2008 Legislation
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SENATE BILL NO. 1367<br /> – PERSI/investmnts/certain companies


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S1367.......................................by COMMERCE AND HUMAN RESOURCES
PUBLIC EMPLOYEE RETIREMENT SYSTEM - Adds to existing law relating to the
Public Employee Retirement System to provide for the identification of
certain scrutinized companies; to provide a required procedure for the
Board of the Public Employee Retirement System, to provide for reporting;
to specify an exemption from other legal obligations; to provide for
reinvestment in certain companies; and to provide for reports if violations

02/01    Senate intro - 1st rdg - to printing
02/04    Rpt prt - to St Aff

Bill Text

  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-ninth Legislature                   Second Regular Session - 2008


                                       IN THE SENATE

                                    SENATE BILL NO. 1367


  1                                        AN ACT
  3        59,  IDAHO  CODE,  BY  THE  ADDITION  OF  NEW SECTIONS 59-1312A, 59-1312B,
  4        59-1312C, 59-1312D, 59-1312E, 59-1312F  AND    59-1312G,  IDAHO  CODE,  TO

 11    Be It Enacted by the Legislature of the State of Idaho:

 12        SECTION  1.  That  Chapter  13,  Title 59, Idaho Code, be, and the same is
 13    hereby amended by the addition thereto of NEW SECTIONS, to be known and desig-
 14    nated as Sections 59-1312A, 59-1312B, 59-1312C, 59-1312D,  59-1312E,  59-1312F
 15    and 59-1312G, Idaho Code, and to read as follows:

 16        59-1312A.  DEFINITIONS.  As  used  in  sections 59-1312A through 59-1312G,
 17    Idaho Code:
 18        (1)  "Active business operations" means all business operations  that  are
 19    not inactive business operations;
 20        (2)  "Board"  means  the  retirement  board  of  the Idaho public employee
 21    retirement system as provided in this chapter;
 22        (3)  "Business operations" means engaging  in  commerce  in  any  form  in
 23    Sudan,  including by acquiring, developing, maintaining, owning, selling, pos-
 24    sessing, leasing or operating equipment, facilities, personnel, products, ser-
 25    vices, personal property, real property, or any other apparatus of business or
 26    commerce;
 27        (4)  "Company" means any sole proprietorship,  organization,  association,
 28    corporation,  partnership, joint venture, limited partnership, limited liabil-
 29    ity partnership, limited liability company, or other entity or business  asso-
 30    ciation, including all wholly-owned subsidiaries, majority-owned subsidiaries,
 31    parent  companies,  or  affiliates  of such entities or business associations,
 32    that exist for profit-making purposes;
 33        (5)  "Complicit" means taking actions during  any  preceding  twenty  (20)
 34    month  period which have directly supported or promoted the genocidal campaign
 35    in Darfur including, but not limited to, preventing Darfur's victimized  popu-
 36    lation  from  communicating with one another, encouraging Sudanese citizens to
 37    speak out against an  internationally  approved  security  force  for  Darfur,
 38    actively working to deny, cover up, or alter the record on human rights abuses
 39    in Darfur, or other similar actions;
 40        (6)  "Direct  holdings"  in a company means all securities of that company
 41    held directly for the benefit of the public employee retirement fund or in  an
 42    account  or  fund  in  which all shares or interests are held directly for the
 43    benefit of the public employee retirement fund;


