County Panel Votes to Keep Tobacco Stocks

Despite a war over tobacco-settlement money and a performance dip in the industry, the county will not divest its retirement fund of nearly $15 million in tobacco stocks, trustees of the Ventura County Employee’s Retirement Assn. voted Monday.

Supervisor Frank Schillo, a member of the county’s retirement board, had pushed for the change, arguing that the stocks were neither a good moral nor fiscal investment.

His motion was defeated 6 to 2, buoyed by a sentiment that such a decision could lead to a “slippery slope” of divestiture from all kinds of politically sensitive industries.

“The question is, where do we stop?” asked board member Tracy Towner. “When you sit on a retirement board, you have fiduciary responsibilities regardless of the political winds. We are obligated by that.”

Anti-tobacco organizations called the decision shortsighted.

“It simply gives the tobacco industry cash money,” said Janet Benner, director of the Tri-County Regional Team, an anti-tobacco organization funded by the state Department of Health Services. “There are so many things to buy, there’s no reason under the sun to rely on tobacco stocks.”

Critics said it was wrong and hypocritical for the county to invest in an industry that has led to high health-care costs.

“It just seems contrary to invest in the tobacco industry, and then also have to pay for tobacco-related [health] costs,” said Debbie Weeks, the director of the local American Lung Assn. chapter. “It’s a direct contradiction.”

Weeks is a member of the campaign against a November ballot measure that seeks to transfer $260 million, paid by tobacco companies to settle a lawsuit, from county coffers to private hospitals.

The trustees who voted against the decision said they believed it wasn’t their place to pick and choose any stocks.

“This is what we pay the managers for,” said Van Perris, the association’s administrator. “If we start telling them what to buy and sell, there’s no accountability for them. That’s the sense of the board.”

This is the first time the board has considered selling off a particular type of stock, Perris said.

Historically, the board has been reluctant to put restrictions on how any of the retirement money is invested. In the early 1990s, the board came under fire for keeping South African stocks even as the state boycotted those investments.

Several government and public organizations have already withdrawn from tobacco stocks.

In June, the California State Teachers Retirement System voted to divest itself of $238 million in tobacco stocks, 0.035% of the system’s equity holdings. In addition, six states, several large cities--including San Francisco--and about 15 universities have chosen to pull their money from the tobacco industry.

Even so, the retirement board is unlikely to reverse its decision, trustees said.

“I don’t know that they morally disagree [with divestiture],” said trustee Steve Wood, who voted with Schillo, and said he also is concerned about investing in companies that use sweatshops. “They just don’t think it’s part of their function, which I can respect.”

Dropping the tobacco stocks would not have been a major financial issue, experts said.

Tobacco-related stocks account for only 1% of the $2.3 billion in the county’s retirement fund. But the county would have to pay $140,000 annually in fees and costs, for the life of the fund, if it divested the tobacco stocks. A consultant, InvestorForce.com, released a report to the board Friday that said economics should guide the county’s decision.

Hit hard by lawsuits and forced to pay off settlements, tobacco profits have dipped during the past several years. Some observers have raised concerns that tobacco companies could file for bankruptcy.

That would mean that the county’s investment managers would probably withdraw from tobacco stocks anyway.

Schillo said that argument is all the more reason to withdraw now. Aside from being a moral quandary, owning tobacco stocks hasn’t been a financial boon to the retirement association’s bankroll.

Dropping tobacco “is not more risk--it’s less risk,” Schillo said. “I think we need to take a stand, and the board was not ready to do that.”