A Los Angeles City Council committee voted Tuesday to allow the city to contract with an engineering firm whose parent company has ties with South Africa after the city extracted a $1-million pledge from the company to sever those ties by early next year.
In a move aimed at toughening the city's anti-apartheid policy, the three-member Finance and Revenue Committee reached the agreement with the firm of Daniel, Mann, Johnson & Mendenhall and its parent company, Ashland Oil. The terms comply with a recently enacted ordinance requiring a company to cease all business connections with South Africa or face the loss of city business.
The panel unanimously voted to exempt the firm--which is in line to receive part of an $11-million engineering contract to help upgrade the city's sewage treatment facilities--after Ashland officials promised to withdraw from their present South African business ventures by Jan. 5, 1987.
As part of the deal, the company said it would deposit $1 million as an "unconditional and irrevocable letter of credit" to be paid to Los Angeles at the rate of $20,000 a day for every day past the deadline that the pledge is not met.
Councilman Zev Yaroslavsky, who chairs the Finance and Revenue Committee, called the agreement a welcome precedent that enables the companies to "put your money where your mouth is."
Other city officials said the unusual deal will put some teeth into the city's broadened anti-apartheid policy and help ensure that companies are sincere when they pledge to rid themselves of South African-related investments.
"It sends a message to these other companies that if they want to do business with the city, the shell game arrangement is not going to be enough here," said Mark Fabiani, legal counsel to Mayor Tom Bradley. "People are going to look at Ashland and they'll say that 'if we want to do business in L.A. and other cities that may follow L.A.'s example, we will have to fully divest.' "
James Ebright, vice president and general counsel of Daniel, Mann, Johnson & Mendenhall, said Ashland had already terminated most of its South African dealings before the city purchasing policy was enacted but has agreed to complete the move by selling its license agreements, distributorship pacts and other contracts or agreements with South African companies.
The licenses involve the use of certain trademarks and trade names. And under the city agreement, the company would be allowed to continue paying fees to the South African government to protect its copyrights and trademarks there. Ebright said that the financial loss to the company from terminating present licensing and other agreements would be about $1 million a year.
The entire City Council is expected to vote on the committee's action today as well as review some suggested changes in the general regulations governing the city's business contract policy.
In a related action Tuesday, the City Council agreed to indemnify members of the three city pension boards that have enacted divestiture policies.
Pension commissioners for police and firefighters, members of the City Employees Retirement System and the board of administration for Department of Water and Power employees have enacted various plans that could gradually rid their investment portfolios of South African-related stocks and bonds.
If the commissioners are sued over the divestiture policy, the council agreed that the cost of legal counsel and the payment of any damages would be borne by the city.