  1        (7)  "Government of Sudan" means the government in Khartoum, Sudan,  which
  2    is  led by the National Congress Party, formerly known as the National Islamic
  3    Front, or any successor government  formed  on  or  after  October  13,  2006,
  4    including  the  coalition Government of National Unity agreed upon in the com-
  5    prehensive peace agreement for Sudan, and does not include the  regional  gov-
  6    ernment of southern Sudan;
  7        (8)  "Inactive  business  operations"  means the mere continued holding or
  8    renewal of rights to property previously operated for the purpose of  generat-
  9    ing revenues but not presently deployed for such purpose;
 10        (9)  "Indirect holdings" in a company means all securities of that company
 11    held  in an account or fund, such as a mutual fund, managed by one (1) or more
 12    persons not employed by the board of the public employee retirement system, in
 13    which shares or interests are owned for the benefit  of  the  public  employee
 14    retirement fund together with other investors not subject to the provisions of
 15    this act;
 16        (10) "Marginalized  populations of Sudan" includes, but is not limited to,
 17    the portion of the population in the Darfur region that has  been  genocidally
 18    victimized;  the  portion  of  the  population of southern Sudan victimized by
 19    Sudan's north-south civil  war;  the  Beja,  Rashidiya,  and  other  similarly
 20    underserved   groups   of  eastern  Sudan;  the  Nubian  and  other  similarly
 21    underserved groups in Sudan's Abyei, Southern Blue  Nile,  and  Nuba  Mountain
 22    regions;  and  the  Amri,  Hamadab,  Manasir,  and other similarly underserved
 23    groups of northern Sudan;
 24        (11) "Military equipment" means  weapons,  arms,  military  supplies,  and
 25    equipment  that  readily may be used for military purposes, including, but not
 26    limited to, radar systems or military-grade transport vehicles; or supplies or
 27    services sold or provided directly or indirectly to any force actively partic-
 28    ipating in armed conflict in Sudan;
 29        (12) "Mineral extraction activities" includes exploring, extracting, proc-
 30    essing, transporting, or wholesale selling or trading of elemental minerals or
 31    associated metal alloys or oxides (ore),  including  gold,  copper,  chromium,
 32    chromite,  diamonds,  iron,  iron ore, silver, tungsten, uranium, and zinc, as
 33    well as facilitating such activities, including by providing supplies or  ser-
 34    vices in support of such activities;
 35        (13) "Oil-related  activities"  includes,  but  is  not limited to, owning
 36    rights to oil blocks; exporting, extracting, producing, refining,  processing,
 37    exploring  for,  transporting, selling, or trading of oil; constructing, main-
 38    taining, or operating a pipeline, refinery, or other oil field infrastructure;
 39    and facilitating such activities, including by providing supplies or  services
 40    in  support of such activities, provided that the mere retail sale of gasoline
 41    and related consumer products shall not be considered oil-related activities;
 42        (14) "Power production  activities"  means  any  business  operation  that
 43    involves  a project commissioned by the national electricity corporation (NEC)
 44    of Sudan or other similar government of  Sudan  entity  whose  purpose  is  to
 45    facilitate  power  generation  and  delivery,  including,  but not limited to,
 46    establishing  power  generating  plants  or  hydroelectric  dams,  selling  or
 47    installing components for the project, providing service contracts related  to
 48    the  installation  or maintenance of the project, as well as facilitating such
 49    activities, including by providing supplies or services  in  support  of  such
 50    activities;
 51        (15) "Public  employee retirement fund" means that fund established pursu-
 52    ant to the provisions of section 59-1311, Idaho Code;
 53        (16) "Scrutinized company" means any company that meets  the  criteria  in
 54    paragraph (a), (b) or (c) of this subsection:
 55        (a)  The  company  has  business operations that involve contracts with or


  1        provision of supplies or services to the government of Sudan, companies in
  2        which the government of Sudan has any direct  or  indirect  equity  share,
  3        government  of  Sudan-commissioned  consortiums  or projects, or companies
  4        involved in government of Sudan-commissioned consortiums or projects; and
  5             (i)   More than ten percent (10%) of the company's revenues or assets
  6             linked to Sudan involve oil-related activities or mineral  extraction
  7             activities;  less  than  seventy-five  percent (75%) of the company's
  8             revenues or assets linked to Sudan involve contracts  with or  provi-
  9             sion of oil-related or mineral extracting products or services to the
 10             regional government of southern Sudan or a project or consortium cre-
 11             ated  exclusively  by  that  regional government; and the company has
 12             failed to take substantial action; or
 13             (ii)  More than ten percent (10%) of the company's revenues or assets
 14             linked to Sudan involve power production activities; less than seven-
 15             ty-five percent (75%) of the company's  power  production  activities
 16             include  projects  whose intent is to provide power or electricity to
 17             the marginalized populations of Sudan; and the company has failed  to
 18             take substantial action.
 19        (b)  The company is complicit in the Darfur genocide.
 20        (c)  The  company  supplies  military  equipment  within  Sudan, unless it
 21        clearly shows that the military equipment cannot  be  used  to  facilitate
 22        offensive military actions in Sudan or the company implements rigorous and
 23        verifiable  safeguards to prevent use of that equipment by forces actively
 24        participating in armed conflict, for example, through postsale tracking of
 25        such equipment by the company, certification from a reputable  and  objec-
 26        tive third party that such equipment is not being used by a party partici-
 27        pating in armed conflict in Sudan, or sale of such equipment solely to the
 28        regional  government  of  southern Sudan or any internationally recognized
 29        peacekeeping force or humanitarian organization.
 30    Notwithstanding anything herein to the contrary, a social development  company
 31    which  is not complicit in the Darfur genocide shall not be considered a scru-
 32    tinized company;
 33        (17) "Social development company" means a company whose primary purpose in
 34    Sudan is to provide humanitarian goods or services, including medicine or med-
 35    ical equipment, agricultural supplies or infrastructure, educational  opportu-
 36    nities,  journalism-related  activities, information or information materials,
 37    spiritually-related activities, services of a  purely  clerical  or  reporting
 38    nature,  food,  clothing, or general consumer goods that are unrelated to oil-
 39    related activities, mineral extraction activities, or power production activi-
 40    ties;
 41        (18) "Substantial action" means adopting, publicizing and  implementing  a
 42    formal  plan  to cease scrutinized business operations within one (1) year and
 43    to refrain from any such  new  business  operations;  undertaking  significant
 44    humanitarian  efforts  in  conjunction with an international organization, the
 45    government of Sudan, the regional government of  southern  Sudan,  or  a  non-
 46    profit  entity and evaluated and certified by an independent third party to be
 47    substantial in relationship to the company's Sudan business operations and  of
 48    benefit  to  one  (1)  or  more  marginalized populations of Sudan; or through
 49    engagement with the government of Sudan, materially improving  conditions  for
 50    the genocidally victimized population in Darfur.

