DWP Defeats Divestiture by Single Vote

A divestiture proposal that would have gradually purged $139 million in South African-related investments from the Los Angeles City Department of Water and Power pension fund failed today when none of the employee managers would back the plan.

In rejecting a policy against investing in companies that do business in racially segregated South Africa, the Board of Adminstration of the Water and Power Employees Retirement Plan bucked a growing divestiture tide that has included the city’s two other major pension funds and state pension fund holdings.

Although a majority of the seven-member water and power board voted in favor of a divestiture plan, all three employee representatives on the board--who represent the 10,500 employees and 8,000 retirees--opposed it. Approval by at least one of the three members was needed to pass the controversial policy.

‘Political’ Issue

Vincent J. Foley, board president and one of the members who voted against the plan, said he objected to considering such “non-economic” or “political” issues as the troubled South African situation in determining where to invest retirement funds. He said, however, that the board, which voted after more than 1 1/2 years of sporadic debate, will continue to discuss other proposals to withdraw South Africa-related investments.

But Walter Zelman, a board member who pressed for divestiture, said he is unsure whether the plan can be salvaged. “I’m not sure what we will end up with--if anything,” he said.

About $139.1 million of the fund’s $1.2-billion portfolio involves stocks and bonds in companies that are linked to South Africa, according to DWP officials.

Five-Year Phase Out

Under the divestiture proposal presented by Paul H. Lane, department general manager and chief engineer, the retirement board would have phased out South African-related investments over five years.

Last year, both the Los Angeles City Employees’ Retirement Systems board with $250 million in South African investments and the city’s police and fire retirement system, which controls $350 million in stocks and bonds of firms linked to South Africa, adopted divestiture plans.

In what would be the largest divestiture plan in the nation, the California Assembly passed a bill Wednesday that will lead to the sale of $11.4 billion in state investments in firms operating in South Africa. (Story, Page 5.)