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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 occur. 02/01 Senate intro - 1st rdg - to printing 02/04 Rpt prt - to St Aff
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-ninth Legislature Second Regular Session - 2008IN THE SENATE SENATE BILL NO. 1367 BY COMMERCE AND HUMAN RESOURCES COMMITTEE 1 AN ACT 2 RELATING TO THE PUBLIC EMPLOYEE RETIREMENT SYSTEM; AMENDING CHAPTER 13, TITLE 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 5 DEFINE TERMS, TO PROVIDE FOR THE IDENTIFICATION OF CERTAIN SCRUTINIZED 6 COMPANIES, TO PROVIDE A REQUIRED PROCEDURE FOR THE BOARD, TO PROVIDE FOR 7 REPORTING, TO SPECIFY AN EXEMPTION FROM OTHER LEGAL OBLIGATIONS, TO PRO- 8 VIDE FOR REINVESTMENT IN CERTAIN COMPANIES, TO PROVIDE FOR REPORTS IF 9 VIOLATIONS OCCUR; PROVIDING SEVERABILITY; AND PROVIDING A SUNSET CLAUSE IF 10 CERTAIN EVENTS OCCUR. 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; 2 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 3 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- 4 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 5 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 6 1 respect to choice of asset managers, investment funds, or investments for the 2 public employee retirement fund securities portfolios. 3 59-1312F. REINVESTMENT IN CERTAIN COMPANIES WITH SCRUTINIZED ACTIVE BUSI- 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
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
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