PRINTER'S NO.  1329

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

SENATE BILL

 

No.

928

Session of

2009

  

  

INTRODUCED BY STACK, SCARNATI, WASHINGTON, FONTANA, PIPPY, TARTAGLIONE, LOGAN, COSTA, ORIE, WARD, HUGHES, BOSCOLA, FARNESE, ALLOWAY, WOZNIAK, LEACH AND DINNIMAN, JULY 17, 2009

  

  

REFERRED TO FINANCE, JULY 17, 2009  

  

  

  

AN ACT

  

1

Providing for divestiture by the State Treasurer, the State

2

Employees' Retirement System and the Public School Employees'

3

Retirement System of investments in companies doing business

4

in Iran and Sudan.

5

The General Assembly of the Commonwealth of Pennsylvania

6

hereby enacts as follows:

7

Section 1.  Short title.

8

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

9

Pennsylvania's Investments Act.

10

Section 2.  Definitions.

11

The following words and phrases when used in this act shall

12

have the meanings given to them in this section unless the

13

context clearly indicates otherwise:

14

"Alternative investments."  An investment in a private equity

15

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

16

fund or absolute return fund.

17

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

18

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

 


1

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

2

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

3

"Business activities."  Owning or controlling property or

4

assets located in, having employees or facilities located in,

5

providing goods or services to, having distribution agreements

6

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

7

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

8

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

9

"Company."  Any sole proprietorship, organization,

10

association, corporation, partnership, joint venture, limited

11

partnership, limited liability partnership, limited liability

12

company or other entity or business association that exists for

13

the purpose of making a profit.

14

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

15

directly by the public fund.

16

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

17

the laws of the United States.

18

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

19

instrumentalities and companies owned or controlled by the

20

government of Iran.

21

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

22

which is led by the National Congress Party, formerly known as

23

the National Islamic Front, or any successor government formed

24

on or after October 13, 2006, including the coalition the

25

National Unity Government agreed upon in the Comprehensive Peace

26

Agreement for Sudan. The term does not include the regional

27

government of southern Sudan.

28

"Inactive business activities."  The continued holding or

29

renewal of rights to property previously operated for the

30

purpose of generating revenues but not presently deployed for

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1

that purpose.

2

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

3

appointed designee of a board member, officer, employee,

4

including, without limitation, the attorneys in the Office of

5

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

6

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

7

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

8

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

9

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

10

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

11

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

12

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

13

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

14

or interests together with other investors.

15

"Iran."  The Islamic Republic of Iran.

16

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

17

designated by the United States Secretary of State as having

18

repeatedly provided support for acts of international terrorism

19

as reported annually in Country Reports on Terrorism under

20

section 140 of the Foreign Relations Authorization Act, Fiscal

21

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

22

"Marginalized populations of Sudan."  Include, but are not

23

limited to, the portion of the population in the Darfur region

24

that has been genocidally victimized; the portion of the

25

population of southern Sudan victimized by Sudan's North-South

26

civil war; the Beja, Rashidiya and other similarly underserved

27

groups of eastern Sudan; the Nubian and other similarly

28

underserved groups in Sudan's Abyei, Southern Blue Nile and Nuba

29

Mountain regions; and the Amri, Hamadab, Manasir and other

30

similarly underserved groups of northern Sudan.

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1

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

2

equipment that may be used readily for military purposes,

3

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

4

transport vehicles. This term shall also include supplies or

5

services sold or provided directly or indirectly to any force

6

actively participating in armed conflict in Sudan.

7

"Mineral extraction activities."  Include exploring,

8

extracting, processing, transporting or wholesale selling or

9

trading of elemental minerals or associated metal alloys or

10

oxides (ore), including gold, copper, chromium, chromite,

11

diamonds, iron, iron ore, silver, tungsten, uranium and zinc, as

12

well as facilitating such activities, including by providing

13

supplies or services in support of such activities.

14

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

15

following:

16

(1)  Development of petroleum or natural gas resources of

17

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

18

of gasoline and related consumer products.

19

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

20

(3)  Exporting, extracting, producing, refining,

21

processing, exploring for, transporting, selling or trading

22

oil or natural gas.

23

(4)  Constructing, maintaining or operating any pipeline,

24

refinery, liquefaction facility or other oil or natural gas

25

infrastructure.

26

(5)  Facilitating activities referred to in paragraph

27

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

28

support of the activities.

