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The Charleston Gazette: Pensions: Tainted investments

September 29, 2006 

EARLIER this year, West Virginia’s Investment Management Board rebuffed questions about its holdings in regions linked to terror and genocide. The state’s pension investment fund is legally bound to make money and nothing else, board members said. But if California can stop investing in companies that deal with nations that sponsor terrorism and “ethnic cleansing,” why not West Virginia?

This week, Gov. Arnold Schwarzenegger signed a bill that bars California pension managers from investing in companies in Sudan. Another protects the University of California from liability as it divests of its holdings there.

The U.S. State Department has designated Sudan — along with Iran, Libya, North Korea and Syria — as a sponsor of terrorism and bars U.S. firms from conducting business there. Of course, that rule does not apply to foreign companies.

In the Darfur region of Sudan, for three years, Arabic militias have attacked the area’s black minorities. They have slaughtered or driven out millions of farmers and their families, sending some to refugee camps, some to neighboring countries. Witnesses say the janjaweed militias act with help from the Sudanese government, something the government denies. Militias burn villages, steal cattle and destroy wells. Sudan also has harbored al-Qaida terrorists, including Osama bin Laden, and previously waged war on Christians and animists in the south.

The Washington research firm Conflict Securities Advisory Group analyzed West Virginia’s state pension investments for The Sunday Gazette-Mail. According to that analysis, West Virginia had 55 stocks with ties to one of the terrorism-sponsoring countries listed above. As reporter Joe Morris found, the state owns:

$1.004 million in Total Fina Elf of France, which has been developing oil fields in Sudan and Iran for years.
$1.029 million in China’s PetroChina Co., also involved in developing Sudanese oil.
$2.913 million in ENI Spa of Italy, a major oil developer for Iran and Libya.
$8.338 million in Royal Dutch Shell, which holds Iranian oil contracts.
Countries such as Iran, Syria and Sudan reap government revenue from their oil.
 
“So when you help to develop that industry, you’re helping to bring money into their treasury, you’re funding their terrorist enterprises, you’re aiding the insurgency in Iraq,” observed Christopher Holton, an analyst at the Center for Security Policy.

In May, West Virginia’s Investment Management Board refused to divest from companies conducting business with terror-linked foreign governments. Board members, responsible for investing pension funds for teachers, state troopers, sheriff’s deputies and Statehouse workers, point out that they are required by state law to make decisions based solely on earnings. If they use any other criteria, investors might sue them. Is terrorism OK if it gives you a good return on your money?

The Legislature could change that law. But even if it doesn’t, other states have decided not to help such countries. Illinois, Oregon, New Jersey, Arizona, Louisiana, Alaska, Georgia, Kentucky, Massachusetts, North Carolina, Ohio, Texas, Vermont and Virginia are all in various stages of requiring their investments to be terror-free. California and New York City used their size and clout to persuade General Motors Corp., Halliburton Co. and ConocoPhillips Co. to shut down operations they had in terror-linked countries.

In Missouri, where pension managers did not wait for authorization to dump stocks with ties to terror, Mark Hughes, a spokesman for the Missouri Treasurer’s Office, says financial reasons are as good as ethical ones for dumping such stocks.

“We feel that terrorism is the antithesis of well-managed, efficient markets,” Hughes said.

Years ago, some financial managers said it was inconvenient to divest their holdings in Apartheid-tainted South Africa. But many conscientious investors, dumped South Africa, and the racist system eventually ended.

No one is asking the state Investment Management Board to take a stand on abortion, gay marriage or “American Idol.” But surely everyone in West Virginia can agree to oppose terror regimes and genocide. This policy demands another look.

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