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Bill Seeks Divestment From Nations That Persist in Sponsoring Terror

March 29, 2007 By:
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Rep. Josh Shapiro

State Rep. Josh Shapiro (D-153) is set to introduce a bill -- one that appears to be garnering broad bipartisan support -- that calls on three state agencies to divest from companies that do business with any of the five nations labeled by the U.S. State Department as sponsors of terrorism: Iran, Sudan, Syria, North Korea and Cuba.

The push in Pennsylvania mirrors a flurry of legislation on the table in roughly half a dozen state capitals, as well Washington, D.C., that seeks to use economic pressure -- forcing government pension funds to divest holdings -- in order to hamper Iran in its support for Hezbollah and its march toward nuclear capability.

While federal law prohibits American-owned and -operated companies from doing business with the above countries -- the regulations for Cuba are a bit more complex -- foreign-owned companies have no such restriction. And for the most part, pension funds are free to invest in those firms.

With activists around the country focused on singling out Iran or Sudan, Shapiro is hopeful that his legislation -- similar to a law passed last year in Missouri -- can work to bring two constituent groups together.

"I watch every night the efforts of our brave men and women to win the war on terror, and I believe that we in the states must do more to help in that effort," said Shapiro, adding that he planned to introduce the bill March 28 or March 29, and that it had 61 co-sponsors, nearly half of whom come from the GOP.

"The states have such economic tools at their disposal. I want to leverage that economic power to help win the war on terror," declared the 33-year-old, a graduate of Akiba Hebrew Academy who is considered a rising Democratic star in Harrisburg, partly because of his close relationship to the new Republican Speaker Dennis O'Brien.

The Shapiro bill would affect the Public School Employees' Retirement System, the State Employees' Retirement System and the Pennsylvania Office of the Treasurer.

This is no small matter; if enacted, the measure would call for a significant financial overhaul.

For example, according to a 2004 report prepared by the Center for Security Policy, a Washington, D.C.-based think tank, the Public School Employees' Retirement System alone once held interest in 145 companies dealing with terrorist-sponsoring nations. According to the report, that comes to nearly $3.5 billion, or roughly 17 percent of the pension funds' $20 billion holdings.

(Also included in those calculations were companies dealing with Iraq and Libya, which have since been taken off the list. An updated report is in the works.)

'This Is Going to Hurt'
But assuming those numbers are similar today, isn't unloading 17 percent of its investments too considerable and costly a task for any pension fund?

Not according to Christopher Holton, a spokesperson for the center, who is tracking divestment legislation on a state level.

"All the pension systems said that this is going to be costly -- that this is going to hurt -- but none of that happened," he reported, referring specifically to Missouri. Holton noted that the Missouri funds have actually performed better since then.

"This is not a complicated issue," he stated. "These are countries that are helping the groups that are seeking to harm us."

But not everyone finds the matter so clear-cut.

For one thing, while there's a growing consensus that divestment can be an effective tactic, debate remains over what to target. Some are more concerned with Sudan and the genocide in Darfur; others worry more about Iran's support of Hezbollah and that country's nuclear ambitions. At the same time, discussion is under way about whether divestment should cover a large number of companies -- as Shapiro's bill appears to -- or take a more limited and pinpointed approach.

Last year, the Philadelphia City Council enacted a targeted divestment from about two-dozen companies that do business in Sudan; since then, the city has unloaded roughly $144 million worth of assets, according to City Controller Alan Butkovitz.

"Any time the procedure is broader, you have a more difficult time getting a winning majority to enact it," said Butkovitz, adding that a more focused approach is likelier to change companies' behavior, though he does not necessarily oppose the proposed law.

California, Illinois, Oregon, New Jersey, Maine and Connecticut have adopted similar measures on Darfur. The National Foreign Trade Council, which promotes global commerce, brought a lawsuit challenging the Illinois law, and it was overturned by the U.S. District Court. Shapiro said that he's working to craft the statute in such a way that it would stand up to legal challenges.

"Our surgical model has dramatically reduced concern from fiduciaries in general and the Jewish community in particular," said Mark Hanis, executive director of the Genocide Intervention Network, a Washington, D.C.-based organization pushing for targeted divestment.

Holton responded: "I wholeheartedly disagree that we only ought to focus on a few companies. It's not just a few companies. This is a moral decision."

Jewish groups have passed divestment resolutions on Darfur, including the National Council of Jewish Women and the Jewish Council for Public Affairs. On Tuesday, JCPA went a step further, adopting a resolution advocating for restrictive economic measures aimed at Tehran. The United Nations passed a new round of sanctions last weekend.

The board that governs the Pennsylvania Jewish Coalition, an umbrella group representing the state's Jewish federations in Harrisburg, plans to discuss the Shapiro bill in full. 

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