29

"Power production activities."  Business operations that

30

involve a project commissioned by the National Electricity

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1

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

2

entity whose purpose is to facilitate power generation and

3

delivery, including, but not limited to, establishing power-

4

generating plants or hydroelectric dams, selling or installing

5

components for the project, providing service contracts related

6

to the installation or maintenance of the project, as well as

7

facilitating such activities, including by providing supplies or

8

services in support of such activities.

9

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

10

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

11

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

12

to compliance with any investment limitations imposed by

13

statute, whether civil, criminal, administrative, investigative

14

or through arbitration.

15

"Public fund."  Any of the following:

16

(1)  The State Employees' Retirement Fund established

17

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

18

State employees and officers).

19

(2)  The Public School Employees' Retirement Fund

20

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

21

retirement for school employees).

22

(3)  The Pennsylvania Municipal Retirement Fund.

23

(4)  Any Commonwealth fund of which the State Treasurer

24

is the custodian.

25

"Scrutinized business activities."  Business activities that

26

have resulted in a company becoming a scrutinized company.

27

"Scrutinized company."  Any of the following:

28

(1)  Any foreign company that has:

29

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

30

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

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1

1996;

2

(ii)  supplied military equipment to the government

3

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

4

date of this section; or

5

(iii)  knowingly and intentionally violated the

6

United States export controls with respect to Iran during

7

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

8

section.

9

(2)  Any foreign company that meets the criteria set

10

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

11

(i)  The company has business operations that involve

12

contracts with or provision of supplies or services to

13

the government of Sudan, companies in which the

14

government of Sudan has any direct equity share,

15

government of Sudan-commissioned consortiums or projects,

16

or companies involved in government of Sudan-commissioned

17

consortiums or projects; and

18

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

19

assets linked to Sudan involve oil-related activities

20

or mineral extraction activities; less than 75% of

21

the company's revenues or assets linked to Sudan

22

involve contracts with or provision of oil-related or

23

mineral extracting products or services to the

24

regional government of southern Sudan or a project or

25

consortium created exclusively by that regional

26

government; and the company has failed to take

27

substantial action specific to Sudan; or

28

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

29

assets linked to Sudan involve power production

30

activities; less than 75% of the company's power

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1

production activities include projects whose intent

2

is to provide power or electricity to the

3

marginalized populations of Sudan; and the company

4

has failed to take substantial action specific to

5

Sudan.

6

(ii)  The company supplies military equipment within

7

Sudan, unless it clearly shows that the military

8

equipment cannot be used to facilitate offensive military

9

actions in Sudan or the company implements rigorous and

10

verifiable safeguards to prevent use of that equipment by

11

forces actively participating in armed conflict, for

12

example, through post-sale tracking of such equipment by

13

the company, certification from a reputable and objective

14

third party that such equipment is not being used by a

15

party participating in armed conflict in Sudan, or sale

16

of such equipment solely to the regional government of

17

southern Sudan or any internationally recognized

18

peacekeeping force or humanitarian organization.

19

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

20

development company.

21

"Social development company."  A company whose primary

22

purpose in Iran or Sudan is to provide humanitarian goods or

23

services, including medicine or medical equipment, agricultural

24

supplies or infrastructure; educational opportunities;

25

journalism-related activities; information or information

26

materials; spiritual-related activities; services of a purely

27

clerical or reporting nature; food, clothing or general consumer

28

goods.

29

"Substantial action specific to Iran."  Adopting, publicizing

30

and implementing a formal plan to cease scrutinized business

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1

activities within one year and to refrain from any such new

2

business activities in Iran.

3

"Substantial action specific to Sudan."  Adopting,

4

publicizing and implementing a formal plan to cease scrutinized

5

business activities within one year and to refrain from any such

6

new business activities; undertaking significant humanitarian

7

efforts in conjunction with an international organization, the

8

government of Sudan, the regional government of southern Sudan

9

or a nonprofit entity and evaluated and certified by an

10

independent third party to be substantial in relationship to the

11

company's Sudan business activities and of benefit to one or

12

more marginalized populations of Sudan; or through engagement

13

with the government of Sudan, materially improving conditions

14

for the genocidally victimized population in Darfur.

15

"Sudan."  The Democratic Republic of Sudan.

16

Section 3.  Identification of companies.

