YOU ARE HERE: LAT HomeCollections

State Pension Divestment Bill Signed

The law requires the teachers and public employees retirement systems to withdraw funds from firms aiding Sudan's government.

September 26, 2006|Nancy Vogel | Times Staff Writer

SACRAMENTO — California's giant public pension systems must rid themselves of investments in companies that help the Sudanese government, under a measure that Gov. Arnold Schwarzenegger signed into law Monday.

University of California students and others who led a campaign for divestment said they hoped that it would persuade other states to do the same. Ultimately, they want to pressure the Arab-dominated government of Sudan, which is blamed for the deaths of at least 200,000 non-Arabs since 2003 and the displacement of more than 2.5 million people in the nation's western Darfur region.

"Divestment will show our defiance against the murderers and their inhumanity," Schwarzenegger said at a bill-signing ceremony at the Hilton Burbank Airport and Convention Center, recalling that a similar divestment movement two decades ago helped end apartheid in South Africa.

Joining him at the ceremony were actors Don Cheadle and George Clooney, and UC student activist Adam Sterling. "State by state, pension fund by pension fund, your genocide will not occur on our watch and it will not occur on our dime," Sterling vowed.

When the law takes effect in January, it will require the California Public Employees' Retirement System and the California Teachers' Retirement System to liquidate their holdings in certain companies that operate in Sudan if, after 90 days' warning, the companies fail to halt business activities there.

About two dozen oil, energy and telecommunications firms -- most of them Chinese, Russian, Malaysian, Indian or French -- are the targets of the divestment, said Jason Miller, a UC San Francisco medical student who, with Sterling, helped create the Sudan Divestment Task Force.

The bill, AB 2941 by Assemblyman Paul Koretz (D-West Hollywood), is narrowly tailored to force divestment of only those companies that provide revenue or weapons to the Sudanese government and refuse to change their practices.

No American companies are on the list for potential divestment, Miller said, and American companies must get U.S. permission to do business in Sudan because the nation is considered a state sponsor of terrorism.

Miller conceded that divestment of the two state pension systems won't be enough to change the stock price of any potential divestment targets.

But he and others see the Koretz bill as model legislation that may spur enough divestment nationwide to pressure the companies and thus Sudan.

Said Clooney: "As more states begin to adopt it, and they just might, then perhaps we can take a giant step in making sure that a government that systematically eliminates its citizens at the very least doesn't profit from it."

Four other states -- Illinois, Maine, Oregon and New Jersey -- also have ordered pension funds to divest from companies operating in Sudan. Legislation that is modeled on the Koretz bill is pending in 15 other states, Miller said.

"It's a more sophisticated route than a couple of other states have tried," Koretz said. "If it's too broad of a brush, you wind up picking up companies that are there and doing good."

The legislation, which passed with the opposition of 13 Republicans in the Assembly and seven Republicans in the Senate, hastens a movement already underway at the teachers and public employees pension systems and the University of California.

In March, pressured by student activists, UC regents voted to liquidate holdings, worth tens of millions of dollars, in nine foreign companies that do business with Sudan. The governor signed another, related bill, AB 2179 by Assemblyman Tim Leslie (R-Tahoe City), that indemnifies UC regents, employees and investment managers from litigation that may arise out of the Sudanese divestment.

The teachers pension system on Monday reported holding $12 million worth of stock in 10 companies operating in Sudan, including Sinopec Corp., PetroChina Co., Bharat Heavy Electrical of India and Sudan Telecom Co. Those companies are targeted for divestment under a policy the teachers pension board adopted in April.

"They have gone through quite an extensive back-and-forth with a number of these companies," teachers pension system spokeswoman Brenna Neuharth said. "The bill just speeds the process along."

Public employees pension system spokesman Brad Pacheco said the fund, with $207 billion in assets, has invested in 39 companies doing business in Sudan, none of them the nine companies from which UC has divested. He said he could not estimate how much the system may need to divest under the legislation because system officials are still trying to determine the nature of the firms' Sudanese operations.

Last December, the public employees pension system warned three European companies that it would sell its hundreds of millions of dollars worth of shares if they did not sever ties with the Sudanese government. "We're still working with those companies" to achieve change, Pacheco said.

Los Angeles Times Articles