Yesterday, State Representatives Josh Mandel and Shannon Jones finally introduced a bill that would require Ohio's state pension fund managers to cut all financial ties with any company that does business with (or in) Iran. It's a good start. Here are the high points:
- Ohio state pension fund managers are forbidden to invest in any "forbidden entity":
- any publicly-traded company with active business ties or operations in or with Iran;
- any publicly-traded company that has active business ties or operations with any company domiciled in Iran;
- any non-publicly-traded foreign company that doesn't annually provide an accurate affidavit that it doesn't own or control any property or assets located in Iran, nor does it have business ties or operations in or with Iran.
- any mutual fund, separate account, index, index managed product, or compilation of stocks identified that can't prove it excludes all forbidden entities.
- All funds currently invested in forbidden entities must be at least 60% divested within six months, and 100% divested within a year;
- If this divestment causes a state pension fund to suffer a loss, the fund manager gets immunity from pensioners' lawsuits alleging a breach of fiduciary duty;
- When private asset managers are under contract to invest Ohio state pension funds, those managers must certify that they won't invest in a forbidden entity, and will divest any funds already so invested. Otherwise they suffer penalties:
- they get their contract yanked;
- for one year, they're forbidden from doing any business with the treasurer of state, the state board of deposit, the workers' compensation oversight commission, the administrator of workers' compensation, and the board of each of the state retirement systems (ouch!)
- The Ohio Attorney General must enforce the bill, and can bring an action in court to do so (count on Lincoln Logs to keep an eye on Marc Dann for us)
Did you spot what's missing from the "forbidden entity" definition?
|Funds, indexes, etc.
I don't understand why Ohio state pension fund managers are allowed to invest in domestic private companies with ties to Iran. Did Representatives Mandel and Jones forget to include them in the "forbidden entities" list? I hope this gets cleared up before the bill comes to a vote.
If you're wondering how many "forbidden entities" get Ohio state pension money, you're not alone, according to The Plain Dealer:
Citing a 2004 study from the Center for Security Policy, Mandel said the Ohio Public Employees Retirement System and the State Teachers Retirement System had each invested in more than 100 companies with ties to Iran. The Ohio Police and Fire Pension Fund had invested in 63 companies with ties to Iran while the School Employees Retirement System had invested in 48, according to the report.
The 2004 study found that about one in five dollars in both the public-employees and teacher pension funds in Ohio were invested in companies with ties to a handful of terrorist-sponsoring states including Iran. Many of the investments are in energy-related companies involved in oil drilling.
Neither Mandel nor Jones could say exactly how many foreign companies do business with Iran, pegging the number at 200 to 300.
It shouldn't matter if there are two or 2,000 companies affected. No state pension funds should pass through the grubby little fingers of Iranian President Ahminamoodforjihad and his mullah buddies.
Another quote from the PD article:
Jones noted that it took only weeks for fund managers to come up with mutual funds free of Sudanese investments after Illinois passed similar legislation.
"We are going to set the policy, and we are going to let Wall Street provide the product," Jones said.
Remember that this bill would only affect funds in Ohio's state pension system, and wouldn't restrict any private-sector investments. You'd be free to send your own money to Iranian companies. That's assuming that you'd want to. Which you don't. I hope.
My only objection to the bill concerns the exemption for investments in "social development companies", defined as: (1) any company or entity that is not an agency of the government of Iran that holds a valid, current accreditation as a nongovernmental organization from the united nations department of public information; (2) a company that has been identified by an independent research provider as a company whose primary purpose in Iran is to provide to the people of Iran goods and services intended to relieve human suffering; to promote health, religious, or spiritual activities; and to provide education for humanitarian purposes; (3) a company that has been identified by an independent research provider as a company whose primary purpose in Iran is to perform journalistic activities.
This wording might offer enough wiggle room to allow a state pension fund manager to invest in a shady Islamic organization with ties to terrorists. As for nongovernmental organizations, The UN Department of Public Information probably maintains an online list of accredited NGOs, but their server's unreachable at the moment. Once they're back online I'll dig around to see if any accredited NGO is deserves scrutiny.
Nevertheless the concept is sound. Bravo, Josh and Shannon. Extra kudos to Democrat co-sponsors Matthew Barrett, Armond Budish, Timothy DeGeeter, Dan Dodd, Jay Goyal, and Dale Mallory. It takes guts these days for a Democrat to take anything resembling a tough stand in the face of our common enemies.
Update: Jill Miller Zimon at Writes Like She Talks notes that the federal version of this bill was introduced on March 6th.