Beacon Journal: Bill calls for Ohio pension funds to divest

Proposed legislation targets more than 70 companies doing business in Iran, Sudan

Akron Beacon Journal, June 4, 2007

By Dennis J. Willard Beacon Journal Columbus Bureau

COLUMBUS - The list of companies doing business in Iran that Ohio's five pension funds will not be able to invest in has been pared from more than 170 to about 19 under a bill heading to the House floor for a vote this week.

At the same time, the revised legislation includes a mandate to the pension funds to divest from companies doing business in the Sudan -- a move that, according to one study, brings the list back up to more than 70 international companies.

The Iran divestiture bill, sponsored by state Reps. Josh Mandel, R-Lyndhurst and Shannon Jones, R-Springboro, has received intense scrutiny in recent weeks following revelations that many of the most prominent international companies that employ thousands of Ohioans were on a list of firms marked as having financial ties to terrorist-supporting states like Iran.

Mandel said the bill has been narrowed to requiring the pension funds to divest from specific energy sector industries such as gas, oil, and mining, but broadened to now include the Sudan.

Mandel said the number of international companies was whittled from more than 170 to 19 currently conducting business in Iran.

He said he did not know how many companies doing business with the Sudan would be on the list, but those firms are not limited to the energy sector.

The overall impact on the pension funds is about $1.1 billion, he said.

``We are confident,'' Mandel said, ``that the bill as passed out of committee will have an impact on the security of our troops abroad, security at home and the security of our retirees.''

Mandel said Ohio would be the second state after Florida to pass this type of legislation, and he is hopeful this will create a domino effect with other states following suit.

Laura Ecklar, a State Teachers Retirement System spokeswoman, said the pension funds, including hers, continue to oppose the measure.

``We've said this before. The intent of the bill's sponsors and co-sponsors is well-intended,'' Ecklar said. ``We agree in premise. We don't support terrorism or genocide, but we are instructed by law as part of our fiduciary duties to make a good return on our investments for our contributors and retirees.''

Ecklar said the number of affected companies is not limited to 19, because lawmakers decided to amend the bill to include the Sudan in the equation.

An analysis by Institutional Shareholder Services tabbed more than 70 companies in which the pension funds are investing that are also doing business in the Sudan and Iran, Ecklar said.

She said lawmakers are singling out the pension plans and overlooking other public entities that invest in companies that do business in Iran and the Sudan.

She said the pension funds are going to lose money through transaction fees and lost opportunities, pointing to the example that investments in Royal Dutch Shell that provide shareholders with good returns will be banned if the bill becomes law.

``I'm not a foreign-policy expert, but if we sell these stocks, then someone else will buy these stocks. There are going to be costs that have to be reflected somewhere,'' Ecklar said.

One of the companies on the Sudan list is Rolls Royce, an international firm being courted by the state to locate operations in the Cleveland area.

State Rep. William Batchelder, R-Medina, voted for the bill in committee, but he said lawmakers were not made aware of the companies on the Sudan list.

Batchelder said it doesn't make sense to tell the pension plans to divest in Rolls Royce at the same time the company is considering a major investment in Ohio.

``We've had a lot of questions about bombs they make in Iran. The answer to that is not economic. It's military,'' Batchelder said. ``You bomb the facility that's making them. Ronald Reagan gave Libya religion by doing that and it's just something we're going to have to face.''

Batchelder and other lawmakers pushed to amend the bill before the House Financial Institutions, Real Estate & Securities Committee voted 17-5 to send it to the House floor for a scheduled Tuesday vote.

One of Batchelder's amendments limited the issue to ``genocide'' to ensure that in the future groups or individuals did not cite the bill as a precedent for banning investments based on social issues.

Batchelder also pushed for an amendment to give the pension funds an escape clause if their divestiture plans meant losing more than 50 basis points on a stock sale.

Jones, the other sponsor, said the bill is simple, although many lawmakers and opponents are trying to complicate the issue.

``It sends a strong statement that we do not want to support terror in any way,'' Jones said.

He said the United States and the United Nations continue to admonish the Sudan for genocide and Iran for attempting to develop nuclear weapons.

Jones said if the U.S. government removes Iran or Sudan from their lists of states that sponsor terrorism then the pension funds would not be restricted from investing in companies doing business in those countries.

Dennis J. Willard can be reached at 614-224-1613 or dwillard@thebeaconjournal.com.