THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY SHAPIRO, JOSEPHS, BENNINGHOFF, FRANKEL, SANTARSIERO, EACHUS, S. H. SMITH, DeWEESE, D. EVANS, BOYLE, BISHOP, BOYD, BRADFORD, BRIGGS, CALTAGIRONE, CARROLL, CLYMER, COHEN, D. COSTA, CURRY, CUTLER, DeLUCA, DENLINGER, DePASQUALE, DERMODY, DONATUCCI, DRUCKER, FABRIZIO, FLECK, FREEMAN, GALLOWAY, GIBBONS, GOODMAN, HARPER, HENNESSEY, HESS, HORNAMAN, HOUGHTON, KAUFFMAN, KORTZ, KULA, LENTZ, LEVDANSKY, MAHONEY, MANN, MATZIE, McGEEHAN, McILVAINE SMITH, MELIO, METCALFE, METZGAR, MICOZZIE, MUNDY, MURT, MUSTIO, MYERS, M. O'BRIEN, PALLONE, PARKER, PASHINSKI, PAYTON, PERZEL, RAPP, READSHAW, REED, ROHRER, SAYLOR, SCHRODER, SEIP, SIPTROTH, K. SMITH, M. SMITH, STURLA, SWANGER, TALLMAN, R. TAYLOR, THOMAS, TRUE, VEREB, WAGNER, WALKO, WANSACZ AND YOUNGBLOOD, JULY 2, 2009

REFERRED TO COMMITTEE ON STATE GOVERNMENT, JULY 2, 2009  

AN ACT

Providing for divestiture by the State Treasurer, the State

Employees' Retirement System and the Public School Employees'

Retirement System of investments in companies doing business

in Iran and Sudan.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the Protecting

Pennsylvania's Investments Act.

Section 2.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Alternative investments."  An investment in a private equity

fund, private debt fund, venture fund, real estate fund, hedge

fund or absolute return fund.

"Board."  As defined in section 102 of the act of February 1,

1974 (P.L.34, No.15), known as the Pennsylvania Municipal

Retirement Law; 24 Pa.C.S. § 8102 (relating to definitions); or

71 Pa.C.S. § 5102 (relating to definitions).

"Business activities."  Owning or controlling property or

assets located in, having employees or facilities located in,

providing goods or services to, having distribution agreements

with, issuing credit or loans to, purchasing bonds or commercial

paper issued by, investing in or having equity ties to or with

Iran, Sudan or any company domiciled in Iran or Sudan.

"Company."  Any sole proprietorship, organization,

association, corporation, partnership, joint venture, limited

partnership, limited liability partnership, limited liability

company or other entity or business association that exists for

the purpose of making a profit.

"Direct holdings."  All securities of a company that are held

directly by the public fund.

"Foreign company."  Any entity which is not organized under

the laws of the United States.

"Government of Iran."  The government of Iran and its

instrumentalities and companies owned or controlled by the

government of Iran.

"Government of Sudan."  The government in Khartoum, Sudan,

which 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 the

National Unity Government agreed upon in the Comprehensive Peace

Agreement for Sudan. The term does not include the regional

government of southern Sudan.

"Inactive business activities."  The continued holding or

renewal of rights to property previously operated for the

purpose of generating revenues but not presently deployed for

that purpose.

"Indemnitee."  Each current or former board member, duly

appointed designee of a board member, officer, employee,

including, without limitation, the attorneys in the Office of

Chief Counsel that serve a public fund, agent, research firm or

investment manager of a public fund who was or is a party to, or

is threatened to be made a party to, or is otherwise involved in

any proceeding by reason of the fact that the person is or was a

board member, designee of a board member, officer, employee,

agent, research firm or investment manager of a public fund.

"Indirect holdings."  All securities held in an account or

fund such as a mutual fund managed by one or more persons not

employed by a public fund, in which the public fund owns shares

or interests together with other investors.

"Iran."  The Islamic Republic of Iran.

"List of State Sponsors of Terrorism."  The list of countries

designated by the United States Secretary of State as having

repeatedly provided support for acts of international terrorism

as reported annually in Country Reports on Terrorism under

section 140 of the Foreign Relations Authorization Act, Fiscal

Years 1988 and 1989 (Public Law 100-24, 26 U.S.C. § 2656(f)).

"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.

