French Disconnection Costs Montana Pension $4 Million

October 6, 2003 ( - Montana's decision to sell off its investments in French companies has cost the state's pension $4 million.

Loss projections come since the Montana Board of Investment’s decision to sell off $14.9 million in stock of French-owned companies would now be worth about $4 million more now than what it was sold for.   The March 13, 2003 decision was in response to the French government’s veto threat against a United Nations resolution sanctioning military action in Iraq, according to an Associated Press report.

The board, which oversees the state’s roughly $5-billion state employee pension fund, was criticized at the time of the divesture because of the board’s split decision (See  Some Dump Wine; Montana Dumps French Stocks) .   This made some within its ranks fearful that the vote was more a political decision than an investment move.

Supporters of the move say their decision was a cautious attempt to protect investments from what appeared to be mounting disapproval with the French that could drive down even further the value of the state’s investments.  “Every time you picked up a newspaper there was calls for (French) boycotts and a lot of French-bashing,” said Jay Klawon, the Hamilton stockbroker and Board of Investments member who proposed the idea of divesting the stocks.

The motion approved by the board restricts the state’s pension fund from buying the stocks until the board itself re-establishes France as “a friend of the United States.”    In the end, the state unloaded most of its holdings in banking giant Societe Generale; Air Liquide, which sells industrial gas; carmaker Peugeot Citroen and oil company Total Fina Elf.  

Council of Institutional Investors spokeswoman Ann Yerger says such a statement is not all that uncommon, pointing to the dumping of tobacco stocks from state investments.   Recently, the mayor of Springfield, Massachusetts made a similar stand asking the city’s retirement board to sell all of its holdings in pharmaceutical stocks (See  Springfield Mayor Asks Pension Fund to Sell Drug Stocks ).   Mayor Michael Albano says the behavior of the US drug companies, which he accuses of manipulating markets to protect high prices in the United States, justifies the sell-off.  “It would send a message to the industry that these profits at the expense of the American consumer are outrageous,” Albano said. “They’re clearly flexing their muscles. It’s like a cartel, the oil cartel or the illegal drug cartel. That’s how they impact the marketplace and control pricing.”