Police, Fire Board Votes Pension Fund Divestiture

The Los Angeles Board of Police and Fire Commissioners, which controls the city’s largest pension fund, adopted a divestiture plan Thursday to gradually purge the $1.8-billion fund of investments in firms that do business in South Africa.

Brushing aside protests from representatives of police officers and firefighters, the commission voted 4 to 2 to begin a five-year phase-out of its South African-related investments as a means of opposing that country’s apartheid policy.

But officials of the police and fire unions, who represent most of the 18,000 retired and active members of the pension fund, said they are considering a legal challenge to the new policy.

In becoming the first of the city’s three pension boards to approve a divestiture plan, the police and fire commissioners agreed to rid their investment portfolio of $350 million in stocks and bonds from firms linked to South Africa.

Several of the board members warned that growing racial violence in South Africa may place those investments at risk.

“(There is) a compelling conclusion that persistence in this type of investment could result in serious economic consequences to the fire and police pension fund,” said Commissioner Sherman Andelson, who played a major role in shaping the plan.

But its opponents were not persuaded. “We will not sit tight and watch any action take place that will have a negative impact on our pension funds,” said Kenneth E. Buzzell, a vice president of the United Firefighters of Los Angeles.

George Aliano, president of the Police Protective League, said his union will sue to stop divestiture if the fund loses money as a result.

Under the commission plan, the board will divest funds in six phases, reassessing the program at each step with the help of independent attorneys and financial advisers in order to ensure that there is no financial loss.

That provision, proponents said, would enable the commission to abandon the divestiture policy if it became clear that the pension fund were endangered.

“The safeguards are built in, and we will be very carefully abiding by those safeguards,” said Dellene Arthur, commission vice president.

Within a year, the timetable calls for pension commissioners to completely divest themselves of funds from companies providing military goods and services to the South African government.

Two years from now, the board must rid itself of any investments with firms that have not signed the so-called Sullivan Principles--a voluntary code which requires employers to improve working and living conditions of nonwhite laborers in South Africa.

In five years, complete divestiture would be required.

But the new policy does give the board the option of retaining investments in affected firms if the commissioners determine that “a company is engaging in political, social and economic activities that substantially assist efforts to end apartheid.”

Mark Fabiani, Mayor Tom Bradley’s legal counsel who worked closely with the commission in drafting its plan, said that language was included to give the commission some flexibility but remains strict enough to ensure that the companies affected are working against the policy of racial separation.

Bradley, who outlined his divestiture proposal in May, called the board’s action a “message to the world” that apartheid will not be tolerated. The City Council voted unanimously Aug. 6 to endorse the principle of divestiture.

But the city’s three pension boards were left to decide whether to implement such a policy, which would affect a total of about $739 million out of the $4 billion in city retirement funds.

Commissioners for both the City Employment Retirement System--which has invested $250 million in South African-related investments--and the Department of Water and Power Retirement Fund--which has about $139 million in such stocks and bonds--are considering divestiture plans but have not yet voted.

After Thursday’s vote, the mayor said in a prepared statement: “By voting in favor of divestiture, the fire and police pension commission has made it clear that divestiture is not only morally correct, but also responsible and fiscally sound.”

But the two commissioners who opposed divestiture charged that Bradley and the City Council had unduly swayed the board into adopting a divestiture plan.

“This plan was initiated, it was developed . . . and will be implemented under a great deal of political pressure,” said Sam Diannitto, who represents Fire Department employees on the commission.

Police representative Ken Staggs, who along with Diannitto is one of only two board members not appointed by Bradley, accused the board majority of “getting into social investing.”

Kenyon Chan, a Bradley appointee who was named to the board after his predecessor had balked at the divestiture idea, cast one of the four votes in favor of the plan. He denied that the mayor had influenced his decision. One commissioner was absent.

Meanwhile, the anti-apartheid movement in Los Angeles picked up steam this week.

On Wednesday, the American Federation of Federal, State, County and Municipal Employees, which represents 4,000 city workers, publicly backed divestiture.

Also, Bradley sought to toughen the city’s anti-apartheid stance by asking the city attorney to consider the legality of additional measures including a surcharge on city contracts or purchases with businesses involved with South Africa and a possible ban on city contracts or purchases to any companies doing business with South African police or military establishments.

Today, Supervisor Kenneth Hahn is expected to hold a news conference to urge the Los Angeles County Investment Board to divest itself of $660 million in South African-related investments, out of an overall $4.9 billion in pension funds.