 51        59-1312B.  IDENTIFICATION  OF  COMPANIES. (1) Within ninety (90) days fol-
 52    lowing passage of this act, the board shall make its best efforts to  identify
 53    all  scrutinized  companies  in which direct or indirect holdings are held for
 54    the benefit of the public employee retirement fund or those that could  possi-


  1    bly be held in the future. Such efforts shall include, as appropriate:
  2        (a)  Reviewing  and  relying,  as  appropriate, upon the board's judgment,
  3        upon publicly available  information  regarding  companies  with  business
  4        operations in Sudan, including information provided by nonprofit organiza-
  5        tions,  research firms, international organizations and governmental enti-
  6        ties;
  7        (b)  Contacting asset managers contracted by the board that invest in com-
  8        panies with business operations in Sudan; and
  9        (c)  Contacting other institutional investors that have divested  from  or
 10        engaged with companies that have business operations in Sudan.
 11        (2)  By  the  first  meeting  of  the  board following the ninety (90) day
 12    period described in subsection (1) of this section, the board  shall  assemble
 13    all scrutinized companies identified into a "scrutinized companies list."
 14        (3)  The  board shall update the scrutinized companies list on a quarterly
 15    basis based upon evolving information from, among other sources, those  listed
 16    in subsection (1) of this section.

 17        59-1312C.  REQUIRED  ACTIONS. The board shall adhere to the following pro-
 18    cedure for companies on the scrutinized companies list:
 19        (1)  Engagement.
 20        (a)  The board shall immediately determine the companies  on  the  scruti-
 21        nized  companies  list  in  which assets of the public employee retirement
 22        fund are invested.
 23        (b)  For each company identified in subsection (1)(a) of this section with
 24        only inactive business operations, the board shall send a  written  notice
 25        informing  the  company  of  this  act  and  encouraging it to continue to
 26        refrain from initiating active business operations in Sudan  until  it  is
 27        able  to  avoid  scrutinized business operations. The board shall continue
 28        such correspondence on a semiannual basis.
 29        (c)  For each company identified in subsection (1)(a) of this section with
 30        active business operations, the board shall send a written notice  inform-
 31        ing  the  company of its scrutinized company status and that it may become
 32        subject to divestment by the board. The notice shall offer the company the
 33        opportunity to clarify its Sudan-related activities  and  shall  encourage
 34        the  company,  within  ninety  (90)  days, to either cease its scrutinized
 35        business operations or convert such operations to inactive business opera-
 36        tions in order to avoid qualifying for divestment.
 37        (d)  If, within ninety (90) days following the  board's  first  engagement
 38        with a company pursuant to subsection (1)(c) of this section, that company
 39        ceases  scrutinized business operations, the company shall be removed from
 40        the scrutinized companies list and the provisions of  this  section  shall
 41        cease  to  apply  to it unless it resumes scrutinized business operations.
 42        If, within ninety (90) days following the board's  first  engagement,  the
 43        company  converts  its  scrutinized active business operations to inactive
 44        business operations, the company shall be subject to all provisions relat-
 45        ing thereto.
 46        (2)  Divestment.
 47        (a)  If, after ninety (90) days following  the  board's  first  engagement
 48        with  a company pursuant to subsection (1)(c) of this section, the company
 49        continues to have scrutinized active business operations, and  only  while
 50        such company continues to have scrutinized active business operations, the
 51        board  shall sell, redeem, divest, or withdraw all publicly-traded securi-
 52        ties of the company, except as provided below, according to the  following
 53        schedule:
 54             (i)   At  least  fifty  percent (50%) of such assets shall be removed


