PRINTER'S NO. 2407
No. 1584 Session of 2008
INTRODUCED BY ARMSTRONG, FUMO, SCARNATI, WONDERLING, ORIE,
STACK, GREENLEAF, EICHELBERGER, COSTA AND LAVALLE,
SEPTEMBER 19, 2008
REFERRED TO FINANCE, SEPTEMBER 19, 2008
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 "Board." As defined in section 102 of the act of February 1,
15 1974 (P.L.34, No.15), known as the Pennsylvania Municipal
16 Retirement Law; 24 Pa.C.S. § 8102 (relating to definitions); or
17 71 Pa.C.S. § 5102 (relating to definitions).
18 "Business activities." Owning or controlling property or
1 assets located in, having employees or facilities located in,
2 providing goods or services to, having distribution agreements
3 with, issuing credit or loans to, purchasing bonds or commercial
4 paper issued by, investing in or having equity ties to or with
5 Iran, Sudan or any company domiciled in Iran or Sudan.
6 "Company." Any sole proprietorship, organization,
7 association, corporation, partnership, joint venture, limited
8 partnership, limited liability partnership, limited liability
9 company or other entity or business association that exists for
10 the purpose of making a profit.
11 "Direct holdings." All securities of a company that are held
12 directly by the public fund.
13 "Government of Iran." The government of Iran and its
14 instrumentalities and companies owned or controlled by the
15 government of Iran.
16 "Government of Sudan." The government in Khartoum, Sudan,
17 which is led by the National Congress Party, formerly known as
18 the National Islamic Front, or any successor government formed
19 on or after October 13, 2006, including the coalition the
20 National Unity Government agreed upon in the Comprehensive Peace
21 Agreement for Sudan. The term does not include the regional
22 government of southern Sudan.
23 "Inactive business activities." The continued holding or
24 renewal of rights to property previously operated for the
25 purpose of generating revenues but not presently deployed for
26 that purpose.
27 "Indemnitee." Each current or former board member, duly
28 appointed designee of a board member, officer, employee,
29 including, without limitation, the attorneys in the Office of
30 Chief Counsel that serve a public fund, agent, research firm or
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1 investment manager of a public fund who was or is a party to, or
2 is threatened to be made a party to, or is otherwise involved in
3 any proceeding by reason of the fact that the person is or was a
4 board member, designee of a board member, officer, employee,
5 agent, research firm or investment manager of a public fund.
6 "Iran." The Islamic Republic of Iran.
7 "List of State Sponsors of Terrorism." The list of countries
8 designated by the United States Secretary of State as having
9 repeatedly provided support for acts of international terrorism
10 as reported annually in Country Reports on Terrorism under
11 section 140 of the Foreign Relations Authorization Act, Fiscal
12 Years 1988 and 1989 (Public Law 100-24, 26 U.S.C. § 2656(f)).
13 "Marginalized populations of Sudan." Include, but are not
14 limited to, the portion of the population in the Darfur region
15 that has been genocidally victimized; the portion of the
16 population of southern Sudan victimized by Sudan's North-South
17 civil war; the Beja, Rashidiya and other similarly underserved
18 groups of eastern Sudan; the Nubian and other similarly
19 underserved groups in Sudan's Abyei, Southern Blue Nile and Nuba
20 Mountain regions; and the Amri, Hamadab, Manasir and other
21 similarly underserved groups of northern Sudan.
22 "Military equipment." Weapons, arms, military supplies and
23 equipment that may be used readily for military purposes,
24 including, but not limited to, radar systems or military-grade
25 transport vehicles; or supplies or services sold or provided
26 directly or indirectly to any force actively participating in
27 armed conflict in Sudan.
28 "Mineral extraction activities." Include exploring,
29 extracting, processing, transporting or wholesale selling or
30 trading of elemental minerals or associated metal alloys or
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1 oxides (ore), including gold, copper, chromium, chromite,
2 diamonds, iron, iron ore, silver, tungsten, uranium and zinc, as
3 well as facilitating such activities, including by providing
4 supplies or services in support of such activities.
