- The Washington Times - Wednesday, August 18, 2004

Public pension funds, which manage multibillion-dollar retirement accounts for teachers, police officers, firefighters and other civil servants, are coming under increasing pressure to divest from companies with ties to state sponsors of terrorism.

Lawmakers at federal and local levels have pressured U.S. companies and pension funds to more carefully explain and document their relationships with countries such as Syria and Iran. The effort is intended to pressure companies to choose between American investors and legal business opportunities in rogue states.

“It is … unconscionable for our country’s public-pension systems to permit investment in companies that provide revenues, advanced equipment and technology to countries that threaten our vital security interests,” Sen. Frank R. Lautenberg, New Jersey Democrat, said in an Aug. 5 letter to state pension-fund managers..

The top pension systems in the United States have invested an estimated $188 billion in companies with legal projects in or sales to countries such as Iran, Libya, Sudan, Syria, North Korea, and Saddam Hussein-era Iraq, the Center for Security Policy said last week in a report meant to quantify the investments.

The U.S. State Department considers those countries, as well as Cuba, state sponsors of terrorism.

“Americans do not want to invest in terror, directly or indirectly. Regrettably, that is what is being done on a massive scale today,” said the center, a nonprofit think tank in Washington.

The Virginia Retirement System, for example, holds almost $4.9 billion in investments in 213 companies with ties to terrorist-sponsoring states.

The state’s retirement system was worth $39.1 billion at the end of the fiscal year on June 30, with a one-year return of 17 percent. The S&P; 500 over the period also rose by 17 percent.

The fund invested in companies that are major, publicly traded multinationals common in index funds purchased by institutional investors. They include French telecommunications equipment supplier Alcatel, French Bank BNP Paribas, French energy company Total, Italian energy company ENI and South Korean manufacturer Hyundai Heavy Industries.

The Maryland State Retirement and Pension Systems invests in 89 companies with ties to terrorist-sponsoring states, and the District of Columbia Retirement Board invests in 77 companies with such ties, the center said.

The companies include German telecommunications firm Siemens, Norwegian energy giant Statoil and Swiss bank UBS.

The Maryland systems held $30 billion in assets as of June 30. Overall equity returns for the year were 23.1 percent, the Maryland Retirement and Pension Agency said.

The District’s fund was valued at $2.23 billion at the close of fiscal 2003 on Sept. 30, with a one-year return of 16.3 percent, according to the retirement board’s Web site.

Different pension funds take different tacks on the issue, although few aggressively review investments for ties to terrorism.

“The [Virginia Retirement System] is not in a position of being able to evaluate who is aiding terrorism and who is not. The retirement system is not a foreign-policy expert — we look to the federal government to provide guidance to that effect,” said Jeanne Chenault, the system’s public-relations director.

Neither the Maryland nor the D.C. systems returned calls.

Corporate activities in the rogue states are wide-ranging. Alcatel, for example, has operated in Iran, Libya, Sudan and Saddam Hussein-era Iraq, the center said. Alcatel reportedly has signed contracts with state-controlled Iranian companies to provide data transmission and switching network capabilities, including personnel training.

Many pension funds maintain they are operating within the bounds of U.S. law and that a company’s links to a country do not mean that the U.S. government thinks that firm is supporting terrorism.

The National Association of State Retirement Administrators, which represents public-retirement-system executives, wrote Securities and Exchange Commission (SEC) Chairman William Donaldson in May complaining that negative press reports are “based upon the false premise that institutional investors are unknowingly ‘supporting’ terrorist activities.”

“These reports are often not only unwarranted, but unfair as institutional investors have no way to determine which companies or their subsidiaries are, in fact, doing business in countries considered by the federal government to be supporting terrorism,” it said.

The association asked the SEC’s new Global Security Risk office to assist investors with information that will help them determine whether a company’s activity supports terrorism. But the office, which still is being staffed, is unlikely to provide the guidance that some funds are seeking.

“It would be inappropriate for us to publish a list of companies whose securities might be deemed to involve terrorism-related investment risk without publishing corresponding lists for every other possible type of investment risk,” Shelley E. Parratt, SEC deputy director, said in a July 28 letter to Pennsylvania’s state retirement system.

Not all pension funds are waiting for federal action. New York City’s fire and police pension funds have taken the lead in using their investments to pressure companies to reconsider their associations.

New York City Comptroller William C. Thompson Jr., who oversees city pension fund investments, last year asked for a review of three U.S. companies with subsidiaries that have potential ties to terrorist-linked countries — Halliburton, General Electric and ConocoPhillips.

Sen. Charles E. Grassley, Iowa Republican, and Sen. Max Baucus, Montana Democrat, earlier this year wrote to the companies, demanding an explanation of their ties to Iran and Syria. A spokeswoman for Mr. Grassley said this week that the legislators are talking with the companies and reviewing the information that has been provided.

Mr. Lautenberg, this year, introduced an amendment to a broader corporate-tax bill that would have blocked subsidiaries of U.S. companies from operating in terrorism-sponsoring nations. The measure failed.

The New Jersey lawmaker turned to pension funds to pursue the matter. In the Aug. 5 letter, he asked state pension-fund managers to provide details of investments in companies with ties to state sponsors of terrorism.

The center’s report, posted on the Internet at DivestTerror.org, examines investments by 87 of the country’s largest pension funds in 400 companies — including about 30 U.S. companies — with projects or investments in states that sponsor terrorism.

The report named only a dozen European companies. D.C.-based Conflict Securities Advisory Group generated the list of firms and maintains it as proprietary information. The firm would profit if more pension funds purchased its database and software to ferret out companies with ties to state sponsors of terrorism.

The Center for Security Policy’s board of directors includes persons tied to or involved with U.S. defense contractors, such as Boeing.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide