08 LC 28
3869
Senate
Bill 370
By:
Senators Shafer of the 48th, Hill of the 32nd, Reed of the 35th, Williams of the
19th, Adelman of the 42nd and others
A
BILL TO BE ENTITLED
AN ACT
AN ACT
To
amend Article 7 of Chapter 20 of Title 47 of the Official Code of Georgia
Annotated, the "Public Retirement Systems Investment Authority Law," so as to
provide for legislative findings; to provide for definitions; to provide for the
initial and continuing identification of companies that do business with Sudan;
to provide for the divestment of ownership interests held by public retirement
and pension funds in such companies; to prohibit investments in such companies;
to provide for exceptions; to provide for termination of such prohibitions and
divestments; to provide for certain notices; to provide for certain reports; to
provide for enforcement; to provide for related matters; to repeal conflicting
laws; and for other purposes.
BE
IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
SECTION
1.
The
General Assembly finds that:
(1)
On July 23, 2004, the United States Congress declared that "the atrocities
unfolding in Darfur, Sudan, are genocide";
(2)
On September 9, 2004, Secretary of State Colin L. Powell told the
United States Senate Foreign Relations Committee that "genocide has
occurred and may still be occurring in Darfur" and "the Government of Sudan and
the Janjaweed bear responsibility";
(3)
On September 21, 2004, addressing the United Nations General Assembly, President
George W. Bush affirmed the Secretary of State´s finding and stated, "[A]t
this hour, the world is witnessing terrible suffering and horrible crimes in the
Darfur region of Sudan, crimes my government has concluded are
genocide";
(4)
On December 7, 2004, the United States Congress noted that the genocidal policy
in Darfur has led to reports of "systematic rape of thousands of women and
girls, the abduction of women and children, and the destruction of hundreds of
ethnically African villages, including the poisoning of their wells and the
plunder of their crops and cattle upon which the people of such villages sustain
themselves";
(5)
Also, on December 7, 2004, Congress found that "the Government of Sudan has
restricted access by humanitarian and human rights workers to the Darfur area
through intimidation by military and security forces, and through bureaucratic
and administrative obstruction, in an attempt to inflict the most devastating
harm on those individuals displaced from their villages and homes without any
means of sustenance or shelter";
(6)
On September 25, 2006, Congress reaffirmed that "the genocide unfolding in the
Darfur region of Sudan is characterized by acts of terrorism and atrocities
directed against civilians, including mass murder, rape, and sexual violence
committed by the Janjaweed and associated militias with the complicity and
support of the National Congress Party-led faction of the Government of
Sudan";
(7)
On September 26, 2006, the United States House of Representatives stated that
"an estimated 300,000 to 400,000 people have been killed by the Government of
Sudan and its Janjaweed allies since the [Darfur] crisis began in 2003, more
than 2,000,000 people have been displaced from their homes, and more than
250,000 people from Darfur remain in refugee camps in Chad";
(8)
The Darfur crisis represents the first time the United States Government has
labeled ongoing atrocities as genocide;
(9)
The federal government has imposed sanctions against the government of Sudan
since 1997 which are monitored through the United States Treasury
Department´s Office of Foreign Assets Control (OFAC);
(10)
According to a former chair of the United States Securities and Exchange
Commission, "the fact that a foreign company is doing material business with a
country, government, or entity on OFAC´s sanctions list is, in the SEC
staff´s view, substantially likely to be significant to a reasonable
investor´s decision about whether to invest in that company";
(11)
Since 1993, the United States Secretary of State has determined that Sudan is a
country whose government has repeatedly provided support for acts of
international terrorism, and, as a result, the United States has restricted
assistance, defense exports, defense sales, financial transactions, and various
other transactions with the government of Sudan;
(12)
A 2006 report by United States House of Representatives states that "a
company´s association with sponsors of terrorism and human rights abuses,
no matter how large or small, can have a materially adverse result on a public
company´s operations, financial condition, earnings, and stock prices, all
of which can negatively affect the value of an investment";
(13)
In response to the financial risk posed by investments in companies doing
business with a state that sponsors terrorists, the Securities and Exchange
Commission established its Office of Global Security Risk to provide for
enhanced disclosure of material information regarding such
companies;
(14)
The current Sudan divestment movement encompasses nearly 100 universities,
municipalities, states, and private pension plans;
(15)
Companies facing such widespread divestment present further material risk to
remaining investors;
(16)
It is a fundamental responsibility of the State of Georgia to decide where, how,
and by whom financial resources in its control should be invested, taking into
account numerous pertinent factors, and, with respect to investment resources in
its control and to the extent reasonable, with due consideration for return on
investment on behalf of the state and its investment beneficiaries, not to
participate in an ownership or capital providing capacity with entities that
provide significant practical support for genocide, including certain non-United
States companies presently doing business in Sudan;
(17)
It is the judgment of the General Assembly that the provisions of this Act
should remain in effect only insofar as it continues to be consistent with, and
does not unduly interfere with, the foreign policy of the United States, as
determined by the federal government; and
(18)
It is the judgment of the General Assembly that mandatory divestment of public
funds from certain companies is a measure that should be employed sparingly and
judiciously, but a congressional and Presidential declaration of genocide
satisfies this high threshold.
SECTION
2.
Article
7 of Chapter 20 of Title 47 of the Official Code of Georgia Annotated, the
"Public Retirement Systems Investment Authority Law," is amended by adding a new
Code section to read as follows:
"47-20-83.1.
(a)
As used in this Code section, the term:
(1)
'Active business operations' means all business operations that are not inactive
business operations.
(2)
'Business operations' means engaging in commerce in any form in Sudan,
including, but not limited to, acquiring, developing, maintaining, owning,
selling, possessing, leasing, or operating equipment, facilities, personnel,
products, services, personal property, real property, or any other apparatus of
business or commerce.
(3)
'Company' means any sole proprietorship, organization, association, corporation,
partnership, joint venture, limited partnership, limited liability partnership,
limited liability company, or other entity or business association, including
all wholly owned subsidiaries, majority owned subsidiaries, parent companies, or
affiliates of such entities or business associations, that exists for the
purpose of making profit.
(4)
'Complicit' means taking actions during any preceding 20 month period which have
directly supported or promoted the genocidal campaign in Darfur, including, but
not limited to, preventing Darfur´s victimized population from
communicating with each other, encouraging Sudanese citizens to speak out
against an internationally approved security force for Darfur, actively working
to deny, cover up, or alter the record on human rights abuses in Darfur, or
other similar actions.
(5)
'Direct holdings' in a company means all securities of that company that are
held directly by the public fund or in an account or fund in which the public
fund owns all shares or interests.
(6)
'Government of Sudan' means the government in Khartoum, Sudan, that is led by
the National Congress Party, formerly known as the National Islamic Front, or
any successor government formed on or after October 13, 2006, including the
coalition National Unity Government agreed upon in the Comprehensive Peace
Agreement for Sudan, and does not include the regional government of southern
Sudan.
(7)
'Inactive business operations' means the mere continued holding or renewal of
rights to property previously operated for the purpose of generating revenues
but not presently deployed for such purpose.
(8)
'Indirect holdings' in a company means all securities of that company that are
held in an account or fund, such as a mutual fund, managed by one or more
persons not employed by the public fund, in which the public fund owns shares or
interests together with other investors not subject to the provisions of this
Code section.
(9)
'Marginalized populations of Sudan' include, but are not limited to, the portion
of the population in the Darfur region that has been genocidally victimized; the
portion of the population of southern Sudan victimized by Sudan´s
north-south civil war; the Beja, Rashidiya, and other similarly underserved
groups of eastern Sudan; the Nubian and other similarly underserved groups in
Sudan´s Abyei, Southern Blue Nile, and Nuba Mountain regions; and the Amri,
Hamadab, Manasir, and other similarly underserved groups of northern
Sudan.
(10)
'Military equipment' means weapons, arms, military supplies, and equipment that
may readily be used for military purposes, including, but not limited to, radar
systems, military-grade transport vehicles, or supplies or services sold or
provided directly or indirectly to any force actively participating in armed
conflict in Sudan.
(11)
'Mineral-extraction activities' include the exploring, extracting, processing,
transporting, or wholesale selling or trading of elemental minerals or
associated metal alloys or oxides (ore), including gold, copper, chromium,
chromite, diamonds, iron, iron ore, silver, tungsten, uranium, and zinc, as well
as facilitating such activities, including providing supplies or services in
support of such activities.
(12)
'Oil related activities' include, but are not limited to, owning rights to oil
blocks; exporting, extracting, producing, refining, processing, exploring for,
transporting, selling, or trading of oil; constructing, maintaining, or
operating a pipeline, refinery, or other oil field infrastructure; and
facilitating such activities, including providing supplies or services in
support of such activities, except that the mere retail sale of gasoline and
related consumer products shall not be considered an oil related
activity.
(13)
'Power-production activities' means any business operation that involves a
project commissioned by the National Electricity Corporation (NEC) of Sudan or
other similar entity of the government of Sudan whose purpose is to facilitate
power generation and delivery, including, but not limited to, establishing
power-generating plants or hydroelectric dams, selling or installing components
for the project, providing service contracts related to the installation or
maintenance of the project, as well as facilitating such activities, including
providing supplies or services in support of such activities.
(14)
'Public fund' means the investment fund of any public retirement system or
pension system as defined in Code Section 47-20-81.
(15)
'Scrutinized company' means any company that meets any of the following
criteria:
(A)
The company has business operations that involve contracts with or provision of
supplies or services to the government of Sudan, companies in which the
government of Sudan has any direct or indirect equity share, consortiums or
projects commissioned by the government of Sudan, or companies involved in
consortiums or projects commissioned by the government of Sudan
and:
(i)
More than 10 percent of the company´s revenues or assets linked to Sudan
involve oil related activities or mineral-extraction activities; less than 75
percent of the company´s revenues or assets linked to Sudan involve
contracts with or provision of oil related or mineral-extracting products or
services to the regional government of southern Sudan or a project or consortium
created exclusively by that regional government; and the company has failed to
take substantial action; or
(ii)
More than 10 percent of the company´s revenues or assets linked to Sudan
involve power-production activities; less than 75 percent of the company´s
power-production activities include projects whose intent is to provide power or
electricity to the marginalized populations of Sudan; and the company has failed
to take substantial action;
(B)
The company is complicit in the Darfur genocide; or
(C)
The company supplies military equipment within Sudan, unless it clearly shows
that such military equipment cannot be used to facilitate offensive military
actions in Sudan, or the company implements rigorous and verifiable safeguards
to prevent use of that military equipment by forces actively participating in
armed conflict. Examples of safeguards include postsale tracking of such
military equipment by the company, certification from a reputable and objective
third party that such military equipment is not being used by a party
participating in armed conflict in Sudan, or sale of such military equipment
solely to the regional government of southern Sudan or any internationally
recognized peacekeeping force or humanitarian organization.
Notwithstanding
anything in this Code section to the contrary, a social-development company
which is not complicit in the Darfur genocide shall not be considered a
scrutinized company.
(16)
'Social-development company' means a company whose primary purpose in Sudan is
to provide humanitarian goods or services, including medicine or medical
equipment; agricultural supplies or infrastructure; educational opportunities;
journalism related activities; information or information materials; spiritual
related activities; services of a purely clerical or reporting nature; food,
clothing, or general consumer goods that are unrelated to oil related
activities; mineral-extraction activities; or power-production
activities.
(17)
'Substantial action' means adopting, publicizing, and implementing a formal plan
to cease scrutinized active business operations within one year and to refrain
from any such new business operations; undertaking humanitarian efforts in
conjunction with an international organization, the government of Sudan, the
regional government of southern Sudan, or a nonprofit entity evaluated and
certified by an independent third party to be substantially in a relationship to
the company´s Sudan business operations and of benefit to one or more
marginalized populations of Sudan; or, through engagement with the government of
Sudan, materially improving conditions for the genocidally victimized population
in Darfur.
(b)
On or before October 1, 2008, each public fund shall make its best efforts to
identify all scrutinized companies in which that public fund has direct or
indirect holdings or could possibly have such holdings in the future. Such
efforts include:
(1)
Reviewing and relying, as appropriate in the public fund´s judgment, on
publicly available information regarding companies having business operations in
Sudan, including information provided by nonprofit organizations, research
firms, international organizations, and government entities;
(2)
Contacting asset managers contracted by the public fund that invest in companies
having business operations in Sudan; and
(3)
Contacting other institutional investors that have divested from or engaged with
companies that have business operations in Sudan.
(c)
By the first meeting of each board responsible for the management of a public
fund after October 1, 2008, the board shall assemble all scrutinized companies
into a Scrutinized Companies List.
(d)
The board of each public fund shall update quarterly its Scrutinized Companies
List based on evolving information from, among other sources, those listed in
subsection (b) of this Code section.
(e)
Each public fund shall adhere to the following procedure for companies on its
Scrutinized Companies List:
(1)
Each public fund shall immediately determine the companies on its Scrutinized
Companies List in which such public fund owns direct or indirect
holdings;
(2)
For each company on such list that has only inactive business operations, the
public fund shall send a written notice informing such company of this Code
section and encouraging it to continue to refrain from initiating active
business operations in Sudan until it is able to avoid scrutinized active
business operations; the public fund shall continue such correspondence
semiannually;
(3)
For each company newly identified under this Code section that has active
business operations, the public fund shall send a written notice informing such
company of its scrutinized company status and that it may become subject to
divestment by the public fund. The notice must inform such company of the
opportunity to clarify its Sudan related activities and encourage such company,
within 90 days, to cease its scrutinized active business operations or convert
such operations to inactive business operations in order to avoid qualifying for
divestment by the public fund; and
(4)
If, within 90 days after a public fund´s first engagement with a company
pursuant to this subsection, that company ceases scrutinized active business
operations, such company shall be removed from the Scrutinized Companies List,
and the provisions of this Code section shall cease to apply to that company
unless that company resumes scrutinized active business operations. If, within
90 days after such public fund´s first engagement, such company converts
its scrutinized active business operations to inactive business operations, such
company shall be subject to all provisions relating to inactive business
operations.
(f)(1)
If, after 90 days following a public fund´s first engagement with a company
pursuant to subsection (e) of this Code section, such company continues to have
scrutinized active business operations, and only while such company continues to
have scrutinized active business operations, such public fund shall sell,
redeem, divest, or withdraw all publicly traded securities of such company,
except as provided in subsection (h) of this Code section, according to the
following schedule:
(A)
At least 50 percent of such assets shall be removed from the public fund´s
assets under management by nine months after the company´s most recent
appearance on the Scrutinized Companies List; and
(B)
One hundred percent of such assets shall be removed from the public fund´s
assets under management within 15 months after the company´s most recent
appearance on the Scrutinized Companies List.
(2)
If a company that ceased scrutinized active business operations following
engagement pursuant to subsection (e) of this Code section resumes such active
business operations, this subsection shall immediately apply, and the public
fund shall send a written notice to such company. The company shall also be
immediately reintroduced onto the Scrutinized Companies List.
(g)
A public fund shall not acquire securities of companies on the Scrutinized
Companies List that have active business operations, except as provided in
subsection (h) of this Code section.
(h)
A company that the United States Government affirmatively declares to be
excluded from its present or any future federal sanctions regime relating to
Sudan is not subject to divestment or the investment prohibition pursuant to
subsections (f) and (g) of this Code section.
(i)
Subsections (f) and (g) of this Code section shall not apply to indirect
holdings in actively managed investment funds. However, each public fund shall
submit letters to the managers of such investment funds containing companies
that have scrutinized active business operations requesting that they consider
removing such companies from the fund or create a similar actively managed fund
having indirect holdings devoid of such companies. If the manager creates a
similar fund, such public fund shall replace all applicable investments with
investments in the similar fund in an expedited time frame consistent with
prudent investing standards. For the purposes of this subsection, a private
equity fund is deemed to be an actively managed investment fund.