"Military equipment."  Weapons, arms, military supplies and

equipment that may be used readily for military purposes,

including, but not limited to, radar systems or military-grade

transport vehicles. This term shall also include supplies or

services sold or provided directly or indirectly to any force

actively participating in armed conflict in Sudan.

"Mineral extraction activities."  Include 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 by providing

supplies or services in support of such activities.

"Oil-related activities."  The term includes all of the

following:

(1)  Development of petroleum or natural gas resources of

Iran or Sudan. This paragraph does not include the mere sale

of gasoline and related consumer products.

(2)  Owning rights to oil or natural gas blocks.

(3)  Exporting, extracting, producing, refining,

processing, exploring for, transporting, selling or trading

oil or natural gas.

(4)  Constructing, maintaining or operating any pipeline,

refinery, liquefaction facility or other oil or natural gas

infrastructure.

(5)  Facilitating activities referred to in paragraph

(1), (2), (3) or (4), including by supplying services in

support of the activities.

"Power production activities."  Business operations that

involve a project commissioned by the National Electricity

Corporation (NEC) of Sudan or other similar government of Sudan

entity 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 by providing supplies or

services in support of such activities.

"Proceeding."  Any threatened, pending or completed action,

suit or proceeding, including, without limitation, an action,

suit or proceeding by or in the right of a public fund, relating

to compliance with any investment limitations imposed by

statute, whether civil, criminal, administrative, investigative

or through arbitration.

"Public fund."  Any of the following:

(1)  The State Employees' Retirement Fund established

pursuant to 71 Pa.C.S. Pt. XXV (relating to retirement for

State employees and officers).

(2)  The Public School Employees' Retirement Fund

established pursuant to 24 Pa.C.S. Pt. IV (relating to

retirement for school employees).

(3)  The Pennsylvania Municipal Retirement Fund.

(4)  Any Commonwealth fund of which the State Treasurer

is the custodian.

"Scrutinized business activities."  Business activities that

have resulted in a company becoming a scrutinized company.

"Scrutinized company."  Any of the following:

(1)  Any foreign company that has:

(i)  invested at least $20,000,000 in oil-related

activities in Iran in any 12-month period since August 5,

1996;

(ii)  supplied military equipment to the government

of Iran within the 12-month period prior to the effective

date of this section; or

(iii)  knowingly and intentionally violated the

United States export controls with respect to Iran during

the 12-month period prior to the effective date of this

section.

(2)  Any foreign company that meets the criteria set

forth either in subparagraph (i) or (ii):

(i)  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 equity share,

government of Sudan-commissioned consortiums or projects,

or companies involved in government of Sudan-commissioned

consortiums or projects; and

(A)  More than 10% of the company's revenue or

assets linked to Sudan involve oil-related activities

or mineral extraction activities; less than 75% 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 specific to Sudan; or

(B)  More than 10% of the company's revenues or

assets linked to Sudan involve power production

activities; less than 75% 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 specific to

Sudan.

(ii)  The company supplies military equipment within

Sudan, unless it clearly shows that the 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 equipment by

forces actively participating in armed conflict, for

example, through post-sale tracking of such equipment by

the company, certification from a reputable and objective

third party that such equipment is not being used by a

party participating in armed conflict in Sudan, or sale

of such equipment solely to the regional government of

southern Sudan or any internationally recognized

peacekeeping force or humanitarian organization.

The term does not include a foreign company that is a social

development company.

"Social development company."  A company whose primary

purpose in Iran or 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.

"Substantial action specific to Iran."  Adopting, publicizing

and implementing a formal plan to cease scrutinized business

activities within one year and to refrain from any such new

business activities in Iran.

"Substantial action specific to Sudan."  Adopting,

publicizing and implementing a formal plan to cease scrutinized

business activities within one year and to refrain from any such

new business activities; undertaking significant humanitarian

efforts in conjunction with an international organization, the

government of Sudan, the regional government of southern Sudan

or a nonprofit entity and evaluated and certified by an

independent third party to be substantial in relationship to the

company's Sudan business activities 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.

"Sudan."  The Democratic Republic of Sudan.

Section 3.  Identification of companies.

(a)  Best effort.--Within 90 days after the effective date of

this section, a public fund shall make its best effort to

identify all scrutinized companies in which the public fund has

direct holdings. A public fund shall review, as appropriate in

the public fund's judgment, publicly available information

regarding foreign companies that have scrutinized business

activities, including information provided by nonprofit

organizations, research firms, international organizations and

government entities.

