Baca Ranch

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In 1994, Farallon Capital Management Inc. was alerted of a potentially promising investment - one, that if carefully pursued could yield 45%-61% returns in four years, according to the court deposition statements of Jason Fish, the manager for Farallon accountable for the investment (1). Peter Hornick, a investor who later worked as a trading executive for Lehman Brothers Incorporated, and Gary Boyce, a local rancher of the San Luis Valley, brought the possibility of marketing the groundwater beneath Baca Ranch of the San Luis Valley, Colorado to the attention of Farallon managers. Following the eight-year long failed attempt by the previous owners of the 97,000 (2) acre ranch (American Water Development Inc.) to get permission from the government to legally sell the resources of the Baca Ranch Aquifer, Farallon Capital Management Inc. resolved to try to pursue the venture through the Special Purpose Vehicle (SPV) Vaca Partners. Special Purpose Vehicles are investments structured similar to those of Special Situation Investments. SPVs are funds designed to finance specific projects; however, often such investments are designed to create tax loopholes to maximize net profits, and because such projects are long-term speculations, such investments easily allow for the camouflaging of debt: it would appear as if the partnership has no responsibility to distribute profits from the investment among the profits, when actually they do this responsibility (3). 

In the case of the Vaca Partnership, Yale University as an owner of half of the Vaca Partnership, according to the court deposition statements of Jason Fish (1), contributed the eight million dollars in equity and the eight million dollars in loans needed to purchase the land above the aquifer: the entirety of the investment. 

Since the 1980’s members of The Nature Conservancy (TNC), an organization created “to protect ecologically important lands and waters for nature and people” (5), have been wary of the financial speculation involving Baca Ranch, as a piece of property that borders The Great Sand Dunes National Monument, home of the tallest Sand Dunes in North America - masses of over 750 ft, and even two peaks (Kit Carson Peak & Challenger Point) that breach 14,000 ft (2). The land masses within Baca Ranch share very similar qualities to the surrounding lands that are part of the National Monument. Furthermore, 70 species of plants and animals make their sole home in the ecosystem that defines the Great Sand Dunes National Monument and the lands of the Baca Ranch (2). Because of the immense environmental value of the land of the Baca Ranch, The Nature Conservancy, in tandem with residents of the San Luis Valley, was responsible for challenging the American Water Development Incorporated’s right to the water in the aquifer beneath the ranch.

Though in 1994 the Supreme Court forced AWDI to relinquish its water rights to the Baca aquifer, when The Cabeza de Vaca Land & Cattle Company LLC, an operation controlled by the Vaca Partners, and therefore by Farallon Partners LLC, purchased the ranch from AWDI, Cabeza de Vaca Land & Cattle Co. LLC strove to finance a state-wide ballot initiative that would overturn the precedent set by the Supreme Court’s decision. Over one million dollars were spent on attempting to sway the general populace to vote to allow Vaca Partners’ access the water aquifer under Baca Ranch (7). In this case, as published in the Denver Post, Yale’s partner spent funds attempting to “sap the economic power of (the) agricultural people in the San Luis Valley” (8). When the ballot came to a vote, it became apparent that the interests of Farallon & Vaca Partners LLC were not similar to those of the residents in the community where the economic venture was to take place. The ballot tally was 3-1 against the interests of Cabeza de Vaca Land & Cattle Company LLC.

Upon the failure of Cabeza de Vaca Land & Cattle Company LLC’s attempt to receive rights to the water in the aquifer, Vaca Partners LLC sold the land to the Nature Conservatory in a transaction that allowed Yale & Farallon LLC to emerge from the venture with a forty percent profit on their initial investment as described in Peter Hornick’s court testimony (9). 

