...of Frank Gaffney, think tanks, and public pensions....look who we're dealing with!

From John Curry, September 8, 2007
Subject: ...of Frank Gaffney, think tanks, and public pensions....look who we're dealing with!

A little history of the folks who have caused public pension systems cause for alarm. Some of these wrapped-in-the-flag cheerleaders are definitely out to get our money while parading on the public stage. Will public pension system board members and legislators have the ability to see through this smokescreen? Will state legislators have the courage to "just say no?"

We, as public pension stakeholders, have to let these legislators know that we have hundreds of thousands of votes to cast against them should they wish to force divestment down our throats. Let them know they will have a price to pay should they force our pension systems to lose millions of dollars.

John

Issue Date: September 6, 2004
Publication: Pensions and Investments
TACTICS DECRIED
Misleading methods
Researcher did not tell public pension fund officials of his connection with national security think
By Barry B. Burr

WASHINGTON — A researcher used misleading means to obtain information from some 100 major public pension funds for a report on terrorism-related investments by the Center for Security Policy, Washington. Bryan Auchterlonie acknowledged in an interview with Pensions & Investments that he identified himself as a graduate student when he sought to collect extensive data on the equity holdings and other investments of public pension funds. He said he did not mention he was providing the information to the CSP, a research organization devoted to national security. The center in mid-August released a 115-page report, “The Terrorism Investments of the 50 States,” based on the data collected by Mr. Auchterlonie. As the report states, it “proves empirically that this nation’s largest and most prominent public pension systems tend to be heavily invested in global publicly traded companies that have business activities in terroristsponsoring states.” The funds invest more than $1 trillion in stock alone, the report added. Started on his own Frank J. Gaffney Jr., CSP president, said Mr. Auchterlonie originated the idea of the report and began collecting data from the public pension funds on his own. In the course of collecting the information, Mr. Auchterlonie approached the center about conducting research to determine if the public pension funds invested in companies doing business in countries linked to terrorism. He provided the center with information he gathered up to that point; then on behalf of the center, Mr. Gaffney said Mr. Auchterlonie continued to gather the data from the pension funds. Mr. Auchterlonie, however, said he never identified his connection with the center. “Perhaps one could characterize it as misleading,” he said. Mr. Gaffney defended Mr. Auchterlonie’s action in the way he gathered the information, because the information should be public and because Mr. Auchterlonie has a right to identify himself as a graduate student because he considered his activity independent study. “The center benefited from the research this graduate study did,” Mr. Gaffney said. Mr. Auchterlonie told P&I he is a volunteer at the center and doesn’t get paid. He clearly denied he works for or is paid by the center. “I do not” work at the center, he said. “I volunteer.” Mr. Gaffney, however, said Mr. Auchterlonie is a paid part-time employee of the center. When told Mr. Auchterlonie characterized himself as a non-paid volunteer, Mr. Gaffney then qualified his own statement to say the center engaged Mr. Auchterlonie only a week before, the week of Aug. 23, to work on a part-time basis, and he has not been paid yet. “There’s nothing devious going on here,” Mr. Gaffney said. “The guy has not been paid yet.” Mr. Auchterlonie said he had no specific purpose in mind when he began gathering the information from the pension funds, including seeking data from public pension systems in the 50 states, the District of Columbia, and cities such as New York, Los Angeles and Chicago, as well as the Federal Retirement Thrift Investment Board and two other federal plans. The project was based on his academic interest in international finance, Mr. Auchterlonie said, although he acknowledged he is not pursuing any of the research in conjunction with a class or professor. “From my point of view, he didn’t need to be working with a professor,” Mr. Gaffney said. He said he just began as a graduate student at Johns Hopkins University, Baltimore. He said, however, he was “enrolled” as a graduate student when he collected the data, although he hadn’t begun the program. His enrollment could not be immediately verified. Public pension funds sometimes charge copying and related administrative fees to provide records, such as extensive listing of securities holdings. But often, in the case of student researchers, they will waive the fees. Asked if the center should pay appropriate fees for the information Mr. Auchterlonie gathered for the report, Mr. Gaffney said, “I would be happy to hear what their standard charge for providing information is and would be willing to entertain on what basis they should charge for it.” “The relationships in this matter seem more than coincidental,” Gary W. Findlay, executive director of the $5.9 billion Missouri State Employees’ Retirement System, Jefferson City, said in a statement. “First we received a request for information from someone who maintains that he is ‘a graduate student at Johns Hopkins University studying socially responsible state and local pension investing.’ We provide the information requested and excerpts from it are later presented in a report with a highly prejudicial title prepared by an alleged think tank,” Mr. Findlay said. “The think tank shares a mailing address with an organization (Conflict Securities Advisory Group) that has been desperately attempting to market a product they maintain is useful in assessing terrorism risk in non-U.S. investments. Just before the CSP report is issued, a U.S. senator sends letters to the directors of the funds included in the CSP report, reminding them of the need to avoid investing in companies that may be supporting terrorism. “I’ll leave it to others to draw their own conclusions from this set of facts, but it just seems a bit too cozy to me. At the end of the day, a lot of what we do hinges on trust. I’m personally hard-pressed to trust people who employ nefarious means to collect data and who resort to political influence-peddling in an attempt to sell products. “When I was contacted by the CSAG about possibly subscribing to their service, they told me that they ‘are not arsonists who are in the fire extinguisher business’ (their words, not mine). The evidence available causes me to question that claim.” Mr. Gaffney said CSP and CSAG share the same office suite, saying CSP sublets the space to CSAG. He said CSAG’s “principals have been colleagues and associates (of leaders of CSP) for some time.” But he said CSP is independent of CSAG. Mr. Gaffney said CSP paid CSAG for the pension fund evaluations. CSAG officials didn’t return phone calls. Encourages divestiture The CSP report encourages the pension funds to divest companies that have business activity in terroristsponsoring countries. “Given this extraordinary financial influence and the important role played by public companies in the economies of terrorist-sponsoring states, the Center for Security Policy has reached a key finding: America’s 100 largest and most prominent pension systems have the power to help defeat terrorism.” “On average, America’s top 100 pension systems invest between 15% and 23% of their portfolio in companies that do business in terrorist-sponsoring states,” the report stated. “From the pension system of this country’s smallest state, Rhode Island, which has close to $400 million invested in 41 companies that are active in terrorist-sponsoring states, to America’s largest public pension system — the California Public Employees’ Retirement System — which has over $17 billion invested in 201 such companies, the results were remarkably uniform,” the report stated. “On average, the Top 100 pension systems invest in 101 companies that have business activities in terrorist sponsoring states. These companies, in turn, are involved in projects in terrorist-sponsoring states valued at more than $73 billion. On average, the Top 100 public funds were invested in: 73 companies doing business in Iran; 24 companies doing business in Libya; 26 companies doing business in Sudan; 31 companies doing business in Syria; and nine companies doing business in North Korea.” Barbara Hafer, Pennsylvania state treasurer, who is involved in examining economic terrorism links, said in a statement, “We want nothing more than to ensure we are reinforcing national security policies through our investment positions, but this report and the data on which it is based seems to be using the threat of terrorism to intimidate everyday investors who follow the laws.” Officials at five public pension plan groups also took issue with a report. In a letter to Mr. Gaffney, the officials said the report presents “a distorted and misleading picture of states and their pension funds.” The letter also criticized the “faulty premise and inflammatory title of the report.” The letter is signed by Ed Hennessee, president of the National Association of State Retirement Administrators; John J. Radford, president, National Association of State Auditors, Comptrollers and Treasurers; Robert D. Podgorny, president, National Conference on Public Employee Retirement Systems; John Hurson, president, National Conference of State Legislatures; and George M. Philip, president, National Council on Teacher Retirement. The report is “large on hype, but does little to actually link investments to terrorist activities or provide assistance to investors trying to ensure they are not doing so,” according to a joint statement by the pension-related groups. Ms. Hafer’s statement, also citing the group’s letter, said the report “merely looked at whether any investments within a portfolio included companies or subsidiaries with a business tie to a country on the State Department’s list;” the findings, according to the letter, “ignore the fact that companies may legally operate within these nations according to the policies established by the U.S. government, which permit various types of business in or with the countries on the list if it is believed they further foreign policy goals.”