PRIOR PRINTER'S NOS. 1390, 2018 PRINTER'S NO. 2190
No. 1140 Session of 2007
INTRODUCED BY JOSEPHS, LENTZ, DeWEESE, BAKER, BARRAR, BASTIAN, BELFANTI, BENNINGHOFF, BENNINGTON, BEYER, BIANCUCCI, BISHOP, BLACKWELL, BOBACK, BRENNAN, BUXTON, CALTAGIRONE, CARROLL, CLYMER, COHEN, CONKLIN, COSTA, CRUZ, CURRY, DALLY, DeLUCA, DePASQUALE, DERMODY, DiGIROLAMO, EACHUS, FABRIZIO, FRANKEL, FREEMAN, GABIG, GEORGE, GIBBONS, GOODMAN, GRELL, GRUCELA, HANNA, HARPER, HELM, HORNAMAN, JAMES, W. KELLER, KENNEY, KING, KIRKLAND, KORTZ, KULA, LEACH, LEVDANSKY, MANDERINO, MANN, MARSHALL, McCALL, McGEEHAN, McILVAINE SMITH, MILNE, MOUL, MUNDY, MURT, MYERS, D. O'BRIEN, M. O'BRIEN, OLIVER, PALLONE, PARKER, PAYTON, PETRARCA, PETRI, PETRONE, PRESTON, QUINN, RAMALEY, RAPP, READSHAW, REICHLEY, ROEBUCK, ROHRER, RUBLEY, SABATINA, SAMUELSON, SANTONI, SAYLOR, SCAVELLO, SEIP, SHAPIRO, SIPTROTH, M. SMITH, SOLOBAY, STABACK, STAIRS, STURLA, SURRA, TANGRETTI, J. TAYLOR, R. TAYLOR, THOMAS, VITALI, WAGNER, WALKO, WATERS, WATSON, WHEATLEY, J. WHITE, WILLIAMS, WOJNAROSKI, YOUNGBLOOD, NAILOR, TRUE, SCHRODER, PASHINSKI, HENNESSEY, VULAKOVICH AND K. SMITH, APRIL 23, 2007
AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES, JULY 2, 2007
AN ACT 1 Prohibiting the investment of State funds in certain private 2 business entities doing business in Sudan; and providing 3 indemnification to certain persons. 4 The General Assembly of the Commonwealth of Pennsylvania 5 hereby enacts as follows: 6 Section 1. Short title. 7 This act shall be known and may be cited as the Sudan 8 Divestment Act. 9 Section 2. Declaration of policy. 10 The General Assembly finds and declares as follows:
1 (1) On July 23, 2004, the United States Congress 2 declared that "the atrocities unfolding in Darfur, Sudan, are 3 genocide." 4 (2) On September 9, 2004, Secretary of State Colin L. 5 Powell told the United States Senate Foreign Relations 6 Committee that "genocide has occurred and may still be 7 occurring in Darfur" and "the Government of Sudan and the 8 Janjaweed bear responsibility." 9 (3) On September 21, 2004, addressing the United Nations 10 General Assembly, President George W. Bush affirmed the 11 Secretary of State's finding and stated, "At this hour, the 12 world is witnessing terrible suffering and horrible crimes in 13 the Darfur region of Sudan, crimes my government has 14 concluded are genocide." 15 (4) On December 7, 2004, the United States Congress 16 noted that the genocidal policy in Darfur has led to reports 17 of "systematic rape of thousands of women and girls, the 18 abduction of women and children, and the destruction of 19 hundreds of ethnically African villages, including the 20 poisoning of their wells and the plunder of their crops and 21 cattle upon which the people of such villages sustain 22 themselves." 23 (5) Also on December 7, 2004, Congress found that "the 24 Government of Sudan has restricted access by humanitarian and 25 human rights workers to the Darfur area through intimidation 26 by military and security forces, and through bureaucratic and 27 administrative obstruction, in an attempt to inflict the most 28 devastating harm on those individuals displaced from their 29 villages and homes without any means of sustenance or 30 shelter." 20070H1140B2190 - 2 -
1 (6) On September 25, 2006, Congress reaffirmed that "the 2 genocide unfolding in the Darfur region of Sudan is 3 characterized by acts of terrorism and atrocities directed 4 against civilians, including mass murder, rape, and sexual 5 violence committed by the Janjaweed and associated militias 6 with the complicity and support of the National Congress 7 Party-led faction of the Government of Sudan." 8 (7) On September 26, 2006, the United States House of 9 Representatives stated that "an estimated 300,000 to 400,000 10 people have been killed by the Government of Sudan and its 11 Janjaweed allies since the Darfur crisis began in 2003, more 12 than 2,000,000 people have been displaced from their homes, 13 and more than 250,000 people from Darfur remain in refugee 14 camps in Chad." 15 (8) The Darfur crisis represents the first time the 16 United States Government has labeled ongoing atrocities a 17 genocide. 18 (9) The United States Government has imposed sanctions 19 against the Government of Sudan since 1997. These sanctions 20 are monitored through the United States Treasury Department's 21 Office of Foreign Assets Control (OFAC). 22 (10) According to a former chair of the United States 23 Securities and Exchange Commission, "the fact that a foreign 24 company is doing material business with a country, 25 government, or entity on OFAC's sanctions list is, in the SEC 26 staff's view, substantially likely to be significant to the 27 reasonable investor's decision about whether to invest in 28 that company." 29 (11) Since 1993, the United States Secretary of State 30 has determined that Sudan is a country the government of 20070H1140B2190 - 3 -