In 2002, YaleInsider, a website maintained and operated by Yale-affiliated unions, published the news of Yale’s involvement in Vaca Partners - and by extension, Yale’s involvement in the attempt to sell the water in the Baca ranch aquifer. As reported by the Yale Daily News, when asked by President Levin if the investments posed a detrimental threat to the environment, managers at Farallon assured the President that there was no environmental risk involved ( 10). In defense of the University’s initial investment, spokeswoman Helaine Klasky stated:

“In this case, it wasn't a case of keeping it secret, [Farallon's] role was that of a limited partner...Actually there was no issue of secrecy. By nature in a limited partnership you rely on the general partner...[Farallon] did their own surveys and studies and thought it was a good investment and that it wouldn't be harmful to the environment," Klasky said. "The senator and governor felt that it was." (10) Klasky’s comments only reveal the degree to which Yale was powerless in controlling where their funds go, in this kind of private, relatively unregulated partnership.

In reaction to the harmful effect of the University’s Investment, Levin declared that the 15 million dollars in profit (11) would be donated to the Nature Conservatory, permitting them to buy the land and then sell it to the government - instituting the land as part of the The Great Sand Dunes National Park. In 2000, the government passed The Great Sand Dunes National Park & Preserve Act, permanently protecting the land of Baca Ranch. The process has “cost Colorado residents millions of dollars, threatened to destroy a symbolically and ecologically important landmark, and nearly caused economic disaster for one of the poorest corners of the state” (12) according to Andrea Johnson, a Coloradan and Master’s Candidate at the school of forestry. Though unexpected by the Investment Office and unintentionally consequential, the negative effect of Yale’s money in this case study is evidence of the need for a stronger ACIR, to give some functioning body the ability to witness more transparency and thereby wield more monetary power.


(1)“Reply to counterclaims and third-party complaint and cross-claim.” CV 01-D-83, Exhibit 5; 
Deposition of Jason Fish, 8/7/01.  Cabeza de Vaca v. Vaca Partners, p. 28-29. 
(2)Seelye, Katharine Q. “Complex Deal is First Step to Create New National Park”. The New York Times. Jan 31st 2002. A23
(3) Investopedia.com. “Special Purpose Vehicle”. 14 MARCH 2009 < http://www.investopedia.com/terms/s/spv.asp >.
(4)“What Lies Beneath: the Story of Baca Ranch”. The David & Lucile Packard Foundation . 14 MARCH 2009 <http://www.packard.org/assets/files/program%20related%20investments/PRI_BacaRanch_FINAL.pdf>.
(5)“About Us”. The Nature Conservatory. 14 MARCH 2009 http://www.nature.org/aboutus/
(6)“Litigation Case Study: The Great Sand Dunes National Park”. Brownstein, Hyatt, Farber & Shreck Law Firm.15 MARCH 2009<http://www.bhfs.com/Practices/Litigation/CaseStudyTheGreatSandDunesNationalPark>
(7) 211-212.  Erin Smith, “federal Government files motion in case on Colorado’s closed basin project.” 
Pueblo Chieftain, March 29, 1999. “Boyce spent about half a million dollars paying staffers to collect 
enough peitition signatures to get his initiatives on the ballot, and another $400,000 on advertisements 
during the campaign.” Marty Jones, “Gary Boyce’s ballot initiatives went under, but he’ll most likely 
resurface.” Denver Westword, Nov. 12, 1998.
(8) Kirk Cunningham of the Sierra Club told The Pueblo Chieftain.[212] 
Mark H. Hunter, “Yale helped fund plan to sell San Luis water.  School’s secret investment sparks 
outrage in valley.” Denver Post, Jan. 24, 2002. 
(9) ”Intervening Plaintiff Peter Hornick’s Brief in Opposition to motion by Defendants for summary 
judgment…” CV 01-D-0083,  Aug. 30, 2001, p. 2 
(10)Becker, Arielle and Elise Jordan. “Yale donates land for New National Park”. The Yale Daily News. Jan 28 2002 http://www.yaledailynews.com/articles/view/3044
(11) Marberg, Sara. “Nature org. to get land sale profits”. The Yale Daily News. January 29 2004 http://www.yaledailynews.com/articles/view/9771
(12) Johnson, Andrea. “Keep University Promises in Colo.”. The Yale Daily News . February 4 2004. http://www.yaledailynews.com/articles/view/9883