A Q&A with alumnus Donald Sturm LLM ’60 in celebration of the 75th anniversary of the Graduate Tax Program.
Native New Yorker Donald Sturm LLM ’60, the son of a waiter who lost his management job during the Great Depression, earned an LLM from NYU Law’s Graduate Tax Program six decades ago and went on to build a highly successful career, residing mainly in Omaha and Denver, in the construction, energy, banking, and real estate sectors. After completing his NYU LLM in Taxation, he began working for the Chief Counsel’s Office of the Internal Revenue Service as a trial attorney in what was then the Omaha Region, then took a position with a major national contractor. He eventually became the second largest shareholder in a global corporation and acquired or developed a number of banks as a private investor. At age 89, Sturm is now an active business owner and philanthropist, with the law school at the University of Denver named after him.
Sturm spoke with Steven Dean, former faculty director of the Graduate Tax Program, about his career and how his experience at NYU Law helped shape his professional trajectory.
How did you decide to pursue an LLM in tax at NYU Law?
I was in my last quarter, having already passed the bar, at the University of Denver College of Law. We had an adjunct professor who had completed the NYU Law tax program. He was very complimentary about the education he had received. I thought I wanted to specialize in taxation. NYU had the predominant program in taxation. I clearly remember Gerry Wallace and Charles Lyon, the two early giants on the tax faculty.
What did you learn from your four years working as a trial attorney for the Internal Revenue Service?
This commenced in September 1959. I was lucky to be sent to Omaha, which was a regional office covering eight states. Because I had a Master of Laws in Taxation—I was alone in having one—and because the fellow who ran the Omaha office and supervised the other offices within the region took to me, he gave me some of the tougher cases, which I handled quite well.
My work at the IRS—I ate it up. I went to places like St. Paul and Des Moines and Kansas City and Denver, traveling the circuit. It was really an exciting, informative, wonderful experience. I learned how to develop a theory, search for the necessary facts to support the theory, and negotiate skillfully. How do you take the situation presented to you and make a better after-tax result?
What appealed to you about working for Peter Kiewit Sons’?
I received a call from Peter Kiewit of PKS, a large private company headquartered in Omaha. At that time I had about six months left on my four-year IRS commitment. He was a dynamo. This is the fellow that Warren Buffett calls one of his mentors. I had a nice interview with him; he seemed like a fine fellow. I didn’t realize at that time how tough he was. That was good for me, frankly. If I had the right answer, it didn’t make any difference how tough he was, or who I was. He was fair, and that was great. He gave me “opportunities of a lifetime.” All I needed to do was succeed.
I took the job. There was a lot of low-hanging tax fruit in the company. I was the beginning of the tax department. I would send him memorandums of things that I wanted to do, and I would get approval from him. I was a lone wolf, working in that environment, which was wonderful. It gave me all kinds of freedom.
You’ve said that your big career break came when you turned PKS’s $35 million tax liability into a $5 million refund. How did you do it?
When I got hired, I didn’t know that there was a large tax case that the government had against the company, being handled by a large law firm in Chicago, in which the government claimed it was owed $35 million. It was a multifaceted case. The case was given to me to handle about six months after my arrival. The biggest part of it involved the assertion that the company was unreasonably accumulating earnings and profits in order to avoid taxation upon shareholders.
I came up with an idea and found a ruling that countermanded the government’s position. It turned out that some of the distributions that were made were not taxable but were returns of capital. It took about six months to recalibrate the company’s E&P. I went to the local IRS office and said, “Based upon this ruling and based upon these new facts, we don’t owe you anything. You owe us $5 million.” They took that under advisement and didn’t like the result. So they sent the case to the IRS national office in Washington, DC, which ultimately revoked the ruling that I was relying on.
You’re not supposed to revoke a ruling unless it has national implications. It took a year going back and forth to Washington to convince national headquarters that the PKS matter did not have national significance. They ultimately revoked the revocation and restored the ruling. We received the $5 million payment. Peter Kiewit got 40 percent. After that, he and others in the company included me in most material matters. That case, and its result, had a great impact on my Kiewit career.
It would have been impossible for me to derive such a result without the tax education I received in the NYU Tax Program.
You spent 28 years at PKS. What were the most valuable aspects of your long tenure there?
I wound up in the coal business, because PKS was beginning to become a major player in that industry. We had coal reserves and I secured other federal leases, and we developed major coal mines in Wyoming and Montana. During most of the 1980s we were making $200 million a year at the mine level, having partners such as the Union Pacific and Pacific Power and Light. PKS was the managing partner. I was integral from the PKS standpoint, selling and contracting almost 200 million tons of coal to large utilities in the Midwest.
Peter Kiewit died in 1979. The company bought the PKS stock from his estate. Thereafter we decided to reinvest profits rather than pay out large dividends. With the advice and consent of then chairman of PKS Walter Scott, I invested in a company called MAPCO out of Tulsa, Oklahoma. They had a pipeline going right through the middle of the country, which I had looked at as a cashflow cow. Pursuant to a standstill agreement, we bought 24.9 percent of the company. MAPCO had Eastern coal reserves. Coal was king at the time.
In 1984, one of our construction customers, David Murdoch, called Walter Scott. He had gotten a call from Goldman Sachs about making a bid for a Fortune 500 company called the Continental Group, which had been put in play by Sir James Goldsmith. PKS had $600 million that we put into this. David Murdoch put in $150 million. I went to New York and borrowed $2.2 billion in order to come up with a total of roughly $3 billion to make the bid. We won.