  1             from the assets of the public employee retirement fund under  manage-
  2             ment by nine (9) months after the company's most recent appearance on
  3             the scrutinized companies list.
  4             (ii)  One hundred percent (100%) of such assets shall be removed from
  5             the  assets  of  the public employee retirement fund under management
  6             within fifteen (15) months after the company's most recent appearance
  7             on the scrutinized companies list.
  8        (b)  If a company that ceased scrutinized active business operations  fol-
  9        lowing  engagement  pursuant  to subsection (1)(c) of this section resumes
 10        such operations, the board shall send a written notice to the company. The
 11        company shall also be immediately reintroduced onto the scrutinized compa-
 12        nies list.
 13        (3)  Prohibition. At no time shall the board acquire securities of  compa-
 14    nies  on  the scrutinized companies list that have active business operations,
 15    except as provided in subsections (4) and (5) of this section.
 16        (4)  Exemption. No company which the  United  States  government  affirma-
 17    tively  declares  to  be excluded from its present or any future federal sanc-
 18    tions relating to Sudan shall be subject to divestment or investment  prohibi-
 19    tion pursuant to subsections (2) and (3) of this section.
 20        (5)  Excluded securities. Notwithstanding anything herein to the contrary,
 21    subsections  (2)  and (3) of this section shall not apply to indirect holdings
 22    in actively managed investment funds. The board shall, however, submit letters
 23    to the managers of such investment funds containing companies with scrutinized
 24    active business operations requesting that they consider removing such  compa-
 25    nies  from  the  fund  or create a similar actively managed fund with indirect
 26    holdings devoid of such companies. If the manager creates a similar fund,  the
 27    board shall replace all applicable investments with investments in the similar
 28    fund  in  an expedited time frame consistent with prudent investing standards.
 29    For the purposes of this section, "private equity" funds shall be deemed to be
 30    actively managed investment funds.

 31        59-1312D.  REPORTING. By August 1, 2008, the board shall file  a  publicly
 32    available  report  with  the  United  States  attorney  general  detailing the
 33    requirements contained in this act.
 34        (2)  The board shall file a publicly available report to the Idaho  legis-
 35    lature  and  the  commerce  and human resources committee of each house of the
 36    Idaho legislature that includes the scrutinized  companies  list  thirty  (30)
 37    days after the list is created.
 38        (3)  Annually thereafter, the board shall file a publicly available report
 39    to  the Idaho legislature and send copies of that report to the United  States
 40    attorney general and the United States  presidential  envoy  to  Sudan  or  an
 41    appropriate designee or successor, that includes:
 42        (a)  A summary of correspondence with companies engaged by the board under
 43        subsection (1)(b) or (1)(c) of section 59-1312C, Idaho Code;
 44        (b)  All  investments  sold, redeemed, divested or withdrawn in compliance
 45        with subsection (2) of section 59-1312C, Idaho Code;
 46        (c)  All prohibited investments under subsection (3) of section  59-1312C,
 47        Idaho Code; and
 48        (d)  Any  progress  made  under  subsection (5) of section 59-1312C, Idaho
 49        Code.

 50        59-1312E.  OTHER LEGAL OBLIGATIONS. With respect to actions taken in  com-
 51    pliance  with this act, including all good faith determinations regarding com-
 52    panies as required by this act, the board shall be exempt from any conflicting
 53    statutory or common law  obligations,  including  any  such  obligations  with


  1    respect  to choice of asset managers, investment funds, or investments for the
  2    public employee retirement fund securities portfolios.

