ReportOnBusiness.com: Critics decry U.S. watchdog’s terrorism list

NORVAL SCOTT
Globe and Mail Update
July 10, 2007 at 9:39 PM EDT

CALGARY — A list of companies that the U.S. securities regulator believes are operating in countries that Washington says sponsor state terrorism is arbitrary and incomplete, critics say.

The list, which includes several Canadian companies, was prepared by the U.S. Securities and Exchange Commission to provide information to investors. But it has been criticized by both business and humanitarian agencies alike, because, among other things, it includes companies that have since withdrawn from the named countries – Cuba, Syria, Iran, North Korea and Sudan.

The document, published last month on the SEC website, includes Calgary-based Petro-Canada and Precision Drilling Trust, Vancouver-based Lundin Mining Corp., and Mississauga-based YM BioSciences Inc. on a longer list that contains some of the world’s largest companies, such as Royal Dutch Shell PLC and BP PLC. Companies were added to the list if they mentioned in their 2006 business reports that they had operations in any of the five states.

Canadian mining firm Sherritt International Corp., Cuba’s largest foreign investor, is not included, but U.S.-based services firm Baker Hughes Inc., which withdrew from Sudan two years ago, is.

Meanwhile, Immtech Pharmaceuticals Inc., which has conducted experiments for the treatment of African sleeping sickness in Sudan, makes the list, as does media firm Reuters Group PLC, which has reporters in Iran, Syria and Cuba.

“The misleading nature of the press release and website is very problematic,” said Nancy McLernon, senior vice-president at the U.S.-based Organization for International Investment. “It contains no sense of whether companies have material operations in these countries or not, and yet investors may act on this list. Ultimately, this scarlet letter could be detrimental not only to the decisions of investors but also to the reputations of these companies.”

The intent of the list is to provide protection to investors, according to SEC chairman Christopher Cox.

“No investor should ever have to wonder whether his or her investments or retirement savings are indirectly subsidizing a terrorist haven or genocidal state,” Mr. Cox said last month.

The SEC has been under pressure from the U.S. government to provide guidance about companies’ international activity. U.S. Senate banking committee chairman Christopher Dodd expressed concern in May about whether regulators were moving fast enough to force companies to disclose business ties to “terrorist-sponsoring states.”

SEC spokesman John Heine denied that the online tool was intended to be a blacklist, saying its intention is only to provide information to investors in order to give them an easier way to search through corporate annual reports that contain references to the five countries. He wouldn’t comment on specific issues with regard to the compilation of the list itself.

Petro-Canada spokeswoman Michelle Harries defended the company’s operations in Syria, saying the company “has a very clear and strict code of business conduct, and we spend much time ensuring all our operations comply with its requirements.” Precision Drilling Trust wasn’t immediately available for comment.

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