17

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

18

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

19

identify all scrutinized companies in which the public fund has

20

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

21

the public fund's judgment, publicly available information

22

regarding foreign companies that have scrutinized business

23

activities, including information provided by nonprofit

24

organizations, research firms, international organizations and

25

government entities.

26

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

27

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

28

shall assemble all scrutinized companies that fit the criteria

29

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

30

company" into a Scrutinized Companies with Activities in Iran

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1

List and shall assemble all scrutinized companies that fit

2

criteria specified in paragraph (2) of the definition of

3

"scrutinized company" into a Scrutinized Companies with

4

Activities in Sudan List.

5

Section 4.  Required actions.

6

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

7

under this section for determining companies on its Scrutinized

8

Companies with Activities in Iran List and Scrutinized Companies

9

with Activities in Sudan List that qualify for divestment.

10

(b)  Engagement.--

11

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

12

Companies with Activities in Iran List or Scrutinized

13

Companies with Activities in Sudan List in which the public

14

fund has direct holdings, the public fund shall send a

15

written notice informing the company of its scrutinized

16

company status and specify the business activities which have

17

resulted in this determination and that it may become subject

18

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

19

company of the opportunity to clarify its scrutinized

20

business activities and encourage the company, within 90 days

21

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

22

scrutinized business activities in Iran, Sudan or both, or

23

convert the activities to inactive business activities in

24

order to avoid qualifying for divestment by the public fund.

25

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

26

effective date of this section.

27

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

28

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

29

disclosure substantial action specific to Iran or substantial

30

action specific to Sudan, the public fund may maintain its

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1

holdings, but the company shall remain on the Scrutinized

2

Companies with Activities in Iran List or Scrutinized

3

Companies with Activities in Sudan List pending completion of

4

the companies' cessation of scrutinized business activities.

5

Following completion of a company's cessation of scrutinized

6

business activities, the public fund shall remove the company

7

from its Scrutinized Companies with Activities in Iran List

8

or Scrutinized Companies with Activities in Sudan List.

9

(c)  Divestment.--

10

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

11

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

12

not announced by public disclosure substantial action

13

specific to Iran, substantial action specific to Sudan or

14

both as specified in the notice, or the public fund

15

determines or becomes aware that the company continues to

16

have scrutinized business activities, the public fund, within

17

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

18

or withdraw from its direct holdings all securities of the

19

company.

20

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

21

company that ceased scrutinized business activities following

22

engagement under subsection (b) has resumed the activities,

23

the public fund shall send a written notice to the company

24

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

25

placed onto the public fund's Scrutinized Companies with

26

Activities in Iran List or Scrutinized Companies with

27

Activities in Sudan List.

28

(3)  A public fund shall monitor a scrutinized company

29

that has announced by public disclosure substantial action

30

specific to Iran, substantial action specific to Sudan or

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1

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

2

aware that the company has not implemented the plan, within

3

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

4

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

5

direct holdings all securities of the company.

6

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

7

of a company on its Scrutinized Companies with Activities in

8

Iran List or Scrutinized Companies with Activities in Sudan

9

List.

10

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

11

the public fund's holdings in alternative investments or

12

indirect holdings.

13

Section 5.  Reporting.

14

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

15

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

16

fund shall file a written report to the United States Attorney

17

General detailing the requirements contained in this act.

18

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

19

year of assembly of its Scrutinized Companies with Activities in

20

Iran List and Scrutinized Companies with Activities in Sudan

21

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

22

tempore of the Senate; the Speaker of the House of

23

Representatives; and each member of the boards of the

24

Pennsylvania Municipal Retirement System, the State Employees'

25

Retirement System and Public School Employees' Retirement

26

System. The report shall include the items required under

27

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

28

public.

29

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

30

the most recent Scrutinized Companies with Activities in Iran

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1

List and Scrutinized Companies with Activities in Sudan List and

2

all of the following:

3

(1)  A summary of correspondence with companies engaged

4

by the public fund under section 4.

5

(2)  All investments sold, redeemed, divested or

6

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

7

expenses of such transfers, and a determination of net gain

8

or loss on account of such transactions incurred in

9

compliance with the provisions of this act.

10

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

11

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

12

public fund.

13

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

14

(1)  Annually update, based on evolving information under

15

subsection (c), and make publicly available its Scrutinized

16

Companies with Activities in Iran List and Scrutinized

17

Companies with Activities in Sudan List.

18

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

19

including updates, to all other public funds.

20

Section 6.  Expiration.

