A financial analyst's report with a reference casually dismissing the 1915 genocide of Armenians under Ottoman Turkish rule has touched off a bitter dispute among officials who run the $155-billion California Public Employees' Retirement System (CalPERS), the nation's biggest public pension fund.
State Treasurer Philip Angelides, a CalPERS board member, says he is appalled by the comment contained in a study about Turkey sent to CalPERS, which has a small portion of its overseas investment in Turkey.
Discussing the World War I era in Turkey, the study said, "The very large Greek minority fled to Greece. The Armenian minority was dealt with in a different way."
During the conflict, the Armenian population was eliminated from Turkey's northeastern provinces. Estimates of the death toll range up to 2 million.
CalPERS Chairman Charles Valdes has accused Angelides of trying to stir up "ethnic hatreds" by criticizing the report prepared by Marvin Zonis, a consultant who runs a subscription service analyzing political and economic stability in various countries.
"What we have here is a Greek treasurer who doesn't like Turkey, the country; who doesn't like Turks, who is trying to . . . drive our policy according to those ethnic hatreds," Valdes said at a CalPERS investment committee meeting last Monday, according to a transcript.
The CalPERS investment selection "is not going to be subverted by that kind of ethnic rivalry," Valdes said.
CalPERS has investments of $190 million in Greece and $90 million in Turkey, a tiny portion of its $36 billion in funds invested outside the United States.
Angelides' complaints go to the heart of a long-running, broader debate over how public agencies handle their pension fund investments and how open that investment process should be. Does public money have a social conscience? Or is the sole focus of pension funds to make the maximum return for the retirees?
The current controversy stems from a CalPERS board discussion held in June about foreign investments. Angelides asked the staff to get more information about investments in countries that might have instability, including Turkey. In response to the request, Zonis supplied a reprint of an article he had prepared for a journal of political economy. The article included the sentences referring to the Greek and Armenian minorities.
Now the dispute has spread beyond the confines of the CalPERS board, which oversees a retirement system with more than 1 million members. Gov. Gray Davis' legal affairs office, Senate President Pro Tem John L. Burton (D-San Francisco), along with state Sen. Jackie Speier (D-Daly City), and Assemblyman Louis J. Papan (D-Millbrae), dean of the Assembly, have sent letters to the CalPERS board calling for discussion of the Zonis report at its board meeting in November.
Meanwhile, CalPERS staff have decided that Zonis has become "controversial," according to a CalPERS spokeswoman, and the agency will not buy his subscription service. He had been giving CalPERS a free trial subscription.
Analyst Defends Report Statement
Zonis, head of Marvin Zonis Associates Inc. in Chicago, described as "international risk consultants," strongly denied that the article he supplied to CalPERS, originally published in a scholarly journal, ignored historical reality.
"I was appalled to learn that the sentence, 'The Armenian minority was dealt with in a different way' . . . was apparently misunderstood," he said in a letter to Mary Cottrill, senior investment officer at CalPERS.
"I have always been a severe critic of the refusal of the Turks to face up to their own history," he wrote. "I have denounced their genocide of Armenians on many occasions, as well as their failure to acknowledge the legitimate cultural aspirations of the Kurds and other violations of basic human rights."
However, the staff's decision not to use Zonis' service may have come too late to defuse anger over the handling of the issue by the CalPERS board, particularly in light of Valdes' personal criticism of Angelides.
"To have my ethnicity attacked, I find repellent," Angelides said Friday. "I am proud to be an American of Greek descent. I am the elected treasurer of California, and I want to do what is best for the state, to be focused on the basic issue, not the personal attack," he said.
For Angelides, the political and historical analysis cannot be separated from the economic considerations of where state pension money should be invested. "All of us have a responsibility to be the guardians of historical truth, whether it is about the Khmer Rouge massacre, or the Soviet massacres, or the Jewish Holocaust or the Armenian genocide," he said.
Angelides' grandmother was a young girl in Smyrna in 1922 when the Turkish army burned the city, which had a large Greek population, and killed many inhabitants. Thousands fled as refugees.
"If a consultant retained for historical and political analysis had written 'In the fall of 1939, the Poles fled Western Poland, and the Jews were dealt with in a different way,' we would not--nor should we--consider retaining that consultant," Angelides said in a letter sent Friday to fellow CalPERS board members.
Valdes and his supporters on the CalPERS board contend that the key issue is the fiscal independence of the huge retirement system, and its mission to get strong, secure pensions and retiree health benefits for its members. They include state employees, workers at school systems who are not teachers, and employees of local government agencies. The system includes 700,000 active workers and 300,000 retirees.
Valdes' comments, although "very unfortunate," were "a function of a highly emotionally charged debate," William Crist, the CalPERS vice chairman, said Saturday.
"It is very frustrating to me, and to Valdes and other people at the meeting, that there is a hidden implication that some people are more concerned about human genocide and atrocities than others," Crist said. "I find this personally hurtful."
Valdez did not respond to a request for comment.
Crist emphasized that CalPERS' prime duty is to consider the risks and rewards of its investments from a financial viewpoint, without considering "social investing," a concept in which a person avoids some companies or countries for social, environmental or political reasons.
For example, the CalPERS board has rejected suggestions that it dispose of stocks in tobacco companies. However, the board did complain to RJR Nabisco about the company's "Joe Camel" advertising campaign, which has since been discontinued, because it seemed to be aimed at children, Crist said. In that case, public anger about ads aimed at children could have caused a backlash against Philip Morris and thereby hurt the value of CalPERS' investment, according to Crist.
Politics' Role in Economy
During the late 1980s, the Legislature ordered CalPERS to get rid of the stocks of companies that invested in South Africa because of the country's system of apartheid.
Proposition 162, adopted by state voters in 1992, gave the CalPERS board a stronger grant of authority over the investment system and "really bars the Legislature from intervening in our investment decisions," Crist said.
The social, political and historical arguments over investments are entangled for any organization deciding where to put its money.
Angelides said he has not called for ending investments in Turkey or any other country, but wants the CalPERS board to be aware that political repression can lead to an unstable economy, making such countries bad places to invest.
Angelides said he will continue to closely monitor CalPERS' activities as the organization prepares for a workshop in December on its "permissible country" policy.
Under that policy, CalPERS allows its hired investment managers to make stock purchase decisions, but limits or prohibits investments in countries considered too risky. Such risks can be economic, political or regulatory, or some combination of all those factors.
The prohibited list includes both stocks and bonds from China, Colombia, Egypt and India. Stocks cannot be purchased from Jordan, Kenya, Morocco, Pakistan, Poland, Russia and Zimbabwe. Bonds cannot be purchased from Turkey, Mexico, Indonesia, the Philippines, Argentina and Brazil.