Dispatch: Pension funds may skip divesting Iran, Sudan links

Friday, August 17, 2007
By James Nash
THE COLUMBUS DISPATCH

After weeks of often-emotional debate pitting homeland security against financial security for Ohio retirees, state lawmakers thought they had a deal.

The five public pension systems would withdraw half of their investments in companies that do business with Iran and Sudan by the end of the year, and work to fully rid themselves of the investments as soon as possible.

That deal, however, appears to rest on shaky ground.

In interviews this week, officials with two of the five pension systems said they might not go through with the deal if it ends up costing them money. They said their deal with House Speaker Jon A. Husted's office requires them only to study the issue and take it to their boards, which would have the final say.

"They're independent boards," said William J. Estabrook, executive director of the Ohio Police & Fire Pension Fund. "They may have a totally different idea of what to do. I don't anticipate that this will go the same way for everybody."

On June 7, executive directors of the state pension systems -- which collectively represent 1.3 million current or retired government employees -- signed a deal with Husted to work toward dumping investments in companies tied to Iran and Sudan. Their letter said they would "expeditiously develop an investment policy consistent with the boards' fiduciary duties."

Each system has interpreted that statement slightly differently. The Ohio Public Employees Retirement System has been in touch with Husted's chief of staff, Scott Borgemenke, to make sure it complies. Even after signing the deal with Husted, the State Teachers Retirement System passed a resolution continuing to oppose legislative efforts to limit its investments.

The issue has inflamed emotions since state Reps. Josh Mandel and Shannon Jones introduced a bill in April to force state pensions to dump billions of dollars in investments tied to Iran. The two Republicans -- one a veteran of the Iraq conflict, the other a mother of two young children -- pitched their bill as a way to strike at terrorism by getting public pensions out of the business of subsidizing an enemy state. Sudan was later added because of its government's unwillingness to stop the massacre in Darfur.

Hundreds of retired state employees have complained about the bill, saying it's unfair to link their retirement incomes to foreign policy. They have found sympathetic ears among members of pension boards, some of whom flatly reject Mandel and Jones' approach.

"I believe that (pension boards) need to have wiggle room," said Judy Stalter, a retired assistant clerk of the state Senate who is active in Public Employee Retirees Incorporated, an advocacy group. "It should be their right to look at the investments and make sure their fiduciary responsibilities are not breached. If they are breached, they should be able to take action to meet their fiduciary responsibilities."

Yesterday, the board of the State Teachers Retirement System debated the issue for more than two hours. Some board members expressed their distaste for what they see as legislative meddling, while others agreed that they should back out of the deal with Husted if it means their investments will generate lower returns. The board hired an investment analyst to study that question and also asked the attorney general's office to look into the pension system's obligations to both the legislature and its members.

Husted expects that the pension systems will have half of their money out of companies that do business with Iran and Sudan by year's end, spokeswoman Karen Tabor said.

"The fact of the matter is, honorable people keep their word," she said. "We expect the pension systems to keep their word. Rep. Mandel is keeping his word to the American people by going back to Iraq for a second time."

jnash@dispatch.comA