1 which has repeatedly provided support for acts of 2 international terrorism, thereby incurring restrictions of 3 United States assistance, defense exports and sales, and 4 financial and other transactions with the Government of 5 Sudan. 6 (12) A 2006 United States House of Representatives 7 report states that "a company's association with sponsors of 8 terrorism and human rights abuses, no matter how large or 9 small, can have a materially adverse result on a public 10 company's operations, financial condition, earnings, and 11 stock prices, all of which can negatively affect the value of 12 an investment." 13 (13) In response to the financial risk posed by 14 investments in companies doing business with a terrorist- 15 sponsoring state, the Securities and Exchange Commission 16 established its Office of Global Security Risk to provide for 17 enhanced disclosure of material information regarding such 18 companies. 19 (14) The current Sudan divestment movement encompasses 20 nearly 100 universities, cities, states and private pension 21 plans. 22 (15) The following are to be commended: 23 (i) The City of Philadelphia, which in September 24 2006 divested its funds from companies doing business in 25 Sudan, the largest city in the United States to do so to 26 date. 27 (ii) The City of Pittsburgh, which in March 2007 28 divested its funds from companies doing business in 29 Sudan. 30 (iii) The over half dozen Pennsylvania colleges and 20070H1140B2190 - 4 -
1 universities which have already divested from companies 2 doing business in Sudan or are considering doing so. 3 (16) Companies facing such widespread divestment present 4 further material risk to remaining investors. 5 (17) It is a fundamental responsibility of the 6 Commonwealth to decide where, how, and by whom financial 7 resources in its control should be invested, taking into 8 account numerous pertinent factors. 9 (18) It is the prerogative and desire of the 10 Commonwealth, in respect to investment resources in its 11 control and to the extent reasonable, with due consideration 12 for, among other things, return on investment, on behalf of 13 itself and its investment beneficiaries, not to participate 14 in an ownership or capital-providing capacity with entities 15 that provide significant practical support for genocide, 16 including certain non-United States companies presently doing 17 business in Sudan. 18 (19) It is the judgment of the General Assembly that 19 this act should remain in effect only insofar as it continues 20 to be consistent with, and does not unduly interfere with, 21 the foreign policy of the United States as determined by the 22 United States Government. 23 (20) It is the judgment of the General Assembly that 24 mandatory divestment of public funds from certain companies 25 is a measure that should be employed sparingly and 26 judiciously. A congressional and presidential declaration of 27 genocide satisfies this high threshold. 28 Section 3. Definitions. 29 The following words and phrases when used in this act shall 30 have the meanings given to them in this section unless the 20070H1140B2190 - 5 -
1 context clearly indicates otherwise: 2 "Active business operations." All business operations that 3 are not inactive business operations. 4 "Business operations." Engaging in commerce in any form in 5 Sudan, including by acquiring, developing, maintaining, owning, 6 selling, possessing, leasing or operating equipment, facilities, 7 personnel, products, services, personal property, real property 8 or any other apparatus of business or commerce. 9 "Company." A sole proprietorship, organization, association, 10 corporation, partnership, joint venture, limited partnership, 11 limited liability partnership, limited liability company or 12 other entity or business association, including a wholly owned 13 subsidiary, majority-owned subsidiary, parent company or 14 affiliate of such entities or business associations, that exists 15 for profit-making purposes. 