Cutting investment ties tricky, Pension funds face problem of terrorism links (Barf alert)

Baton Rouge Morning Advocate ^ | 5 April 05 | MICHELLE MILLHOLLON

[LSUfan]

It's a problem that's vexing public pension funds across the nation, and Louisiana is no different.

Companies with ties to terrorist-sponsoring countries are popping up in the investment portfolios of the funds that manage the government sector's retirement accounts. The question is whether divesting, or dumping, the irksome investments is the potion for the problem.

The debate took center stage Monday at a meeting of the House Committee on Retirement.

A representative from a national think tank fueled the discussion with impassioned talk about terrorists using American dollars to wreak havoc on the nation. State pension fund officials agreed with his sentiment but urged caution, pointing out the amount of money at stake.

Bob Borden, chief investment officer for the Louisiana State Employees' Retirement System, said it's not easy to erase the financial support for terrorism. It's pervasive, he said, from the oil business to investment portfolios.

"You've got to look no farther than every SUV on the highway sucking down 9 miles a gallon and funding terrorism even though they've got American flags all over the SUV," Borden said.

In the end, the committee passed a resolution to take a position against terrorism and agreed to further study the issue.

Chris Holton of the Center for Security Policy told the committee that two of the state's largest retirement systems hold stock in companies that do business with countries with ties to terrorism. According to Holton:

The Louisiana State Employees Retirement System holds stock in 56 foreign companies that do business in and with Iran and 32 companies that do business in and with Syria.

The Teachers Retirement System of Louisiana holds stock in 67 foreign companies that do business in and with Iran and 30 companies that do business in and with Syria.

The State Department considers Iran, Syria, Cuba, Libya, North Korea and Sudan to be sponsors of terrorism.

The Center for Security Policy, a national think-tank, launched a campaign last year to empower Americans to play a financial role in the war on terrorism. Holton said public pension funds are inadvertently giving terrorists the use of U.S. dollars.

Public pension funds across the nation are feeling the pressure to cut ties with terrorism. That means combing their investment portfolios for companies whose foreign subsidiaries do business with terrorist-sponsoring countries.

In March, Halliburton Co. appeased three of New York City's public pension funds by agreeing to not take on new business in Iran.

State Treasurer John Kennedy said the issue is complicated by a global economy that makes it the norm for U.S. companies to have subsidiaries that do business with foreign countries.

"No reasonable person supports terrorism," he told the committee. "No reasonable elected official supports terrorism. No reasonable board member of our retirement system supports terrorism."

Committee member Rep. Peppi Bruneau, R-New Orleans, questioned why the states are tackling the issue when the federal government has embargo power.

"Are any of these countries on an embargo list like Cuba?" he asked Holton.

Holton said some of the embargo against Cuba's been relaxed while no U.S. company can do business with Iran, Syria, Sudan or North Korea.

A loophole in the U.S. sanctions law, he said, allows foreign subsidiaries of U.S. companies to do business with embargoed countries.

[LSUfan]

This article is bullcrap. The fact is, pension plans across the country have been dragging their feet on this issue and making bogus excuses. When asked to divest from South Africa in the 80s, however, 24 states did so and there were a lot more companies doing business there than are doing business in North Korea, Sudan, Syria and possibly even Iran. Managers typically claim that divestment from companies doing business with state sponsors of terrorism will ruin their portfolio performance, which is bunk, since we're talking about a small % of companies and they can phase the divestment over a period of 3 years, as was common with the case of South Africa.

It is amazing to me that state pension plans will refuse to invest in tobacco companies, yet will do business with companies working in Iran and act as if nothing is wrong. Hell, one California pension divested a stock of a military contractor who had personnel at Abu Grahib prison, but won't support this campaign. Shameful...