonprofit that operates the Karsten Creek golf course and paid Holder’s $150,000 annual salary as golf coach until he became athletic director. Cowboy Golf later changed its name to Cowboy Athletics Inc.

Cowboy Dining is part of a growing web of nonprofits created by OSU athletic administrators to better invest money.

A senior fellow at the Brookings Institution, an independent policy and research think tank, said such arrangements show that collegiate sports are really all about business.

“This is a big-time business operation that has a symbiotic relationship with the university but operates free and clear of it to a substantial degree,” Hugh Price said.

The business aspect favors the university over the athletes, Price said.

“The big picture, which is the one that I think is really interesting and highly sensitive, is that this is in fact a big business that is operating in conjunction with the university and all the adults involved in the big business are being paid like business people,” he said.

The request to waive bidding raised red flags for the OSU Purchasing Director Sharon Susmilch Toy because it involved an organization related to the university.

She ensured that the $220,000 request would go before the regents, who, for the second time in seven months, gave the athletic department permission to waive bidding to purchase services from Cowboy Dining. In March 2006, they had approved paying the estimate amount of $125,000 annually to Cowboy Dining for catering to the athletic training tables.

The university must use competitive bidding or at least solicit quotes for purchases of $5,000 or more that are not professional services, such as legal, medical or accounting services, according to board policy and state statutes. But the regents may approve requests to waive their own policies, according to the board’s policy manual.

OSU policy prohibits the university from entering into an agreement with a company with which a university employee has a substantial financial interest. Receiving a salary from the company is considered a substantial financial interest, according to state statutes.

However, Holder did not violate this policy because he was no longer being paid by Cowboy Golf when the athletic department hired Cowboy Dining. In an interview Thursday, Holder said he didn’t think it was a conflict of interest for his department to hire the subsidiary of an organization that once paid him a salary.

Cutting out local businesses

Several local businesses catered football games in Boone Pickens Stadium before they were abruptly told in the middle of the 2005 football season their services would no longer be used. Eskimo Joe’s, Hideaway Pizza, Bad Brad’s Bar-B-Q and Freddie Paul’s Steakhouse were among those hired for the job.

Jeff and Dana Thrash, who have owned Bad Brad’s Bar-B-Q in Stillwater for 13 years, said they were surprised to find out about the change the week of a game.

“It was a huge loss for us,” Dana Thrash said.

The restaurant served brisket, sausage, potato salad and other typical barbecue foods to club level ticket-holders for half of the games. Suite-holders could chose among the various restaurants that catered to the club level.

Dana Thrash said her customers were curious about what had happened.

“We had people ringing our phone off the hook,” she said.

The restaurants did not have written contracts for the catering job, the owners said.

Brian Saliba, who has owned Freddie Paul’s Steakhouse for six years, was also surprised to be suddenly cut off.

Saliba caters to the Cowgirl basketball team before games and often to baseball and basketball teams opposing OSU. He also serves several other OSU departments, which he said usually require a bid.

The executive director of the pork council said it would have continued catering to the stadium if it had been given the opportunity. Roy Lee Lindsey Jr. said the council is now on the outside looking in.

“We have invested a significant amount of time and money to help the athletic department over a number of years,” he said.

Holder said his concern was the quality of the food service and he wanted to use Cowboy Dining because he has complete control over it.

“We didn’t want to go though a bid process because what we were interested in was quality, not necessarily the best price,” he said.

Under the old arrangement, Holder said, the local restaurants, OSU athletics and Sodexho, the company that provides food and beverages throughout the rest of the stadium, were taking a cut from the sale of food to the suites and club-level seats.

He wanted to streamline the process and take the focus away from making more money off the premium-seating customers, he said.

“We wanted to take the profit motive completely out of the equation,” Holder said. “We’re just trying not to lose too much money. Breaking even is fine with us on any kind of food and beverage service we provide in those areas.”

Cowboy Dining didn’t have the ability to cater to the stadium because it has limited capacity at the golf course and the stadium does not yet have on-site dishwashers or other cooking facilities, said Andrew McGee, director of food and beverage at Karsten Creek.

Ned’s Catering, an Oklahoma City-based catering company owned by Ned Shadid, provided food at Karsten Creek before the clubhouse was built and has worked with the golf course for more than 10 years. It also catered to the old press box at the football stadium, McGee said.

Holder said he was sure Ned’s Catering would provide good service.

