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PRINTER'S NO. 3161
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1987
Session of
2015
INTRODUCED BY MICCARELLI, BOYLE, THOMAS, ROTHMAN, MURT, METZGAR,
SCHLOSSBERG, O'BRIEN, COX, SAYLOR, CUTLER AND WATSON,
APRIL 11, 2016
REFERRED TO COMMITTEE ON STATE GOVERNMENT, APRIL 11, 2016
AN ACT
Amending the act of July 2, 2010 (P.L.266, No.44), entitled "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," providing for divestiture
of investments in companies boycotting Israel.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The title of the act of July 2, 2010 (P.L.266,
No.44), known as the Protecting Pennsylvania's Investments Act,
is amended to read:
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 boycotting
Israel and doing business in Iran and Sudan.
Section 2. Section 2 of the act is amended to read:
Section 2. Definitions.
The following words and phrases when used in this act shall
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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).
"Boycott Israel." Engaging in actions that are
politically motivated and are intended to penalize, inflict
economic harm on or otherwise limit commercial relations with
the State of Israel or companies based in the State of Israel or
in territories controlled by the State of Israel.
"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
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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
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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.
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(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 activities 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).
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(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 activities 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
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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.
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(3) Any foreign company that boycotts Israel.
The term does not include a foreign company that is a social
development company.
"Social development company." A company whose primary
purpose in Israel, 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 Israel. " Adopting,
publicizing and implementing a formal plan to cease boycotting
Israel within one year and to refrain from boycotting Israel
after that period.
"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
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for the genocidally victimized population in Darfur.
"Sudan." The Democratic Republic of Sudan.
Section 3. The act is amended by adding a section to read:
Section 3.1. Identification of companies boycotting Israel.
(a) Best effort.--Within 90 days after the effective date of
this section, a public fund shall make its best effort to
identify all companies boycotting Israel 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 companies boycotting Israel, 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 companies boycotting Israel into a
Scrutinized Companies Boycotting Israel List.
Section 4. Sections 4, 5 and 6 of the act are amended to
read:
Section 4. Required actions.
(a) Procedure.--A public fund shall adhere to the procedures
under this section for determining companies on its Scrutinized
Companies Boycotting Israel List, 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 Boycotting Israel List, 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
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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 180 days of the date of
receipt of the notice, to cease boycotting Israel or 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 180 days of the date of receipt of a
notice under paragraph (1), a company announces by public
disclosure s ubstantial action specific to Israel, 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 Boycotting
Israel List, 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
Boycotting Israel List, Scrutinized Companies with Activities
in Iran List or Scrutinized Companies with Activities in
Sudan List.
(c) Divestment.--
(1) If, after 180 days following the effective date of
receipt of the notice under subsection (b)(1), a company has
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not announced by public disclosure s ubstantial action
specific to Israel, 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 boycott Israel or have
scrutinized business activities, the public fund, within 26
months after the 180-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 boycotting Israel 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 Boycotting Israel List, 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 s ubstantial action
specific to Israel, 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 26 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 Boycotting Israel
List, Scrutinized Companies with Activities in Iran List or
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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 Boycotting Israel
List, 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 Boycotting Israel List,
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 scrutinized
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
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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 Boycotting Israel List, 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
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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.
(c) Recurrence of investment in companies engaged in
boycotting Israel.--A public fund shall have no obligations
under this act with respect to a company engaged in boycotting
Israel upon the occurrence of the President or Congress of the
United States, through legislation or executive order, declaring
that mandatory divestment of the type provided for in this act
interferes with the conduct of United States foreign policy.
Section 5. This act shall take effect in 60 days.
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