5 "Oil-related activities." The term includes all of the
6 following:
7 (1) Development of petroleum or natural gas resources of
8 Iran or Sudan. This paragraph does not include the mere sale
9 of gasoline and related consumer products.
10 (2) Owning rights to oil or natural gas blocks.
11 (3) Exporting, extracting, producing, refining,
12 processing, exploring for, transporting, selling or trading
13 oil or natural gas.
14 (4) Constructing, maintaining or operating any pipeline,
15 refinery, liquefaction facility or other oil or natural gas
16 infrastructure.
17 (5) Facilitating activities referred to in paragraph
18 (1), (2), (3) or (4), including by supplying services in
19 support of the activities.
20 "Power production activities." Business operations that
21 involve a project commissioned by the National Electricity
22 Corporation (NEC) of Sudan or other similar government of Sudan
23 entity whose purpose is to facilitate power generation and
24 delivery, including, but not limited to, establishing power-
25 generating plants or hydroelectric dams, selling or installing
26 components for the project, providing service contracts related
27 to the installation or maintenance of the project, as well as
28 facilitating such activities, including by providing supplies or
29 services in support of such activities.
30 "Proceeding." Any threatened, pending or completed action,
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1 suit or proceeding, including, without limitation, an action,
2 suit or proceeding by or in the right of a public fund, relating
3 to compliance with any investment limitations imposed by
4 statute, whether civil, criminal, administrative, investigative
5 or through arbitration.
6 "Public fund." Any of the following:
7 (1) The State Employees' Retirement Fund established
8 pursuant to 71 Pa.C.S. Pt. XXV (relating to retirement for
9 State employees and officers).
10 (2) The Public School Employees' Retirement Fund
11 established pursuant to 24 Pa.C.S. Pt. IV (relating to
12 retirement for school employees).
13 (3) The Pennsylvania Municipal Retirement Fund.
14 (4) Any Commonwealth fund of which the State Treasurer
15 is the custodian.
16 "Scrutinized business activities." Business activities that
17 have resulted in a company becoming a scrutinized company.
18 "Scrutinized company." Any of the following:
19 (1) Any foreign company that has:
20 (i) invested at least $20,000,000 in the development
21 of the petroleum or natural gas resources of Iran in any
22 12-month period since August 5, 1996;
23 (ii) supplied military equipment to the government
24 of Iran within the 12-month period prior to the effective
25 date of this section; or
26 (iii) knowingly and intentionally violated the
27 United States export controls with respect to Iran during
28 the 12-month period prior to the effective date of this
29 section.
30 (2) Any foreign company that meets the criteria set
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1 forth either in subparagraph (i) or (ii):
2 (i) The company has business operations that involve
3 contracts with or provision of supplies or services to
4 the government of Sudan, companies in which the
5 government of Sudan has any direct equity share,
6 government of Sudan-commissioned consortiums or projects,
7 or companies involved in government of Sudan-commissioned
8 consortiums or projects; and
9 (A) More than 10% of the company's revenue or
10 assets linked to Sudan involve oil-related activities
11 or mineral extraction activities; less than 75% of
12 the company's revenues or assets linked to Sudan
13 involve contracts with or provision of oil-related or
14 mineral extracting products or services to the
15 regional government of southern Sudan or a project or
16 consortium created exclusively by that regional
17 government; and the company has failed to take
18 substantial action specific to Sudan; or
19 (B) 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
23 is to provide power or electricity to the
24 marginalized populations of Sudan; and the company
25 has failed to take substantial action specific to
26 Sudan.
27 (ii) The company supplies military equipment within
28 Sudan, unless it clearly shows that the military
29 equipment cannot be used to facilitate offensive military
30 actions in Sudan or the company's implements rigorous and
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1 verifiable safeguards to prevent use of that equipment by
2 forces actively participating in armed conflict, for
3 example, through post-sale tracking of such equipment by
4 the company, certification from a reputable and objective
5 third party that such equipment is not being used by a
6 party participating in armed conflict in Sudan, or sale
7 of such equipment solely to the regional government of
8 southern Sudan or any internationally recognized
9 peacekeeping force or humanitarian organization.
10 The term does not include a foreign company that is a social
11 development company.