21

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

22

have no obligations under this act with respect to a company

23

engaged in business activities in Iran upon the occurrence of

24

any of the following:

25

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

26

of Terrorism.

27

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

28

through legislation or executive order, declares that

29

mandatory divestment of the type provided for in this act

30

interferes with the conduct of United States foreign policy.

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1

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

2

have no obligations under this act with respect to a company

3

engaged in business activities in Sudan upon the occurrence of

4

any of the following:

5

(1)  The President or Congress of the United States

6

declares Darfur genocide has been halted for at least 12

7

months.

8

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

9

of Terrorism.

10

(3)  The President or Congress of the United States

11

declares that the government of Sudan has honored its

12

commitments to cease attacks on civilians, demobilize and

13

demilitarize the Janjaweed and associated militias, grant

14

free and unfettered access for deliveries of humanitarian

15

assistance and allow for the safe and voluntary return of

16

refugees and internally displaced persons under the Sudan

17

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

18

Stat. 2516).

19

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

20

through legislation or executive order, declares that

21

mandatory divestment of the type provided for in this act

22

interferes with the conduct of United States foreign policy.

23

Section 7.  Conflict with other laws.

24

A public fund may perform any action necessary to comply with

25

this act, notwithstanding the provisions of any other law,

26

including, but not limited to, any fiduciary or prudent

27

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

28

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

29

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

30

obligations of a public fund with respect to choice of asset

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1

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

2

securities portfolios.

3

Section 8.  Indemnification.

4

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

5

held harmless by the Commonwealth for all good faith actions

6

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

7

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

8

take action, in connection with attempts to comply with any

9

investment limitations imposed by statute against all expense,

10

liability and loss, including, without limitation, attorney

11

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

12

be paid in settlements reasonably incurred or suffered by the

13

indemnitee in connection with any proceeding.

14

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

15

in this section shall include the right to have the expenses

16

reasonably incurred by the indemnitee in defending any

17

proceeding paid by the Commonwealth in advance of the final

18

disposition of the proceeding upon the receipt by the

19

Commonwealth of a written undertaking by the indemnitee to

20

refund the amounts so advanced if it is ultimately determined

21

that the indemnitee is not entitled to indemnification under

22

this section.

23

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

24

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

25

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

26

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

27

legal representatives, heirs, executors and administrators.

28

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

29

Commonwealth does not make any indemnification payments,

30

including any advancement of legal fees and expenses, within 30

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1

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

2

and the Commonwealth shall reimburse the public fund.

3

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

4

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

5

indemnitee to indemnification, including advancement of

6

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

7

prior to the effective date of such repeal or amendment.

8

Section 9.  Fund reimbursement.

9

The Commonwealth shall reimburse each public fund for their

10

net losses, costs and expenses incurred as a result of

11

compliance with the provisions of this act. The reimbursements

12

shall occur in the following manner:

13

(1)  The public fund shall submit to the Secretary of the

14

Budget an itemization of the amount necessary to be

15

appropriated by the General Assembly to reimburse the public

16

fund for their net losses, costs and expenses incurred as a

17

result of compliance with the provisions of this act in the

18

previous fiscal year. To the extent the public fund

19

experiences net gains as a result of compliance with the

20

provisions of this act in a fiscal year, the net gains shall

21

be used to offset any reported costs or expenses incurred by

22

the public fund.

23

(2)  In consultation with each public fund, the Secretary

24

of the Budget shall annually establish a uniform method for

25

the determination of gains and losses. The method shall be

26

used by each public fund in making a claim for reimbursement

27

under this section. The budget submission shall be on a form

28

and in a manner determined by the secretary of the budget,

29

including net losses, along with an itemized accounting of

30

all costs and expenses claimed by the public fund. Budget

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1

submission shall occur no later than November 1 following the

2

fiscal year in which the net losses, costs and expenses were

3

incurred.

4

(3)  Upon appropriation by the General Assembly to

5

provide for the obligations of the Commonwealth, the amount

6

shall be paid by the State Treasurer through the Department

7

of Revenue into the public fund within 90 days of receipt of

8

the requisition presented by the public fund.

9

Section 10.  Severability.

10

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

11

or circumstances is held invalid, the invalidity shall not

12

affect other provisions or applications of this act that can be

13

given effect without the invalid provision or application.

14

Section 30.  Effective date.

15

This act shall take effect immediately.

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