16 "Complicit." Taking actions during any preceding 20-month 17 period that have directly supported or promoted the genocidal 18 campaign in Darfur, including, but not limited to: 19 (1) preventing members of Darfur's victimized population 20 from communicating with each other; 21 (2) encouraging Sudanese citizens to speak out against 22 an internationally approved security force for Darfur; 23 (3) actively working to deny, cover-up or alter the 24 record on human rights abuses in Darfur; or 25 (4) other similar actions. 26 "Direct holdings in a company." All securities of that 27 company held directly by the public fund in an account or fund 28 in which the public fund owns all shares or interests. 29 "Government of Sudan." The government in Khartoum, Sudan, 30 which is led by the National Congress Party, formerly known as 20070H1140B2190 - 6 -
1 the National Islamic Front, or any successor government formed 2 on or after October 13, 2006, including the coalition National 3 Unity Government agreed upon in the Comprehensive Peace 4 Agreement for Sudan. The term does not include the regional 5 government of southern Sudan. 6 "Inactive business operations." The mere continued holding 7 or renewal of rights to property previously operated for the 8 purpose of generating revenues but not presently deployed for 9 such purpose. 10 "Indirect holdings in a company." All securities of that 11 company held in an account or fund, such as a mutual fund, 12 managed by one or more persons not employed by a public fund, in 13 which the public fund owns shares or interests together with 14 other investors not subject to the provisions of this act. 15 "Marginalized populations of Sudan." Includes, but are not 16 limited to: 17 (1) the portion of the population in the Darfur region 18 that has been genocidally victimized; 19 (2) the portion of the population of southern Sudan 20 victimized by Sudan's North-South civil war; 21 (3) the Beja, Rashidiya and other similarly underserved 22 groups of eastern Sudan; 23 (4) the Nubian and other similarly underserved groups in 24 Sudan's Abyei, Southern Blue Nile and Nuba Mountain regions; 25 and 26 (5) the Amri, Hamadab, Manasir and other similarly 27 underserved groups of northern Sudan. 28 "Military equipment." Weapons, arms, military supplies and 29 equipment that readily may be used for military purposes, 30 including radar systems or military-grade transport vehicles or 20070H1140B2190 - 7 -
1 supplies or services sold or provided directly or indirectly to 2 any force actively participating in armed conflict in Sudan. 3 "Mineral extraction activities." Includes exploring, 4 extracting, processing, transporting or wholesale selling or 5 trading of elemental minerals or associated metal alloys or 6 oxides (ore), including gold, copper, chromium, chromite, 7 diamonds, iron, iron ore, silver, tungsten, uranium and zinc, as 8 well as facilitating such activities, including by providing 9 supplies or services in support of such activities. 10 "Oil-related activities." Includes, but are not limited to: 11 (1) owning rights to oil blocks; 12 (2) exporting, extracting, producing, refining, 13 processing, exploring for, transporting, selling or trading 14 oil; 15 (3) constructing, maintaining or operating a pipeline, 16 refinery or other oil-field infrastructure; or 17 (4) facilitating such activities, including by providing 18 supplies or services in support of such activities, except 19 that the mere retail sale of gasoline and related consumer 20 products are not oil-related activities. 21 "Power production activities." Any business operation that 22 involves a project commissioned by the National Electricity 23 Corporation of Sudan or another similar Government of Sudan 24 entity whose purpose is to facilitate power generation and 25 delivery, including, but not limited to, establishing power- 26 generating plants or hydroelectric dams, selling or installing 27 components for the project, and providing service contracts 28 related to the installation or maintenance of the project, as 29 well as facilitating such activities, including by providing 30 supplies or services in support of such activities. 20070H1140B2190 - 8 -
