Bradley Threatens Firings if Divestiture Is Challenged

Los Angeles Mayor Tom Bradley said Friday that he will replace the commissioners who supervise the city’s three pension systems if they do not go along with his proposal to purge pension funds of all investments in firms that do business in South Africa.

The commissioners will “approve the policy of the mayor and the City Council or another set of commissioners will,” Bradley said during a morning press conference, where he appeared with South African Anglican Bishop Desmond Tutu, the Nobel laureate and prominent anti-apartheid leader.

The mayor’s comments were made on the spur of the moment in the midst of questions to him and Tutu on the issue of divestment, the policy adopted by about 20 cities and states to sell off investments in firms that do business in South Africa. The questions put to Bradley reflected the concerns of some pension fund officials that divestment could harm pension funds by restricting investment opportunities.

About one-third of the major U.S. corporations traditionally favored by large investors, such as pension funds, do business in South Africa.

Nearly $700 million of the city’s pension funds, which total nearly $4 billion, are invested in companies that do business in South Africa, according to officials who administer the funds.

Vincent Foley, chairman of one of the three city commissions that oversees the pension funds, said it was the first time in his 11 years as a commission member that Bradley has issued an ultimatum on pension management.

“He’s always given the board the independence to do what they thought was correct,” Foley said.

Foley said, however, that he was not surprised.

“Knowing how strongly he feels on this matter, I was not taken aback,” he said.

Foley, who was not appointed by Bradley, is chairman of the Board of the Water and Power Employees Retirement System.

Expresses Confidence

David Bow Woo, chairman of the commission in charge of the Police and Fire Pension System, said he continued to feel confident that Bradley will accept whatever conclusion his panel reaches about divestment.

“I believe that if we do a conscientious study and reach a conclusion that the mayor’s plan on divestment isn’t the right way to go, I think he will accept it,” Woo said. The $1.7-billion police and fire fund is the largest of the funds.

Woo, who was appointed by Bradley, said his confidence was based on a conversation with Bradley’s office after the mayor’s statement Friday.

Woo said his commission decided earlier this week to hire a consultant to study the mayor’s plan, which Woo described as “one of the most far-reaching of any of the divestment plans I’ve seen.” Woo said the commission also was waiting for an opinion on divestment from the city attorney’s office.

Act Independently

The pension commissions can act independently of the mayor. However, the mayor appoints the majority of the members of two of three commissions, subject to the consent of a majority of the City Council. In addition, Bradley, with the consent of a council majority, can remove the commissioners he appoints.

The mayor appoints three of the five commissioners of the City Employees Retirement System, five of the seven commissioners of the Police and Fire Pension System and two of the eight members of the pension board of the Water and Power Employees Retirement System. Employee beneficiaries appoint the remaining members of the commissions.

Last year, Bradley replaced nearly 70% of all city commissioners in a move widely interpreted as an effort to strengthen his political influence over the city’s 32 commissions.

The pension fund commissioners face a legal requirement to manage the funds in the financial interest of the beneficiaries. They are now faced with deciding whether Bradley’s divestment plan can be accomplished without harming the interests of the beneficiaries.

Opinion Issued

Mark Fabiani, legal counsel to the mayor, said Friday that the city attorney’s office had issued a preliminary opinion indicating that the pension commissions could carry out the mayor’s plan without violating their fiduciary responsibilities.

However, Siegfried Hillmer, one of the assistant city attorneys working on the opinion, said the preliminary opinion concluded only that “it may be possible” to carry out the mayor’s plan and still abide by fiduciary standards.

“It may be possible. It may be compatible,” Hillmer said. “But I wouldn’t want to be quoted that it positively can be done.”

Hillmer said the answer hinged on the question of whether alternative investments of equal or better value could be found for the stocks and bonds sold through divestment.

Bradley’s divestment proposal, announced Tuesday, called for divesting the pension funds, removing city deposits from banks that lend money to South Africa, imposing a fee on the sale of South African gold coins known as Krugerrands and setting up a nonprofit corporation to fight the apartheid system.