(b)  Assembly.--By the first meeting of a public fund

following the time period under subsection (a), the public fund

shall assemble all scrutinized companies that fit the criteria

specified in paragraph (1) of the definition of "scrutinized

company" into a Scrutinized Companies with Activities in Iran

List and shall assemble all scrutinized companies that fit

criteria specified in paragraph (2) of the definition of

"scrutinized company" into a Scrutinized Companies with

Activities in Sudan List.

Section 4.  Required actions.

(a)  Procedure.--A public fund shall adhere to the procedures

under this section for determining companies on its Scrutinized

Companies with Activities in Iran List and Scrutinized Companies

with Activities in Sudan List that qualify for divestment.

(b)  Engagement.--

(1)  For each company on a public fund's Scrutinized

Companies with Activities in Iran List or Scrutinized

Companies with Activities in Sudan List in which the public

fund has direct holdings, the public fund shall send a

written notice informing the company of its scrutinized

company status and specify the business activities which have

resulted in this determination and that it may become subject

to divestment by the public fund. The notice must inform the

company of the opportunity to clarify its scrutinized

business activities and encourage the company, within 90 days

of the date of receipt of the notice, to cease its

scrutinized business activities in Iran, Sudan or both, or

convert the activities to inactive business activities in

order to avoid qualifying for divestment by the public fund.

The notice shall be sent no later than 120 days after the

effective date of this section.

(2)  If, within 90 days of the date of receipt of a

notice under paragraph (1), a company announces by public

disclosure substantial action specific to Iran or substantial

action specific to Sudan, the public fund may maintain its

holdings, but the company shall remain on the Scrutinized

Companies with Activities in Iran List or Scrutinized

Companies with Activities in Sudan List pending completion of

the companies' cessation of scrutinized business activities.

Following completion of a company's cessation of scrutinized

business activities, the public fund shall remove the company

from its Scrutinized Companies with Activities in Iran List

or Scrutinized Companies with Activities in Sudan List.

(c)  Divestment.--

(1)  If, after 90 days following the effective date of

receipt of the notice under subsection (b)(1), a company has

not announced by public disclosure substantial action

specific to Iran, substantial action specific to Sudan or

both as specified in the notice, or the public fund

determines or becomes aware that the company continues to

have scrutinized business activities, the public fund, within

15 months after the 90-day period, shall sell, redeem, divest

or withdraw from its direct holdings all securities of the

company.

(2)  If a public fund determines or becomes aware that a

company that ceased scrutinized business activities following

engagement under subsection (b) has resumed the activities,

the public fund shall send a written notice to the company

under subsection (b), and the company shall be immediately

placed onto the public fund's Scrutinized Companies with

Activities in Iran List or Scrutinized Companies with

Activities in Sudan List.

(3)  A public fund shall monitor a scrutinized company

that has announced by public disclosure substantial action

specific to Iran, substantial action specific to Sudan or

both. If after one year the public fund determines or becomes

aware that the company has not implemented the plan, within

15 months after the expiration of the one-year period, the

public fund shall sell, redeem, divest or withdraw from its

direct holdings all securities of the company.

(d)  Prohibition.--A public fund may not acquire securities

of a company on its Scrutinized Companies with Activities in

Iran List or Scrutinized Companies with Activities in Sudan

List.

(e)  Excluded securities.--Nothing in this act shall apply to

the public fund's holdings in alternative investments or

indirect holdings.

Section 5.  Reporting.

(a)  Report to United States Attorney General.--Within 30

days of the passage of this act, administrators of the public

fund shall file a written report to the United States Attorney

General detailing the requirements contained in this act.

(b)  Duty of public fund.--A public fund shall, within one

year of assembly of its Scrutinized Companies with Activities in

Iran List and Scrutinized Companies with Activities in Sudan

List, provide a report to the Governor; the President pro

tempore of the Senate; the Speaker of the House of

Representatives; and each member of the boards of the

Pennsylvania Municipal Retirement System, the State Employees'

Retirement System and Public School Employees' Retirement

System. The report shall include the items required under

subsection (c). The report shall be made available to the

public.

