Retirement Fund Edges Nearer to Divestiture

Despite protests of “political arm-twisting,” commissioners for the Los Angeles Fire and Police Pension System--the city’s largest pension fund--edged closer Thursday toward adopting a plan to purge the $1.8-billion fund of investments in firms that do business with South Africa.

However, the seven-member board delayed until next Thursday a vote on a proposal to phase out such investments over the next five years.

The administrators of the police and fire pension fund are being asked to follow through on the city’s new divestiture policy, which was adopted unanimously Tuesday by the City Council.

The pension commission, although troubled over the potential risks involved, signaled a readiness to adopt the anti-apartheid policy.

“Divestiture is now Los Angeles city policy,” said Commissioner Sherman Andelson. “This commission cannot, must not, be left behind.”

Andelson, who has pushed for divestiture, later told reporters that he is confident that the commission will adopt such a plan, perhaps when the panel reconvenes Thursday.

However, some commissioners expressed reservations about the policy.

“My main concern is that there is a lot of political arm-twisting going on and that the taxpayers do not fall victim to political arm-twisting just so that we can make, or the mayor can make, or the City Council can make a political statement,” said Sam Diannitto, who represents Fire Department pensioners on the seven-member commission.

“I see no benefit in this divestment plan that has been submitted to us,” added Ken Staggs who represents police pensioners on the commission.

The split among board members underscored the concerns pension commissioners and employee unions have expressed over implementing a divestiture that could affect $350 million in stocks and bonds. Among the concerns was whether the policy would endanger the pension incomes of 18,000 fund beneficiaries.

In all, the city’s three pension systems have 25,000 beneficiaries.

The three funds contain about $4 billion in city retirement funds, more than $700 million of which is invested in corporations with ties to South Africa.

Meet Next Week

The City Employee Retirement System has a total of $271 million in such stocks and bonds, according to a spokesman. The Department of Water and Power Retirement Fund has about $139 million in South African-related investments.

Commissioners for the city employee system will meet next week on the divestiture issue. The DWP commissioners met Thursday but did not discuss the policy.

The police and fire pension commissioners, meanwhile, wrestled with various proposals that would both carry out a divestiture plan and ensure that there would be no financial loss for the pension system.

Commission President Dave Velasquez said the proposed policy will incorporate “caution, flexibility and reassessment at each stage.” However, outgoing commissioner David Bow Woo warned that it could end up costing the pension system millions of dollars in transaction costs alone to replace the South African-related stocks and bonds.

Bow Woo said Mayor Tom Bradley was “ill-advised” in pressing for such a plan.

“When I signed on as a commissioner, I didn’t sign on to do foreign policy, and I think, in effect, that that’s what we are are doing,” he warned his colleagues.

Bow Woo later told reporters that he expects the commission to adopt a divestment plan, even if he is not around to vote on it. When the commission reconsiders its divestment plan next week, Bow Woo will no longer be on the board.

Bradley, who vowed to fire any of his appointees who failed to carry out the divestiture plan, named Kenyon Chan last month to replace Bow Woo. Chan, a supporter of divestiture, is expected to be confirmed by the City Council today and thus would vote on the issue Thursday.

‘Send a Message’

Asked if he thought he was fired simply because of his divestiture stand, Bow Woo said he has not been told the reason why he was replaced.

“But I assume the mayor or his underlings saw an opportunity to send a message to other commissioners and made it,” Bow Woo said.

Bradley appoints a majority of the fire and pension commissioners, as well as most members of the city employee retirement boards. However, the Department of Water and Power Retirement Fund is independent of city government. Its commissioners can adopt their own divestiture policy, but they cannot be replaced by the mayor.