A state senator whose metropolitan district includes victims”™ survivors from the 9/11 attacks on the World Trade Center is leading a push in Albany to divest New York state pension fund investments in companies that do business in terrorism-sponsoring nations.
“We”™re sending men and women overseas to fight the war on terror,” said Sen. Jeffrey D. Klein, the state Senate”™s deputy minority leader, whose 34th District includes parts of the Bronx and southern Westchester County. “We”™re not using the most important weapon, I think, in our arsenal, which is financial resources.”
“This is something that”™s got to be done quickly,” he said in a recent phone interview.
The Democrat was referring to a bill, adopted by the Senate and introduced in the Assembly in June, requiring the state comptroller, as sole trustee of New York”™s $140.45 billion pension fund, to refrain from investing in or divest from companies that do business in or with nations identified as state sponsors of international terrorism. The State Department lists those as Iran, Sudan, Syria, North Korea and Cuba.
“I hope that that”™s something that will be taken up in September,” when the state Legislature is back in session in Albany, Klein said. “I think we should be moving a little quicker on this issue.”
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Terrorist Treasury
Klein in June released a report, Terrorist Treasury: How New York”™s Public Pension Fund Invests in Our Enemies, that helped spur lawmakers to action. With assistance from Global Securities Advisory Group Inc., a research and consulting firm in Washington, D.C., that specializes in assessing and managing risk associated with corporate ties to countries of security concern, terrorism or weapons proliferation, Klein”™s staff analyzed the comptroller”™s 2006 comprehensive final annual report on the state”™s Common Retirement Fund. One of the three largest public pension funds in the country, it has 995,536 members, including 653,291 active members and 342,245 beneficiaries and retirees, according to Klein.
Analysts found that $12 billion of the state”™s total $75 billion in equity assets, or 16 percent, are invested in companies that do business with nations that sponsor terrorism.  They identified 235 state pension fund holdings in those companies.
Klein said the state should use its shareholder power “to demand a fiduciary and moral obligation from our corporate partners.”
In a survey update in late July, Klein gave a breakdown of the state”™s holdings for the four chief terror-supporting nations:
Ӣ Iran Р204 investments that amount to approximately $10.4 billion, or 14 percent of the total portfolio;
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”¢ North Korea ”“ 30 holdings amounting to approximately $934 million, or 1 percent of the total;
”¢ Sudan ”“ 11 investments amounting to about $8.4 billion, or 11 percent; and
”¢ Syria ”“ 133 holdings that amount to approximately $9 billion, or 12 percent of the state portfolio.
Klein noted the breakdown exceeded the number of holdings and the $12 billion in equity assets cited in his original report because some companies in which the state has invested are active in more than one terrorism-sponsoring nation.
“The federal government actually bans U.S. companies from doing business in those four nations,” he said. “A lot of them have gotten around that by doing that investment through foreign subsidiaries.”
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Coke connection
Based in Atlanta, Ga., The Coca-Cola Co., for example, in which the state has more than $349 million invested, does business in all four terrorist-linked countries through its Coca-Cola Ireland subsidiary, the senator said.
Coca-Cola Enterprises Inc., the world”™s largest marketer, producer and distributor of Coca-Cola products, operates a bottling plant in Elmsford. The Coca-Cola Co. owns about 35 percent of the publicly traded bottling company”™s stock.
Of the corporations headquartered in New York City or the metropolitan area, “I don”™t think there are any” identified in his recent report, Klein said. “I don”™t think we were able to find anyone directly” from this region linked to financial dealings in the blacklisted countries.
Klein”™s Senate office staff did find large state pension fund investments in several major corporations doing business in those countries. Of the largest, the state has about $537.6 million in equity in Chevron Corp., which does business in Sudan; $402.5 million in ConocoPhillips, which has dealings in Iran and Syria, and about $210 million in Royal Dutch Shell, which is financially linked to Iran, Sudan and Syria.
Shell and seven of its energy-producing rivals, including Russia”™s OAO Gazprom and France”™s Total SA, in which New York state has invested about $1.8 million and $165.7 million, respectively, last month were asked to cut their ties with Iran by a group of U.S. pension funds investors, The Times of London reported. The concerned investors included New York City”™s five main pension funds and the California Public Employees Retirement System.
Regarding the growing anti-terrorism divestment movement among public pension funds, Klein said, “New York state was not ahead of the curve on this ”“ and that”™s unusual.”
Klein said his friend and former Senate colleague, state Comptroller Thomas P. DiNapoli, has not taken the initiative on the investment issue in advance of state legislation that would require him to do so.
Jim Fuchs, a spokesman for the comptroller, said last week, “Our general policy is engagement” with companies to point out the bad investment risk of doing business in countries such as Sudan, “rather than straight divestment.”
Klein said he wants the comptroller to “use his discretion” in attempting to convince companies to change their business practices and in determining which investments should be divested.
“Selling soda (in Iran) is a little different than developing oil and gas resources” there, Klein said. “I understand that any manager of a pension fund has a fiduciary duty to the pensioners. I”™m not expecting these pension funds to bankrupt themselves.”
Klein said he has asked New York labor unions to let him analyze their pension fund investments too for links to terrorism-sponsoring nations.
“I think you”™ll see a cottage industry that develops of terror-free investments,” he said.
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