The billionaire who's breaking his million-dollar promises.

The billionaire who's breaking his million-dollar promises.

The billionaire who's breaking his million-dollar promises.

Moneybox
Commentary about business and finance.
Sept. 24 2002 2:26 PM

Lemon Pledge

The dot-com billionaire who's reneging on his million-dollar promises.

Sports teams are learning that granting arena-naming rights to New Economy supernovas can cause complications. When high-fliers bust, the expensive long-term arrangements are frequently the first liabilities they seek to shed, which is why suburban Boston's CMGI Field has been renamed Gillette Stadium, Houston's Enron Field has metamorphosed into Minute Maid Park, andBaltimore's PSINet has reverted to the more poetic but less lucrative Ravens Stadium.

Now some cultural organizations are learning the same tough lesson. The New York Times reports that Alberto Vilar, a technology-stock fund money manager who in the late 1990s became the pre-eminent benefactor of opera, has failed to make good on some of his grand gestures. Because Vilar didn't come through on a promise to the Maazel-Vilar Conductors' Competition at Carnegie Hall, famed conductor Lorin Maazel had to dig into his own tuxedo-pants pocket to ensure that the contest would come off. The Washington (D.C.) Opera removed his name from the Vilar/Domingo Young Artist Program when Vilar didn't complete a $1 million pledge. And from the Kirov Opera to the Lyric Opera of Chicago, maestros and divas are anxiously watching the mail.

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A few years ago, when Vilar stormed into one of the bastions of old money philanthropy, opera company managers must have thought him a godsend. Vilar, a 61-year-old Cuban refugee and self-made man—his father was an executive at a sugar company—had a billion-dollar fortune, a consuming passion for opera, and no wife or children. In the space of several months, he pledged or donated a stunning $225 million to opera organizations.

The donations were fueled by the performance of Amerindo Investments, the investment group hefounded in 1980. Vilar was an early and aggressive fan of tech stocks. He made big bets in the 1980s on Microsoft and Cisco before they became blue chips. In the 1990s, he latched onto Yahoo!, eBay, and the other horsemen of the New Economy. In many ways, he made an unlikely dot-com booster. Middle-aged, refined, and invariably wearing a suit, Vilar spoke more soothingly than his dressed-down West Coast counterparts. But he delivered the same sky's-the-limit message.

And for a while, it seemed he was right. In 1999, Vilar's Amerindo Technology fund notched a stunning 249 percent annual return. Amerindo's assets under management soared to more than $9 billion in 2001, and the inflating bubble made Vilar a billionaire. To his great credit, instead of socking away his newfound treasure into municipal bonds or plowing it into jets and yachts, Vilar began to give it away immediately, much of it to opera companies.At the Met, hepromised to underwrite 10 productions at about $2 million a pop and pledged $20 million for the endowment fund. He gave or pledged $17 million toward the renovation of London's Royal Opera House at Covent Garden, $14 million to the Kirov Opera, $10 million to construct the Vilar Center for the Arts in Beaver Creek, Colo., and $50 million to the Kennedy Center in Washington.

The huge sums were a boon to what is perhaps the most expensive of the performing arts. Putting on an opera production requires a full orchestra, a huge cast, and extravagant sets. (Every production I've been to at the Met—admittedly a single-digit sample—has a cast of hundreds that invariably includes a horse.) And Vilar's donations single-handedly supported new productions. "Most people pay for seats at the opera," author Norman Lebrecht wrote in the London Daily Telegraph last year. "Alberto Vilar pays for the operas."

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Vilar was, in some ways, a controversial donor. He exercised a certain droit du seigneur,sitting front and center at performances and referring to productions as "mine." Nor was he shy about suggesting personnel moves to his beneficiaries. Vilar also had a penchant for planting his name squarely on scholarship programs, competitions, and buildings. Aside from the Vilar Center in Colorado, there's the Vilar Floral Hall at the Royal Opera House inLondon and the Vilar Grand Tier at the Met.

Vilar may have ruffled some feathers, although it's hard to see why the extraction of seats, influence, and naming rights in exchange for patronage is such a problem. Indeed, it's a more honest recognition of the fact that high-profile philanthropy is as much a commercial transaction as it is charity. In both cases two parties make a deal—sealed by a contract, not a handshake.

To a large degree, the opera organizations behaved like the technology companies Vilar knew so well. In the late 1990s, such companies tended to overstate the size and amount of cash that traded hands in certain transactions.(Software firms, for instance, liked to claim all the anticipated revenues of a multi-year contract in the first year.) Similarly, when the Kennedy Center announced that Vilar was donating $50 million, it didn't mean he had written a check for that amount. Typically, such large commitments are paid in prescribed installments over several years. But like up-and-coming companies, established arts organizations are prone to highlighting the overall size of the deal. It looks impressive, bolsters their competitive position in the marketplace, and encourages other donors.

And just like the dot-coms that made lavish spending decisions based on anticipated revenues that never materialized, some of the opera companies have already spent a solid chunk of the money Vilar pledged. The Met, according to the New York Times, has set up a bad debt reserve, believing that it may not receive the $4 million Vilar had promised to support last season's productions of War and Peace and Fidelio. Of the $6 million Vilar pledged for new productions at the Los Angeles Opera, he has given $1 million.

Vilar promises to make good on his commitments and has said that poor health has made him less than fully attentive to paying his bills in a timely manner—much as a nasty flu might make you or me forget to pay the electric bill. But there's great consternation in opera-land because, as William Mason of the Chicago Lyric Opera put it: "We have no way of knowing what his resources really are."

That's true—fund managers don't have to disclose their personal ownership stakes in funds the way CEOs of public companies must. But it is safe to guess that Vilar's pile is probably only a small fraction of what it was a few years ago. The Amerindo Technology fund fell almost 65 percent in 2000 and more than 50 percent in 2001. And through the end of last month, it was down another 40 percent. In other words, the fund is off 90 percent since the beginning of 2000. Today, Amerindo manages a little more than $1 billion in assets—probably about one-tenth of the assets it had at its peak.

In the spring of 2001, Vilar let on to the London Daily Telegraph that he could afford to give away $50 million a year. If his assets—and grant-making capacity—are indeed off by 90 percent, then the vita in the opera world might be significantly less dolce.