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State Treasury Changes Its Guidelines in Investing Abroad

January 24, 2008 By:
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In what divestment advocates hail as an important first step in an effort to use Pennsylvania's economic leverage against rogue regimes like Iran and Sudan, the Pennsylvania Treasurer's office announced a significant overhaul of its guidelines, as well as its first terror-related divestment action.

According to the newly revised investment guidelines, "the unconventional threats that confront companies in terror states are particularly resistant to easy reliable quantification. ... Thus, investment in these companies can impose a quality and a degree of uncertainty upon Treasury that is inconsistent with its responsibility for prudence."

Using fiduciary rather than moralistic language, Pennsylvania Treasurer Robin Wiessmann said that the office is conducting a thorough review of its investments, which total about $12 billion.

The office also revealed that it has already divested $1.2 million in shares of the China Petroleum and Chemical Corporation, which operates in Sudan and has apparently been resistant to shareholder pressure to change its practices.

That firm is involved in developing oil-rich parts of Sudan -- oil which is then funding genocide in Darfur, she said.

In addition, Wiessmann noted that she is also engaging in discussions with two other firms -- Weatherford International Ltd. and Schlumberg Ltd. -- which account for $13.6 million in holdings, although no divestment plans are imminent.

The Sudanese government is responsible for genocide that has killed at least 400,000 and displaced more than 2.5 million citizens in the Darfur region, according to Wiessmann's office.

'The Next Frontier'
Wiessmann stated that the passage of the Sudan Accountability and Divestment Act, which President George W. Bush signed into law on Dec. 31, encouraged her to pursue change. That federal statute authorizes state and local governments to divest from firms doing business in Sudan related to oil, electricity, mining and military equipment -- areas considered to be enabling Khartoum.

Because of that law, Wiessmann said that she felt revising the guidelines was not instituting her own foreign policy.

"I have referred to it as the 'next frontier of investing.' It's a complex topic; there are a lot of things to consider," said Wiessmann, who took office in April 2007.

Wiessmann also sits on the board of both the Public School Employees Retirement System and the State Employees Retirement System, which have $94 billion in holdings. She said that she's trying to get those two funds to alter their policies.

For months, the Pennsylvania Jewish Coalition, which represents Jewish federations across the state, has lobbied hard for the General Assembly to force the pension funds and treasurer's office to divest from companies with ties to Iran and Sudan.

"It's a great first step," Hank Butler, the executive director of the PJC, said of Wiessmann's announcements. "But at the same time, we need to pass divestment legislation."

Both State Rep. Babette Josephs (D-District 182) and State Rep. Josh Shapiro (D-District 153) offered qualified praise of Wiessmann's efforts, but said that more needs to be done. Josephs sponsored a bill that focuses on a small list of companies doing business in Sudan -- that passed the house in June, yet has not made it out of the State Senate Finance Committee.

Shapiro sponsored three bills that call for divestment from any company doing business in the five nations identified by the U.S. State Department as terror sponsors: Iran, Sudan, Syria, North Korea and Cuba. That passed out of committee, but hasn't come up for a full vote.

Such a sweeping measure has encountered stiff resistance from fund managers, as well as certain legislators, particularly in light of the National Intelligence Estimates conclusion that Iran scrapped its nuclear-weapons program years ago.

Josephs and Shapiro -- whose bills were viewed as competing -- have acknowledged that they're working with one another to have an Iran amendment added to the Sudan bill. In the past, Josephs had wanted Iran treated separately.

According to several sources, State Sen. Vince Fumo (D-District 1) is planning to introduce his own Iran divestment measure -- one intended to stand on its own, but which observers noted could potentially become an amendment to the Josephs' bill. A Fumo spokesman said the office wasn't ready to discuss the issue.

Shapiro said that to help shed light on the issues, he has arranged for local Israel Consul General Uriel Palti to address the House about issues regarding the Middle East on Tuesday, Jan. 29. 

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