  4    NESS OPERATIONS. Notwithstanding anything herein to the  contrary,  the  board
  5    shall  be permitted to cease divesting from certain scrutinized companies pur-
  6    suant to section 59-1312C(2), Idaho Code, or reinvest in  certain  scrutinized
  7    companies  from which it divested pursuant to section 59-1312C(2), Idaho Code,
  8    if clear and convincing evidence shows that the value  for  all  assets  under
  9    management by the board becomes equal to or less than ninety-nine and one-half
 10    percent  (99.5%)  (fifty  (50)  basis points) of the hypothetical value of all
 11    assets under management by the board, assuming no divestment for  any  company
 12    had  occurred  under section 59-1312C(2), Idaho Code. Cessation of divestment,
 13    reinvestment, or any subsequent ongoing investment authorized by this  section
 14    shall  be strictly limited to the minimum steps necessary to avoid the contin-
 15    gency set forth in the preceding sentence. For any  cessation  of  divestment,
 16    reinvestment, or subsequent ongoing investment authorized by this section, the
 17    board  shall provide a written report to the legislature in advance of initial
 18    reinvestment, updated semiannually thereafter as applicable, setting forth the
 19    reasons and justification, supported by clear and convincing evidence, for its
 20    decisions to cease divestment, reinvest, or remain invested in companies  with
 21    scrutinized  active  business  operations.  This section has no application to
 22    reinvestment in companies on the ground  that  they  have  ceased  scrutinized
 23    active business operations.

 24        59-1312G.  REPORTS OF VIOLATIONS. The board shall report any violations in
 25    complying  with  this  act  annually  to  both houses of the legislature on or
 26    before the fifteenth of January each year.

 27        SECTION 2.  SEVERABILITY. The provisions of this act are  hereby  declared
 28    to  be  severable  and if any provision of this act or the application of such
 29    provision to any person or circumstance is declared invalid  for  any  reason,
 30    such  declaration  shall  not affect the validity of the remaining portions of
 31    this act.

 32        SECTION 3.  The provisions of this act shall be null, void and of no force
 33    and effect on and after the occurrence of the Congress  or  President  of  the
 34    United  States declaring that the Darfur genocide has been halted for at least
 35    twelve (12) months; the United States revoking all sanctions  imposed  against
 36    the  government  of  Sudan;  the  Congress  or  President of the United States
 37    declaring that the government of Sudan has honored its  commitments  to  cease
 38    attacks on civilians, demobilize and demilitarize the Janjaweed and associated
 39    militias,  grant  free  and  unfettered  access for deliveries of humanitarian
 40    assistance, and allow for the safe and voluntary return of refugees and inter-
 41    nally displaced persons; or the Congress or President of  the  United  States,
 42    through legislation or executive order, declaring that mandatory divestment of
 43    the type provided for in this act interferes with the conduct of United States
 44    foreign policy.

Statement of Purpose / Fiscal Impact

                          STATEMENT OF PURPOSE

                                RS 17505

This legislation seeks to financially dissociate the state of Idaho and
specifically the Public Employee Retirement System of Idaho (PERSI) from
financial investments in a small subset of "highest offending" foreign
companies that facilitate the genocide in the Darfur region of Sudan.
Perpetrated by the Government of Sudan   a government heavily reliant on
foreign direct investment to fund its military and militia allies   Darfur's
atrocities have already claimed as many as 200,000 lives and displaced more
than 2.5 million. For the first time in history, the US has accused a
government of perpetuating genocide against its own citizens while the
atrocities are ongoing. PERSI presently has holdings in 6 foreign companies
subject to divestment, with a base market value of $ 24.3 Million
(representing 0.22% of total PERSI pension funds of $ 11.26 Billion).

This legislation complies with the Sudan Authorization and Divestment Act of
2007 unanimously passed by the US Congress and signed by President Bush on
December 31, 2007. In passing this legislation Idaho will join 22 other
states adopting divestment (15 states have thus far enacted the "targeted"
divestment model followed by this legislation). The divestment movement,
repeatedly condemned by the Sudanese government, has already prompted several
major foreign companies operating in Sudan to either change problematic
behavior or leave the country entirely. This legislation sends a clear
message to the Government of Sudan and to offending companies that Idahoans
will not financially support genocide.

                                 FISCAL IMPACT

No impact to the general fund.  

Contact: Senate          Contact: House of Representatives
322-1000                 322-1000
Langhorst, David         Snodgrass, Mark     
Stegner, Joe             LeFavour, Nicole         
Bastian, Stan            Jaquet, Wendy       
Hill, Brent              Ringo, Shirley           
Heinrich, Leland         Hart, Phil               
Bair, R. Steven          Mathews, Russ
Pearce, Monty J.         Trail, Tom
Stennett, Clint          Bock, Les
Burkett, Mike            Bowers, Curtis
Werk, Elliot             Pasley-Stuart, Anne
                         Henbest, Margaret
                         Hagedorn, Marv 
                         Chew, Sue

STATEMENT OF PURPOSE/FISCAL NOTE                        S 1367