Pension Funds’ Investments Linked to Terror
The nation’s biggest public pension funds have nearly $200 billion invested in stock of companies that conduct business in countries that support terrorism, according to a report released Thursday.
Five California pension funds are among the largest investors, including the Los Angeles County Employees’ Retirement Assn. and the California Public Employees’ Retirement System, which has nearly $17.5 billion invested in shares of such companies, the report said.
Frank Gaffney, president of the Center for Security Policy, the think tank that issued the report, accused the funds of “enabling” terrorism by propping up regimes that send money to terrorist organizations.
He urged a divestiture campaign, similar to the one against South Africa during the apartheid years of the 1980s, to force the funds to sell shares of companies linked to State Department-designated terrorist nations, which include Iran, Libya, Sudan, North Korea and Syria.
“We are not suggesting that what they’re doing is illegal, but that doesn’t mean it’s right,” Gaffney said. “These companies are enabling terror by propping up and providing lifeblood to these terrorist regimes.”
Pension officials are themselves divided on the issue.
Some funds have aggressively sought details on companies’ involvement with suspected state sponsors of terror. New York City Comptroller William C. Thompson Jr. and Arizona State Treasurer David Petersen, for instance, have waged campaigns to force state pension funds to provide more information about their investments in such companies. But neither has called for divestiture of the investments.
Other state funds have said that pulling out of profitable companies -- no matter where they do business -- would violate their fiduciary duties to seek out the best return on their investments.
“It takes a quantum leap to conclude that a company is supporting terrorism by doing business in countries where there may be terrorist activity,” said Gary Findlay, the executive director of the Missouri State Employees’ Retirement System. “We don’t do foreign policy.”
CalPERS and California State Treasurer Phil Angelides, long on the forefront of applying social justice and human rights criteria in making decisions, haven’t taken any actions regarding investments and where companies do business.
“We don’t have the resources to track what companies are involved in what activities in which countries,” said Brad Pacheco, spokesman for CalPERS.
For his part, Angelides accused the Bush administration of failing to provide information that the funds need to make decisions on companies’ activities in terrorist nations.
“To date they have failed to act, to the detriment of investors and our security,” he said.
Thursday’s report said the pension funds owned shares of more than 400 publicly traded companies that have done business in nations identified by the State Department as sponsors of terrorism.
But the report named only a “Dirty Dozen” such companies, all based in Europe, including Germany’s Siemens, France’s Alcatel and Switzerland’s UBS. All of the named companies contacted Thursday said their investments were legal and dismissed the argument that their actions supported terrorism.
To prepare its report, the Center for Security Policy relied on a list of companies compiled by Conflict Securities Advisory Group Inc., an investment research firm. Of the 400 on the list, the center said, about 25% are U.S.-based firms that either operate directly in places such as Syria, where investments by U.S. companies are limited though legal, or through foreign subsidiaries in places like Iran, where sanctions ban any investment by U.S. citizens.
Securities and Exchange Commission officials noted that this year they opened an office of global security risk to raise investor awareness of the issue. But an SEC spokesman said that there were no plans to create a watch list of specific companies that should be avoided by investors.
“Historically, the SEC has viewed its role as disclosure, not one that tells investors where they should or should not invest,” the spokesman said.
Miller reported from Washington and Vrana from Los Angeles.