(c)  Contents.--The report under subsection (b) shall include

the most recent Scrutinized Companies with Activities in Iran

List and Scrutinized Companies with Activities in Sudan List and

all of the following:

(1)  A summary of correspondence with companies engaged

by the public fund under section 4.

(2)  All investments sold, redeemed, divested or

withdrawn in compliance with section 4(c), the costs and

expenses of such transfers, and a determination of net gain

or loss on account of such transactions incurred in

compliance with the provisions of this act.

(3)  All prohibited investments under section 4(d).

(4)  A list of all publicly traded securities held by the

public fund.

(d)  Update.--A public fund shall do all of the following:

(1)  Annually update, based on evolving information under

subsection (c), and make publicly available its Scrutinized

Companies with Activities in Iran List and Scrutinized

Companies with Activities in Sudan List.

(2)  Provide a copy of the lists under paragraph (1),

including updates, to all other public funds.

Section 6.  Expiration.

(a)  Recurrence of investment in Iran.--A public fund shall

have no obligations under this act with respect to a company

engaged in business activities in Iran upon the occurrence of

any of the following:

(1)  Iran does not appear on the List of State Sponsors

of Terrorism.

(2)  The President or Congress of the United States,

through legislation or executive order, declares that

mandatory divestment of the type provided for in this act

interferes with the conduct of United States foreign policy.

(b)  Recurrence of investment in Sudan.--A public fund shall

have no obligations under this act with respect to a company

engaged in business activities in Sudan upon the occurrence of

any of the following:

(1)  The President or Congress of the United States

declares Darfur genocide has been halted for at least 12

months.

(2)  Sudan does not appear on the list of State Sponsors

of Terrorism.

(3)  The President or Congress 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 under the Sudan

Accountability and Divestment Act of 2007 (P.L. 110-174, 121

Stat. 2516).

(4)  The President or Congress of the United States,

through legislation or executive order, declares that

mandatory divestment of the type provided for in this act

interferes with the conduct of United States foreign policy.

Section 7.  Conflict with other laws.

A public fund may perform any action necessary to comply with

this act, notwithstanding the provisions of any other law,

including, but not limited to, any fiduciary or prudent

investing responsibilities as prescribed in 24 Pa.C.S. § 8521 

(relating to management of fund and accounts) and 71 Pa.C.S. §

5931 (relating to management of fund and accounts) and any

obligations of a public fund with respect to choice of asset

managers, investment funds or investments for the public fund's

securities portfolios.

Section 8.  Indemnification.

(a)  General rule.--Each indemnitee shall be indemnified and

held harmless by the Commonwealth for all good faith actions

taken by the indemnitee and for all good faith failures to take

action, regardless of the date of any such action or failure to

take action, in connection with attempts to comply with any

investment limitations imposed by statute against all expense,

liability and loss, including, without limitation, attorney

fees, judgments, fines, taxes, penalties and amounts paid or to

be paid in settlements reasonably incurred or suffered by the

indemnitee in connection with any proceeding.

(b)  Advance payment.--The right to indemnification provided

in this section shall include the right to have the expenses

reasonably incurred by the indemnitee in defending any

proceeding paid by the Commonwealth in advance of the final

disposition of the proceeding upon the receipt by the

Commonwealth of a written undertaking by the indemnitee to

refund the amounts so advanced if it is ultimately determined

that the indemnitee is not entitled to indemnification under

this section.

(c)  Persons entitled.--Indemnification pursuant to this

section shall continue as to an indemnitee who has ceased to be

a board member, designee of a board member, officer or employee

of a public fund and shall inure to the benefit of such person's

legal representatives, heirs, executors and administrators.

(d)  Reimbursement to public funds.--To the extent that the

Commonwealth does not make any indemnification payments,

including any advancement of legal fees and expenses, within 30

days of demand therefor, a public fund shall make such payment

and the Commonwealth shall reimburse the public fund.

(e)  Construction.--The repeal, expiration or amendment of

any provision of this section shall not limit the rights of any

indemnitee to indemnification, including advancement of

expenses, with respect to any action or failure to act occurring

prior to the effective date of such repeal or amendment.

Section 9.  Severability.

If any provision of this act or its application to any person

or circumstances is held invalid, the invalidity shall not

affect other provisions or applications of this act that can be

given effect without the invalid provision or application.

Section 30.  Effective date.

This act shall take effect immediately.