State Plans Revving Up Engines for Anti-Terror Campaign

July 15, 2003 ( - Multinational firms with operations in countries accused of sponsoring terrorism are increasingly getting pressure from a relatively new source to sever those ties - state retirement plans functioning as major investors.

Officials who invest public funds are scouring their holdings for shares in such companies, partly because of the added risk and partly in order to pressure the companies to turn away from the accused terrorism backers, according to a Reuters news report. The State Department lists Iran, Iraq, Libya, North Korea, Sudan and Syria as sponsors of terrorism (See Asset Mix: Terrorist Tactics .)

Nevada Treasurer Brian Krolicki, head of the National Association of State Treasurers, said several state treasurers have raised the issue as the group tries to pull together corporate governance guidelines. “We all share the belief that no one in this country should be helping anyone in the area of terrorism,” he told Reuters, referring to a sentiment that has been widely held since the attacks on the United States on September 11, 2001.

But Krolicki said it was a “gray and murky” issue that was unlikely to make it into the guidelines, which are due out later this year.

Big Apple Already Active

But some state plan officials are already taking steps. For example, earlier this year, New York City Comptroller William Thompson accused General Electric Co., Halliburton Co. and ConocoPhillips of putting shareholder value at risk by doing business in countries accused of being linked to terrorism (See NYC Pension Chief Demands Corp. Terror Review ). Pressured by the city’s $31 billion pension funds, all three companies have considered possible reviews of those ties, according to Thompson’s office.

In Nebraska, Treasurer Lorelee Byrd told Reuters such investments could be risky if shares are devalued due to a company’s business dealings in a blacklisted country. She added she also sees a conflict because Nebraska has military personnel on the front line fighting terrorism. But Byrd said she was not considering a total disinvestment in the companies, saying that not every company would pose a bad investment risk for the state.

Lawmakers in Pennsylvania, which has $70 billion in investments, are considering entering into a contract with a firm that would filter out companies that do business in such countries. Conflict Securities Advisory Group Inc., in conjunction with the Investor Responsibility Research Center, both based in Washington, have developed a database of companies that do business with the six countries identified by the State Department.

Meanwhile, Arizona Treasurer David Petersen is using the Conflict Securities database to screen about $9 billion in investments, according to Tony Malaj, Petersen’s chief of staff. Lawmakers in that state failed to pass a bill that would have required all state investments to be screened for terrorism ties.