1 "Public fund." A Commonwealth fund, including the State 2 Employees' Retirement Fund and the Public School Employees' 3 Retirement Fund. The term includes the State entity responsible 4 for administering the fund. 5 "Scrutinized company." A company that: 6 (1) engages in scrutinized business operations described 7 under section 4; or 8 (2) is complicit in the Darfur genocide. 9 "Social development company." A company whose primary 10 purpose in Sudan is to provide humanitarian goods or services, 11 including medicine or medical equipment, agricultural supplies 12 or infrastructure, educational opportunities, journalism-related 13 activities, information or information materials, spiritual- 14 related activities, services of a purely clerical or reporting 15 nature, food, clothing or general consumer goods that are 16 unrelated to oil-related activities, mineral extraction 17 activities or power production activities. 18 "Substantial action." Adopting, publicizing and implementing 19 a formal plan to cease scrutinized business operations within 20 one year and to refrain from any such new business operations, 21 undertaking humanitarian efforts in conjunction with an 22 international organization, the Government of Sudan, the 23 regional Government of Southern Sudan or a nonprofit entity and 24 evaluated and certified by an independent third party to be 25 substantial in relationship to the company's Sudan business 26 operations and of benefit to one or more marginalized 27 populations of Sudan, or, through engagement with the Government 28 of Sudan, materially improving conditions for the genocidally 29 victimized population in Darfur. 30 Section 4. Scrutinized business operations. 20070H1140B2190 - 9 -
1 (a) General rule.--A company engages in scrutinized business 2 operations if: 3 (1) the company has business operations that involve 4 contracts with or providing supplies or services to the 5 Government of Sudan, a company in which the Government of 6 Sudan has any direct or indirect equity share, a Government 7 of Sudan-commissioned consortium or project or a company 8 involved in a Government of Sudan-commissioned consortium or 9 project and: 10 (i) more than 10% of the company's revenues or 11 assets linked to Sudan involve oil-related activities or 12 mineral extraction activities, less than 75% of the 13 company's revenues or assets linked to Sudan involve 14 contracts with or provision of oil-related or mineral 15 extracting products or services to the regional 16 government of southern Sudan or a project or consortium 17 created exclusively by that regional government and the 18 company has failed to take substantial action; or 19 (ii) more than 10% of the company's revenues or 20 assets linked to Sudan involve power production 21 activities, less than 75% of the company's power 22 production activities include projects whose intent is to 23 provide power or electricity to the marginalized 24 populations of Sudan and the company has failed to take 25 substantial action; or 26 (2) the company supplies military equipment within 27 Sudan, unless: 28 (i) the company clearly shows that the military 29 equipment cannot be used to facilitate offensive military 30 actions in Sudan; or 20070H1140B2190 - 10 -
1 (ii) the company implements rigorous and verifiable 2 safeguards to prevent use of that equipment by forces 3 actively participating in armed conflict, including: 4 (A) using post-sale tracking of such equipment 5 by the company; 6 (B) certification from a reputable and objective 7 third party that such equipment is not being used by 8 a party participating in armed conflict in Sudan; or 9 (C) selling such equipment solely to the 10 regional government of southern Sudan or any 11 internationally recognized peacekeeping force or 12 humanitarian organization. 13 (b) Social development company.--Notwithstanding any other 14 provision of this act, a social development company that is not 15 complicit in the Darfur genocide may not be considered a 16 scrutinized company. 17 Section 5. Identification of companies. 18 (a) Identification.--Within 90 days following the effective 19 date of this act, the public fund shall make its best efforts to 20 identify all scrutinized companies in which the public fund has 21 direct or indirect holdings or could possibly have such holdings 22 in the future. Efforts shall include, as appropriate, any of the 23 following: 24 (1) reviewing and relying, as appropriate in the public 25 fund's judgment, on publicly available information regarding 26 companies with business operations in Sudan, including 27 information provided by nonprofit organizations, research 28 firms, international organizations and government entities; 29 (2) contacting asset managers contracted by the public 30 fund that invest in companies with business operations in 20070H1140B2190 - 11 -