“I’ve known Ned for a long time,” he said. “He used to cater a lot of functions that we had for our golf team. I’m confident in his ability to provide a quality product and that’s the only thing that I’m concerned about.”

Web of nonprofits

Cowboy Dining operated under Cowboy Golf, a nonprofit begun in September 2003 to accept donations to support the OSU men’s and women’s golf teams. Cowboy Golf also operated Karsten Creek golf course, which is open to the public but exists primarily as a course the golf teams use for practice.

Cowboy Golf wanted to be in charge of its own investing, said Holder, who was the nonprofit’s president.

“We felt we could do a better job of investing our money than the OSU Foundation,” he said. “I think that history has proven that to be correct.”

Cowboy Golf’s investments increased from $6 million to $31 million in the first two years and Karsten Creek was opened debt-free, Holder said.

Cowboy Golf had a seven-member board of directors that included high-profile donors, including Texas oil tycoon Boone Pickens, and current and former OSU administrators, such as former athletic director Harry Birdwell.

“Due to the composition of its Board of Directors, Golf is considered a component unit of Oklahoma State University,” according to a December 2005 audit of the nonprofit.

In May 2006, Cowboy Golf was renamed Cowboy Athletics and another nonprofit was created to accept donations to the golf teams. The Cowboy Athletics board of directors was reduced to four members, including Holder as president.

Holder said the change was made to reflect the shift in focus from golf-related functions to the activities of the entire athletic department. This meant using the strategies Holder had used with the golf teams and Karsten Creek and copying them throughout the rest of the department.

“That’s a complete 180 in direction in how things are administered, how fundraising is viewed and how construction projects are funded,” Holder said.

Cowboy Athletics is a holding company for Cowboy Dining as well as two nonprofits formed in May 2006: a new Cowboy Golf and Cowboy Athletic Facilities, which is in charge of building the west end zone at Boone Pickens Stadium and the athletic village, the collection of other athletic facilities that will be built north of the stadium.

Cowboy Golf has common management with Cowboy Golf Building Corp., which operates the clubhouse at Karsten Creek as well as some of its dining areas. Cowboy Golf paid Cowboy Golf Building $108,000 a year for rent in 2004 and 2005, according to the nonprofit’s tax forms.

The manager of Cowboy Dining is McGee, director of food and beverage at Karsten Creek.

In July, McGee applied for a beer license using Cowboy Spirit Inc., another nonprofit formed in June with McGee as the manager.

The OSU Foundation used Cowboy Dining to enter into an agreement with the university in June to sell alcoholic beverages at the Atherton Hotel, which the university owns, according to the foundation’s 2005-06 annual report.

Cowboy Dining provides food and beverage services at Karsten Creek, including daily lunch and weekend breakfast options. It also provides any other culinary needs for Cowboy Golf, including providing meals for hosted tournaments, McGee said.

Nonprofits frequently used

The director of communications for GuideStar, a nonprofit that provides information about other nonprofit organizations, said universities often use 501(c)3, or nonprofit, entities.

“It is not uncommon for a university to have a gazillion nonprofits associated with them,” Suzanne Coffman said.

Universities are themselves tax-exempt and usually work with other nonprofits, she said.

It is fairly common for nonprofits to pay salaries for university coaches because some taxpayers prefer their money going to professors, not coaching staff, Coffman said.

The president of the OSU Foundation said nonprofits have fewer regulations for investing money and are able to finish time-sensitive projects more quickly because they don’t have strict bid requirements.

“I view this as an extremely positive thing for the university,” Gary Clark said.

In many cases, multiple nonprofits are involved because the delegation of responsibilities can help safeguard donated money from liability suits, Clark said.

Holder said he knew of several universities and athletic programs, such as the University of Florida and the University of Arkansas, that use nonprofits, and he expects the trend to continue.

“I’m not going to comment on whether it should or shouldn’t be [tax exempt],” he said. “I just know the tax code allows for it. And we’ve chosen to take advantage of it, no different than the OSU Foundation or any other foundation.”

Cowboy Golf investments are solely in the hands of Pickens and his BP Capital. Pickens does not charge any of the normal fees, which Holder estimates has saved about $15 million. The $202 million invested after Pickens’ $165 million donation in 2005 increased to $257 million within a year, Holder said.

Price, the senior fellow at the Brookings Institution, said many university athletic program are more like private businesses at professional leagues.

“I think the big point for me is that it really does reveal that in fact big-time collegiate sports is a business,” he said.