LONG BEACH — The City Council has approved in principle a plan to divest the city of any financial ties with South Africa in an effort to signal opposition to that country's system of apartheid.
The council voted unanimously Tuesday to adopt in concept a policy restricting the city from investing employee pension funds in South Africa and depositing money in banks doing business in that country or selling Krugerrands.
Before those actions can be implemented, however, the legal implications of the policy will be considered by the council's three-member finance committee and then referred back to the council. In particular, the committee is expected to discuss whether the proposed restrictions on banks would be a violation of the state antitrust law.
Possible Antitrust Violation
City Atty. John Calhoun said that a move by the city to pull its funds out of banks with ties to South Africa could be a violation of the law, which forbids discrimination against corporations engaged in lawful business activities.
A violation of the antitrust statute is punishable by a fine of up to $1 million, triple the damages suffered by the corporation and the cost of attorney fees, Calhoun said.
"I'm as much against apartheid as anyone else, but I'm looking at this from a legal standpoint," Calhoun said. "It looks like the anti-apartheid policy itself would be discriminatory."
Councilman James Wilson, who championed the anti-apartheid policy, has said he views divestiture of city funds in South Africa as mainly a symbolic gesture to demonstrate opposition to that country's system of racial segregation.
"What we're talking about is a country where the vast majority of the residents are repressed," Wilson said, adding that the city should not be "in the business of financing apartheid."
Although the anti-apartheid policy did not win an unfettered victory, proponents of the action applauded the council's move.
"They could have kept the thing tied up in committees ad nauseum if they had wanted," said Sid Solomon, president of Long Beach Area Citizens Involved, a political activist group. "It's nice to see the council vote unanimously to do this."
Exactly what percentage of the city's $450-million investment portfolio is tied up in South Africa remains unclear.
The city does most of its day-to-day business with two large financial institutions, Bank of America and Security Pacific National Bank.
While Security Pacific does not make loans to the South African government or sell Krugerrands, it has "nominal credit relationships" with three private corporations in South Africa, according to Warren Heistand, city treasurer.
Bank of America acts as a lender to private firms in South Africa primarily to support its multinational clients by financing short-term trade transactions, and commercial and industrial projects, Heistand said. The bank does not make loans to the government nor does it sell the South African gold coins.
Most of the city's long-term money, however, is invested in nearly 30 other banks and financial institutions as well as in financing notes issued by large private firms, Heistand said. So far, city financial officials have not determined whether any of those firms have interests in South Africa, he said.
The city has two pension programs. One fund for police and fire personnel is part of the city's financial portfolio and would be affected by any overall investment changes made by the city.
The city's general retirement fund is contracted out to the state Public Employees Retirement System (PERS). The city has no power to dictate how PERS handles pension money coming from Long Beach employees, but the retirement system does invest in firms that uphold the Sullivan Principles, city officials said.
Those principles, authored by the Rev. Leon Sullivan of Philadelphia, call on American firms in South Africa to promote social reform by requiring equal employment and living conditions for people of all races.
Prior to the council's decision, one group urged the city lawmakers to adopt a policy along the lines of the Sullivan Principles, rather than outright divestiture.
"We would urge you to not simply divest, but to use the city's economic power however you can" to bring about reform in South Africa, said Mike Howard, a Long Beach chapter representative of the American Coalition for Traditional Values, a conservative Christian group.
But others pushed for the council to adopt in concept a policy of full divestiture and allow the finance committee to hammer out any unresolved details.
"You have a moral responsibility to the people of the city," said Richard Rose, a representative of the Long Beach Area Coalition for a Fair Budget and the Long Beach Jobs for Peace Campaign. "This city should not get its money off the backs of oppressed people."
Frank Berry, Long Beach chapter president for the NAACP, called on the council to take even broader steps, by requiring that all firms doing business with the city uphold the Sullivan Principles.
"We're talking about 2 million black people with no civil rights," Berry said.