1 Sudan; or 2 (3) contacting other institutional investors that have 3 divested from or engaged with companies that have business 4 operations in Sudan. 5 (b) List.--By the first meeting of the public fund following 6 the 90-day period described in subsection (a), the public fund 7 shall assemble all scrutinized companies identified into a 8 scrutinized companies list. 9 (c) Update.--The public fund shall update the scrutinized 10 companies list on a quarterly basis based on evolving 11 information from, among other sources, those listed in 12 subsection (a). 13 Section 6. Required actions. 14 (a) Engagement.--The public fund shall adhere to the 15 following procedure for companies on the scrutinized companies 16 list: 17 (1) The public fund shall immediately determine the 18 companies on the scrutinized companies list in which the 19 public fund owns direct or indirect holdings. 20 (2) For each company identified in paragraph (1) with 21 only inactive business operations, the public fund shall send 22 a written notice informing the company of this act and 23 encouraging it to continue to refrain from initiating active 24 business operations in Sudan until it is able to avoid 25 scrutinized business operations. The public fund shall 26 continue such correspondence on a semiannual basis. 27 (3) For each company newly identified in paragraph (1) 28 with active business operations, the public fund shall send a 29 written notice informing the company of its scrutinized 30 company status and that it may become subject to divestment 20070H1140B2190 - 12 -
1 by the public fund. The notice shall offer the company the 2 opportunity to clarify its Sudan-related activities and shall 3 encourage the company, within 90 days, to either cease its 4 scrutinized business operations or convert the operations to 5 inactive business operations in order to avoid qualifying for 6 divestment by the public fund. 7 (4) If, within 90 days following the public fund's first 8 engagement with a company pursuant to paragraph (3), that 9 company ceases scrutinized business operations, the company 10 shall be removed from the scrutinized companies list and the 11 provisions of this section shall cease to apply to it unless 12 it resumes scrutinized business operations. If, within 90 13 days following the public fund's first engagement, the 14 company converts its scrutinized active business operations 15 to inactive business operations, the company shall be subject 16 to all provisions relating thereto. 17 (b) Divestment.--The public fund shall adhere to the 18 following procedure for companies on the scrutinized companies 19 list: 20 (1) If, after 90 days following the public fund's first 21 engagement with a company pursuant to subsection (a)(3), the 22 company continues to have scrutinized active business 23 operations, and only while the company continues to have 24 scrutinized active business operations, the public fund shall 25 sell, redeem, divest or withdraw all publicly traded 26 securities of the company, except as provided, according to 27 the following schedule: 28 (i) At least 50% of such assets shall be removed 29 from the public fund's assets under management by nine 30 months after the company's most recent appearance on the 20070H1140B2190 - 13 -
1 scrutinized companies list. 2 (ii) 100% of such assets shall be removed from the 3 public fund's assets under management within 15 months 4 after the company's most recent appearance on the 5 scrutinized companies list. 6 (2) If a company that ceased scrutinized active business 7 operations following engagement pursuant to subsection (a)(3) 8 resumes such operations, paragraph (1) shall immediately 9 apply, and the public fund shall send a written notice to the 10 company. The company shall also be immediately reintroduced 11 onto the scrutinized companies list. 12 (c) Prohibition.--At no time shall the public fund acquire 13 securities of companies on the scrutinized companies list that 14 have active business operations, except as provided in 15 subsection (d). 16 (d) Exemption.--No company which the United States 17 Government affirmatively declares to be excluded from its 18 present or any future Federal sanctions regime relating to Sudan 19 shall be subject to divestment or investment prohibition 20 pursuant to subsections (b) and (c). 21 (e) Excluded securities.--Notwithstanding any provision of 22 this act to the contrary, subsections (b) and (c) shall not 23 apply to indirect holdings in actively managed investment funds. 24 The public fund shall, however, submit letters to the managers 25 of such investment funds containing companies with scrutinized 26 active business operations requesting that they consider 27 removing such companies from the fund or create a similar 28 actively managed fund with indirect holdings devoid of such 29 companies. If the manager creates a similar fund, the public 30 fund shall replace all applicable investments with investments 20070H1140B2190 - 14 -
