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Pennsylvania votes to divest firms tied to Iran


PhillyDeals: Pa. House votes to divest firms tied to Iran

By Joseph N. DiStefano

The Pennsylvania House of Representatives voted unanimously Tuesday to make the state Treasury and pension funds dump stock worth more than $400 million in Royal Dutch Shell and dozens of other foreign companies.”If they want to do business with Pennsylvania’s pension funds, they’ll have to cut their ties to Iran,” the bill’s sponsor, Rep. Josh Shapiro, a Democrat who represents Abington and Upper Dublin, told me.

State pension funds would be barred from buying into companies that make significant investments in Iran and Sudan under the law, which Gov. Rendell is likely to sign once state lawyers review it, his spokesman, Gary Tuma, told me.

Pennsylvania’s pension funds resisted past

attempts to divest companies in Northern Ireland and South Africa amid concerns that politicizing the underfunded pension plans would hurt investment returns.

Indeed, Shapiro’s proposal “was met with very stiff oppositions from the pension funds and from their sympathizers” when he pressed it in his first term five years ago, Shapiro told me.

What made Harrisburg give in this time? “The different Jewish federations throughout the state” mobilized in support of the bill, said Matthew Handel, an executive at Shire Pharmaceuticals in suburban Philadelphia, who is chairman of the Pennsylvania Jewish Coalition.

The America-Israel Public Affairs Committee, which calls itself “America’s Pro-Israel Lobby,” joined to back the bill, said Robin Schatz, director of government affairs for the Jewish Federation of Greater Philadelphia.

The bill also got support, in its early stages, from members of the Darfur Coalition, a group of U.S. activists who oppose the national government in war-torn Sudan, Schatz added. She credited State Rep. Babette Josephs (D., Phila.) for bringing in the Darfur activists.

Why is Pennsylvania taking on the enemies of Israel, a foreign country?

“Foreign policy is clearly conducted on the banks of the Potomac,” by the State Department in Washington, Shapiro told me.

“But here on the banks of the Susquehanna, we can leverage $400 million worth of investments in a way that supports our allies, for example Israel, and isolates our enemies.”

The law would also force the sale of shares in Italy’s ENI, Russia’s Gazprom and Lukoil, France’s Total, China’s CNOOC, and industrial companies in South Korea, Taiwan and Thailand.

The bill won’t force the funds to sell stocks that are included in index funds, which account for a large proportion of the funds’ equity holdings, noted Robert Gentzel, spokesman for the State Employees’ Retirement System.

Shapiro says the groups that backed the bill want to “choke off foreign capital” supporting Iran, in hopes of stopping Iran’s nuclear weapons development that threatens Israel and other countries in that region.

He told me he agrees with remarks earlier this month in support of blockades against Israel’s enemies, by U.S. Sen. Charles Schumer (D., N.Y.).

According to Schumer’s speech, Israel’s blockade of the Palestinian Gaza territory “makes sense,” so long as “people [are] not starving to death,” because it seeks “to strangle them economically” until they agree “that a path of living with Israel and the Jews is a better way to go than a path of total and obdurate confrontation.”

Back in the market

The market for commercial mortgage-backed securities (CMBS) – bonds backed by loans on apartments, offices, stores, warehouses, hotels – stalled in the 2008 credit freeze.That’s one reason commercial real estate prices have collapsed and the private sector’s not building much.

“We’re starting to lead the market back,” Dan Sheehy, the Reading native who heads California-based Impact Community Capital L.L.C., told me, after pricing the main $235 million, AAA-rated portion of a $302 million CMBS, at a variable rate of 5.35 percent, or 2.25 percent over U.S. Treasuries.

The group was represented by Philadelphia lawyer David Forti and his colleagues at Dechert L.L.P. “Couldn’t have done it without them,” said Sheehy, who added he “spent four weeks on the road, going like the hammers of Hell,” pushing the deal to pension funds and other big investors to buy the bonds and help bring back the market.

Contact Joseph N. DiStefano at 215-854-5194 or [email protected].
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