PRIOR PRINTER'S NOS. 1390, 2018               PRINTER'S NO. 2190

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

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."
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     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
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     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
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     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
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     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
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     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
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     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.
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     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.
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     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
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     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
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     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
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     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
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     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
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     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
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     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
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     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.


    D17L71BIL/20070H1140B2190       - 19 -
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