1 in the similar fund in an expedited time frame consistent with 2 prudent investing standards. For the purposes of this section, 3 "private equity" funds shall be deemed to be actively managed 4 investment funds. 5 Section 7. Reporting. 6 (a) Initial report.--The public fund shall file a publicly 7 available report to the General Assembly and the Auditor General 8 that includes the scrutinized companies list within 30 days 9 after the list is created. 10 (b) Subsequent reports.--Annually thereafter, the public 11 fund shall file a publicly available report to the General 12 Assembly and the Auditor General and send a copy of that report 13 to the United States Presidential Special Envoy to Sudan, or an 14 appropriate designee or successor, that includes: 15 (1) A summary of correspondence with companies engaged 16 by the public fund under section 6(a)(2) and (3). 17 (2) All investments sold, redeemed, divested or 18 withdrawn in compliance with section 6(b). 19 (3) All prohibited investments under section 6(c). 20 (4) Any progress made under section 6(e). 21 Section 8. Expiration. 22 This act shall expire upon the occurrence of any of the 23 following: 24 (1) The Congress or President of the United States 25 declares that the Darfur genocide has been halted for at 26 least 12 months. 27 (2) The United States revokes all sanctions imposed 28 against the Government of Sudan. 29 (3) The Congress or President of the United States 30 declares that the Government of Sudan has honored its 20070H1140B2190 - 15 -
1 commitments to cease attacks on civilians, demobilize and 2 demilitarize the Janjaweed and associated militias, grant 3 free and unfettered access for deliveries of humanitarian 4 assistance and allow for the safe and voluntary return of 5 refugees and internally displaced persons. 6 (4) The Congress or President of the United States, 7 through legislation or executive order, declares that 8 mandatory divestment of the type provided for in this act 9 interferes with the conduct of United States foreign policy. 10 Section 9. Other legal obligations. 11 With respect to actions taken in compliance with this act, 12 including ANY FIDUCIARY OR PRUDENT INVESTING RESPONSIBILITIES AS <-- 13 DESCRIBED IN 24 PA.C.S. § 8521 (RELATING TO MANAGEMENT OF FUND 14 AND ACCOUNTS) AND 71 PA.C.S. § 5931 (RELATING TO MANAGEMENT OF 15 FUND AND ACCOUNTS) AND all good faith determinations regarding 16 companies as required by this act, the public fund shall be 17 exempt from any conflicting statutory or common law obligations, 18 including any obligations in respect to choice of asset 19 managers, investment funds or investments for the public fund's 20 securities portfolios. 21 Section 10. Reinvestment in certain companies with scrutinized 22 active business operations. 23 (a) Reinvestment.--Notwithstanding any other provision of 24 this act to the contrary, the public fund shall be permitted to 25 cease divesting from certain scrutinized companies pursuant to 26 section 6(b) or reinvest in certain scrutinized companies from 27 which it divested pursuant to section 6(b) if clear and 28 convincing evidence shows that the value for all assets under 29 management by the public fund becomes equal to or less than 30 99.50% (50 basis points) of the hypothetical value of all assets 20070H1140B2190 - 16 -