Now we owned this massive company: 40,000 employees around the world; packaging plants, about $5 billion in annual sales, with $2 billion in Europe; four insurance companies; oil and gas reserves, a major pipeline; and forests with paper-making facilities. I was deeply involved in putting the bid together and then managing what was acquired, as CEO.
It was like the fly eating the elephant, and we almost choked. We hired consultants to help us. I learned a lot, I experienced a lot, I led a lot. You learn a lot about yourself, you learn about your impact on others, but all along you’re thinking about and accepting challenge. You have to have the confidence that you can deal with all this. There was an enormous amount of travel.
I sold the MAPCO position that we had in 1986 to Conoco. We made about $135 million, almost doubling our money. It took seven years to work through the Continental Group acquisition. We made $880 million. At that point in time, I owned 10 percent of PKS, making me the second largest shareholder. The company was redeeming stock from retiring shareholders, and my interest went up as a result of those redemptions. Starting in the mid-1980s I sold stock back to the company, producing cash.
Around this time, you began to buy banks. How did that happen?
The first bank I bought was in 1983 in Macomb, Illinois. Two bankers with the Omaha National Bank asked me if I wanted to buy it. I had cash, and they were going to manage it for me. I was now in banking. In 1986, I bought another bank in Cheyenne, Wyoming. The seller was the Omaha National Bank. Now I had two banks. At the end of 1989, I got a call from the Comptroller of the Currency asking me if I wanted to buy two failing banks in Colorado Springs. Now I had four banks. I currently own ANB Bank, headquartered in Denver, with 31 branches in three states.
After considerable thoughtfulness, you sometimes do things that come your way without a strategic plan. If you have quality people and you have enough money and expertise yourself, you can do these things. But you’ve also got to delegate to high-quality people. No matter how much I had going with PKS, I still developed personal investments in banks and then real estate.
You’ve engaged in extensive philanthropy, especially in your adopted home state of Colorado, and established a family foundation for that purpose. What has guided your philanthropic efforts?
I was drafted into the Army in 1954. I had never really been outside of New York. My father was a hardworking, wonderful man but never made much money and suffered through the Depression, so we lived modestly. I graduated from the City College of New York and then went directly into military service. I was put on a train to Columbia, South Carolina, for basic training.
I was shocked and disturbed by the segregation I witnessed and its impact on the lives of both Black and white people. I worked as a personnel psychologist at the examination station in Montgomery, Alabama. We examined, mentally and physically, all of the people coming from that state. I tested thousands and interviewed people who failed, to see if they were malingering. They weren’t malingering. They wanted to go into military service. They wanted to change their lives.
What I really think about is how to help people help themselves. When I started to accumulate money and give some to charity, I wanted to help low-to-moderate-income groups, both in housing and in education. We started 13 charter schools. We gave money to about 100 different affordable housing projects in the 1980s and early 1990s. All because of what I experienced in Montgomery, Alabama. My family and I have also given money to the Denver Art Museum, the Denver Botanic Gardens, the Denver Museum of Nature and Science, and many other entities.
I also got involved in helping the University of Denver. I was on the board of that institution for 23 years. I chaired the University’s Finance Committee, sat on the Buildings and Grounds Committee. I pledged $20 million to the law school, which is now called Sturm College of Law, and I’m still working toward making it a better place for students. Since my wife and I got involved, the bar passage rate has increased from 60 percent for first-time takers to 85 percent.
In 2019 we made a $10 million investment in Arapahoe Community College, which has an arrangement with Colorado State University and Douglas County School District. A campus was built called the Sturm Collaboration Campus within the Meadows, located in Castle Rock, Colorado. I and two other gentlemen developed 4,000 acres in the Meadows. There are currently about 20,000 people living there. The Sturm Collaboration Campus is next to a high school and a hospital. If you’re a senior in high school, you can take classes at the collaboration campus. You can get practical experience at the hospital and become a nurse. There are many good people out there who cannot go to a four-year university. They need to be educated and learn a trade so they can make a good living and raise a family and be a great citizen.
Recently, we contributed $450,000 to Colorado Mesa University to enable them to buy a truck. The inside of the trailer is a classroom. You can learn technical skills. That truck goes out to far western Colorado where there are no community colleges. The education is coming to you. Education changes lives; it changed my life.
What advice do you have for a student interested in following a similar career path?
Be lucky. Work hard and think hard. Going to the IRS as a trial attorney was significantly important for me. I wanted to have a great resume. The reputational boost that came from getting an LLM and having government trial experience was major.
I took a huge amount of risk in leaving Denver to attend NYU Law. I went to New York without a job and without any money, and worked full time while going to school full time. I had to do what I did. Have a goal and a realistic way of achieving that goal, and work hard to achieve it. Take the risk. It has to be a thoughtful risk. Plan your future; don’t just accept what comes your way.
How has your NYU Law education benefited you most over the course of your career?
The training I got at NYU Law was part of the bedrock for my career. The way of thinking and how you approach structuring. The Graduate Tax Program introduced me to business concepts. I didn’t have any business background. I never had actual financial courses.
Reorganization, restructuring—what does that mean to a lawyer coming out of an LLB program? I didn’t know anything about international law or labor law. I didn’t have any of that as an LLB student. When you start getting involved in M&A activity, particularly for international companies, you’ve got to understand this material. When I talk about the companies that we owned outside of the USA—say, in Europe—each of those countries that we were in had different labor laws, tax laws, whatever laws. You’ve got to integrate all the answers to questions, and I learned how to do that at NYU. That way of thinking walks around with me constantly.
Posted January 11, 2021