(j)
Notwithstanding any other provision of this Code section, each public fund, when
discharging its responsibility for operation of a defined contribution plan,
shall engage the manager of the investment offerings in such plans requesting
that they consider removing scrutinized companies from the investment offerings
or create an alternative investment offering devoid of scrutinized companies.
If the manager creates an alternative investment offering and the offering is
deemed by such public fund to be consistent with prudent investor standards,
such public fund shall consider including such investment offering in the
plan.
(k)
Each public fund shall file a report with the President of the Senate and the
Speaker of the House of Representatives that includes its Scrutinized Companies
List within 30 days after such list is created. This report shall be made
available to the public. At each meeting of the board responsible for the
management of a public fund thereafter, the board shall file a report, which
shall be made available to the public and to the President of the Senate and the
Speaker of the House of Representatives, and shall send a copy of that report to
the United States Presidential Special Envoy to Sudan or an appropriate designee
or successor, which includes:
(1)
A summary of correspondence with companies engaged by the public fund under this
Code section;
(2)
All investments sold, redeemed, divested, or withdrawn in compliance with this
Code section;
(3)
All prohibited investments under this Code section; and
(4)
Any progress made under subsection (i) of this Code section.
(l)
If any of the following occur, each public fund shall no longer scrutinize
companies according to this Code section and shall no longer assemble the
Scrutinized Companies List, shall cease engagement and divestment of such
companies, and may reinvest in such companies:
(1)
The Congress or President of the United States declares that the Darfur genocide
has been halted for at least 12 months;
(2)
The United States revokes all sanctions imposed against the government of
Sudan;
(3)
The Congress or President of the United States declares that the government of
Sudan has honored its commitments to cease attacks on civilians, demobilize and
demilitarize the Janjaweed and associated militias, grant free and unfettered
access for deliveries of humanitarian assistance, and allow for the safe and
voluntary return of refugees and internally displaced persons; or
(4)
The Congress or President of the United States through legislation or executive
order declares that mandatory divestment of the type provided for in this Code
section interferes with the conduct of United States foreign
policy.
(m)
With respect to actions taken in compliance with this Code section, including,
but not limited to, all good faith determinations regarding companies as
required by this Code section, a public fund shall be exempt from any
conflicting statutory or common law obligations, including, but not limited to,
any such obligations with respect to choice of asset managers, investment funds,
or investments of such public fund´s securities portfolios.
(n)
Notwithstanding any other provision of this Code section to the contrary, a
public fund may cease divesting from certain scrutinized companies or reinvest
in certain scrutinized companies from which it divested pursuant to this Code
section if clear and convincing evidence shows that the value of all assets
under management by such public fund becomes equal to or less than 99.5 percent,
or 50 basis points, of the hypothetical value of all assets under management by
such public fund, assuming no divestment for any company had occurred under this
Code section. Cessation of divestment, reinvestment, or any subsequent ongoing
investment authorized by this subsection shall be strictly limited to the
minimum steps necessary to avoid the contingency set forth in this subsection.
For any cessation of divestment, reinvestment, or subsequent ongoing investment
authorized by this Code section, each public fund shall provide a written report
to the President of the Senate and the Speaker of the House of Representatives
in advance of initial reinvestment, updated semiannually thereafter as
applicable, setting forth the reasons and justification, supported by clear and
convincing evidence, for its decisions to cease divestment, reinvest, or remain
invested in companies having scrutinized active business operations. This
subsection shall not apply to reinvestment in companies on the grounds that they
have ceased to have scrutinized active business operations.
(o)
The Attorney General shall enforce the provisions of this Code section and,
either personally or through any lawful designee, may bring such actions in
court as are necessary to do so."
SECTION
3.
All
laws and parts of laws in conflict with this Act are repealed.