1 under management by the public fund assuming no divestment for 2 any company had occurred under section 6(b). 3 (b) Limitation.--Cessation of divestment, reinvestment or 4 any subsequent ongoing investment authorized by this section 5 shall be strictly limited to the minimum steps necessary to 6 avoid the contingency set forth in subsection (a). 7 (c) Report.--For any cessation of divestment, reinvestment 8 or subsequent ongoing investment authorized by this section, the 9 public fund shall provide a written report to the General 10 Assembly and the Auditor General in advance of initial 11 reinvestment, updated semiannually thereafter as applicable, 12 setting forth the reasons and justification, supported by clear 13 and convincing evidence, for its decisions to cease divestment, 14 reinvest or remain invested in companies with scrutinized active 15 business operations. 16 (d) Application.--This section has no application to 17 reinvestment in companies on the ground that have ceased to have 18 scrutinized active business operations. 19 Section 11. Indemnification. 20 (a) General rule.--Each indemnitee shall be indemnified and 21 held harmless by the Commonwealth for all good faith actions 22 taken by the indemnitee and for all good faith failures to take 23 action, regardless of the date of any such action or failure to 24 take action; in connection with attempts to comply with any 25 investment limitations imposed by statute against all expense, 26 liability and loss, including, without limitation, attorney 27 fees, judgments, fines, taxes, penalties and amounts paid or to 28 be paid in settlements reasonably incurred or suffered by the 29 indemnitee in connection with any proceeding. 30 (b) Advance payment.--The right to indemnification provided 20070H1140B2190 - 17 -
1 in this section shall include the right to have the expenses
2 reasonably incurred by the indemnitee in defending any
3 proceeding paid by the Commonwealth in advance of the final
4 disposition of the proceeding upon the receipt by the
5 Commonwealth of a written undertaking by the indemnitee to
6 refund the amounts so advanced if it is ultimately determined
7 that the indemnitee is not entitled to indemnification under
8 this section.
9 (c) Persons entitled.--Indemnification pursuant to this
10 section shall continue as to an indemnitee who has ceased to be
11 a board member, designee of a board member, officer or employee
12 of a public fund and shall inure to the benefit of such person's
13 legal representatives, heirs, executors and administrators.
14 (d) Reimbursement to public funds.--To the extent that the
15 Commonwealth does not make any indemnificaton INDEMNIFICATION <--
16 payments, including any advancement of legal fees and expenses,
17 within 30 days of demand therefore, a public fund shall make
18 such payment and the Commonwealth shall reimburse the public
19 fund.
20 (e) Construction.--The repeal or amendment of any provision
21 of this section shall not limit the rights of any indemnitee to
22 indemnification, including advancement of expenses, with respect
23 to any action or failure to act occurring prior to the effective
24 date of such repeal or amendment.
25 (f) Definitions.--As used in this section, the following
26 words and phrases shall have the meanings given to them in this
27 subsection:
28 "Indemnitee." Each current or former board member, duly
29 appointed designee of a board member, officer, employee,
30 including, without limitation, the attorneys in the Office of
20070H1140B2190 - 18 -
1 Chief Counsel that serve a public fund, agent, research firm, or
2 investment manager of a public fund who was or is a party to, or
3 is threatened to be made a party to, or is otherwise involved
4 in, any proceeding, by reason of the fact that the person is or
5 was a board member, designee of a board member, officer,
6 employee, agent, research firm or investment manager of a public
7 fund.
8 "Proceeding." Any threatened, pending or completed action,
9 suit or proceeding, including, without limitation, an action,
10 suit or proceeding by or in the right of a public fund, relating
11 to compliance with any investment limitations imposed by
12 statute, whether civil, criminal, administrative, investigative
13 or through arbitration.
14 Section 12. Audits.
15 The Auditor General shall conduct an annual compliance audit
16 of each public fund subject to the provisions of this act. The
17 Auditor General may refer any finding of an audit conducted
18 under this section to the Attorney General for investigation.
19 SECTION 13. REIMBURSEMENT. <--
20 AFTER THE END OF THE FISCAL YEAR OF EACH PUBLIC FUND, THE
21 PUBLIC FUND SHALL SUBMIT TO AND THE SECRETARY OF THE BUDGET
22 SHALL CERTIFY THE DETERMINATION OF THE LOSSES INCURRED BY THE
23 PUBLIC FUND AS A RESULT OF COMPLIANCE WITH THE PROVISIONS OF
24 THIS ACT AND THE COMMONWEALTH SHALL PROMPTLY REIMBURSE THE
25 PUBLIC FUND FOR SUCH LOSSES FROM THE GENERAL FUND.
26 Section 13 14. Effective date. <--
27 This act shall take effect in 60 days.
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