Ohio Treasurer's Terror-Free Investment Policy

From Nancy Hamant, July 15, 2007
Subject: Ohio Treasurer's Terror-Free Investment Policy

Dr. Asbury, Ms. Bierdemann and STRS Board Members:

As you know, many STRS members are deeply concerned about the impact proposed HB 151 will have on the STRS Pension Fund.

Personally, I have written to the Governor, the Ohio Treasurer, and local legislators to convey our concerns. Richard Cordray's staff member (Ohio's Treasurer) forwarded the recent Treasurer's policy developed to address the issue of terror-free investment. A press release and the Treasurer's Policy follow for your consideration.

Hopefully, this alternative will contain procedures that will lower the impact of terror-free investing on the STRS Pension Plan and also keep STRS staff time to a minimum in executing such a plan.

Respectfully,
Nancy B. Hamant

For Immediate Release
April 18th, 2007

CORDRAY ANNOUNCES NEW TERROR-FREE INVESTMENT POLICY FOR STATE TREASURY

(Columbus)— Ohio Treasurer Richard Cordray today announced the adoption of a new Terror-Free Investment Policy, designed to ensure that all investments made directly under the authority of the State Treasury are free of any connection to terrorism. This new policy, the first of its kind in Ohio and among the first in the nation, requires a comprehensive and on-going review leading to the certification that all investments controlled by the Treasurer’s office comply with the federal laws and policies that prohibit doing business with specified individuals and entities that aid terrorism. The result, says Cordray, is that Ohioans can be sure that none of their tax-dollars are being invested in ways that aid the cause of terrorism.

The U.S. government bars Americans from doing business with Foreign Terrorist Organizations, state sponsors of terrorism, or any of a list of approximately 5,000 Specially Designated Nationals from around the world. “We reviewed the Ohio Treasury’s policies and safeguards regarding these federal laws and regulations, and I was surprised to find that until now the Treasury has had no such safeguards in place and apparently has ignored these matters altogether,” said Cordray.

The Ohio Treasury is responsible for investing the State’s main fund portfolios, currently worth more than $12 billion. “We will make sure that each investment of state taxpayer dollars is in compliance with all federal anti-terrorism directives,” Cordray said. “We all wish to live in a peaceful world, free of the threat of terrorism. And all surely agree that public funds should not be invested in ways that aid terrorism. With our new Terror-Free Investment Policy in place, Ohioans can rest assured that their state funds are not helping to finance the wrong side of that struggle.”

The new Terror-Free Investment Policy is attached.

For more information, contact:

Tyler Lowry; 614-752-2747; 614-746-0787; Tyler.Lowry@tos.ohio.gov

Holly Hollingsworth; 614-728-2827; 614-425-2234; Holly.Hollingsworth@tos.ohio.gov

TO: INVESTMENT DIRECTOR AND GENERAL COUNSEL
FROM: OHIO TREASURER RICHARD CORDRAY
RE: NEW TERROR-FREE INVESTMENT POLICY
DATE: APRIL 18, 2007

All Ohioans wish to live in a peaceful world, free of the threat of terrorism. And all surely agree that public funds should not be invested in ways that promote terrorism. The Ohio Treasurer therefore enacts this Terror-Free Investment Policy to prevent public funds from supporting terrorism.

The conduct of foreign affairs is, of course, the responsibility of our federal government. Indeed, the United States Supreme Court has long prevented “intrusion[s] by the State[s] into the field of foreign affairs which the Constitution entrusts to the President and the Congress.” In recent years, the Congress and the President have enacted policies designed to disrupt terrorist networks and isolate state sponsors of terrorism. While mindful of the federal government’s responsibility to chart American foreign policy, the State of Ohio should nonetheless do all it can to assist in and conform to these federal anti-terrorism efforts.

Accordingly, through the procedures outlined below, the Ohio Treasurer’s office will ensure that it supports the following anti-terrorism policies of the federal government and any other such policies required by law:

State Sponsors of Terrorism List

The United States designates as state sponsors of terrorism those countries whose governments have repeatedly provided support for acts of international terrorism. Five countries are currently so designated: Cuba, Iran, North Korea, Sudan, and Syria. These designations impose four sets of U.S. Government sanctions:

A ban on arms-related exports and sales; Controls over exports of dual-use items, requiring 30-day Congressional notification for goods or services that could significantly enhance the terrorist-list country's military capability or ability to support terrorism; Prohibitions on economic assistance; Imposition of miscellaneous financial and other restrictions, including:

· Requiring the United States to oppose loans by the World Bank and other international financial institutions;

· Lifting diplomatic immunity to allow families of terrorist victims to file civil lawsuits in U.S. courts;

· Denying companies and individuals tax credits for income earned in terrorist-listed countries;

· Denial of duty-free treatment of goods exported to the United States;

· Authority to prohibit any U.S. citizen from engaging in a financial transaction with a terrorist-list government without a Treasury Department license; and

· Prohibition of Defense Department contracts above $100,000 with companies controlled by terrorist-list states.

Executive Order 13224 List

On September 23, 2001, the President signed Executive Order 13224 to disrupt the financial support network of terrorists and terrorist organizations by authorizing the federal government to designate and block the assets of foreign individuals and entities that commit, or pose a significant risk of committing, acts of terrorism. The Order also authorizes the federal government to block the assets of individuals and entities that provide support, services, or assistance to, or otherwise associate with, terrorists and terrorist organizations designated under the Order, as well as their subsidiaries, front organizations, agents, and associates. Click here for a current list of 443 terrorists and entities identified under this Order.

Foreign Terrorist Organizations List

The United States maintains a list of foreign terrorist organizations (FTOs), to which a person in the United States cannot provide material support or resources. Unlawful support or services to FTOs includes, but is not limited to, any property, tangible or intangible, or service, including currency or monetary instruments or financial securities or financial services. Furthermore, any U.S. financial institution that becomes aware that it has possession of or control over funds in which a designated FTO or its agent has an interest must retain possession of or control over the funds and report the funds to the Office of Foreign Assets Control of the U.S. Department of the Treasury. Click here for a current list of nearly 50 FTOs.

Sanctions List

The federal government, through the U.S. Department of the Treasury’s Office of Foreign Assets Control, administers and enforces economic and trade sanctions against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction. Specially Designated Nationals and Blocked Persons (SDNs) are individuals and entities located throughout the world that are blocked pursuant to the various sanctions programs administered by the federal government. American citizens and companies are prohibited from engaging in any transactions with SDNs and must block any property in their possession or under their control in which an SDN has an interest. Click here for a current list of approximately 5,000 SDNs.

New Policies and Procedures of the Ohio Treasurer’s Office

The Ohio Treasury shall create, for the first time, a comprehensive program to track and abide by the federal government’s anti-terrorism and sanctions requirements. To do so, the Treasury’s General Counsel and Investment Director shall work to ensure that all of the investments controlled by the Treasurer’s office comply with federal law concerning:

· the State Sponsors of Terrorism List

· the President’s Executive Order 13224

· the Foreign Terrorist Organizations List

· the Sanctions SDN List

Within 30 days of this new policy being issued, the General Counsel and Investment Director shall certify to the Treasurer that no funds controlled by the Treasury are invested in terror-related entities as proscribed by these federal policies. Thereafter, the General Counsel and Investment Director shall meet on a quarterly basis to ensure and to certify continued compliance with these and other such requirements that may be enacted by the federal government.