12 "Social development company." A company whose primary
13 purpose in Iran or Sudan is to provide humanitarian goods or
14 services, including medicine or medical equipment, agricultural
15 supplies or infrastructure; educational opportunities;
16 journalism-related activities; information or information
17 materials; spiritual-related activities; services of a purely
18 clerical or reporting nature; food, clothing or general consumer
19 goods.
20 "Substantial action specific to Iran." Adopting, publicizing
21 and implementing a formal plan to cease scrutinized business
22 activities within one year and to refrain from any such new
23 business activities in Iran.
24 "Substantial action specific to Sudan." Adopting,
25 publicizing and implementing a formal plan to cease scrutinized
26 business operations within one year and to refrain from any such
27 new business operations; undertaking significant humanitarian
28 efforts in conjunction with an international organization, the
29 government of Sudan, the regional government of southern Sudan
30 or a nonprofit entity and evaluated and certified by an
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1 independent third party to be substantial in relationship to the
2 company's Sudan business operations and of benefit to one or
3 more marginalized populations of Sudan; or through engagement
4 with the government of Sudan, materially improving conditions
5 for the genocidally victimized population in Darfur.
6 "Sudan." The Democratic Republic of Sudan.
7 Section 3. Identification of companies.
8 (a) Best effort.--Within 90 days after the effective date of
9 this section, a public fund shall make its best effort to
10 identify all scrutinized companies in which the public fund has
11 direct holdings. A public fund shall review, as appropriate in
12 the public fund's judgment, publicly available information
13 regarding foreign companies that have scrutinized business
14 activities, including information provided by nonprofit
15 organizations, research firms, international organizations and
16 government entities.
17 (b) Assembly.--By the first meeting of a public fund
18 following the time period under subsection (a), the public fund
19 shall assemble all scrutinized companies that fit the criteria
20 specified in paragraph (1) of the definition of "scrutinized
21 company" into a Scrutinized Companies with Activities in Iran
22 List and shall assemble all scrutinized companies that fit
23 criteria specified in paragraph (2) of the definition of
24 "scrutinized company" into a Scrutinized Companies with
25 Activities in Sudan List.
26 (c) Update.--A public fund shall, from the effective date of
27 this section, annually update and make publicly available its
28 Scrutinized Companies with Activities in Iran List and
29 Scrutinized Companies with Activities in Sudan List based on
30 evolving information from, among other sources, those listed
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1 under subsection (a). In addition, a public fund shall provide a
2 copy of its lists to all other public funds including all
3 updates.
4 Section 4. Required actions.
5 (a) Procedure.--A public fund shall adhere to the procedures
6 under this section for assembling companies on its Scrutinized
7 Companies with Activities in Iran List and Scrutinized Companies
8 with Activities in Sudan List.
9 (b) Engagement.--
10 (1) For each company on a public fund's Scrutinized
11 Companies with Activities in Iran List or Scrutinized
12 Companies with Activities in Sudan List in which the public
13 fund has direct holdings, the public fund shall send a
14 written notice informing the company of its scrutinized
15 company status and specify the business activities which have
16 resulted in this determination and that it may become subject
17 to divestment by the public fund. The notice must inform the
18 company of the opportunity to clarify its scrutinized
19 business activities and encourage the company, within 90 days
20 of the date of receipt of the notice, to cease its
21 scrutinized business activities in Iran, Sudan or both, or
22 convert the activities to inactive business activities in
23 order to avoid qualifying for divestment by the public fund.
24 The notice shall be sent no later than 120 days after the
25 effective date of this section.
26 (2) If, within 90 days of the date of receipt of a
27 notice under paragraph (1), a company announces by public
28 disclosure substantial action specific to Iran or substantial
29 action specific to Sudan, the public fund may maintain its
30 holdings, but the company shall remain on the Scrutinized
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1 Companies with Activities in Iran List or Scrutinized
2 Companies with Activities in Sudan List pending completion of
3 the companies' cessation of scrutinized business activities.
4 Following completion of a company's cessation of scrutinized
5 business activities, the public fund shall remove the company
6 from its Scrutinized Companies with Activities in Iran List
7 or Scrutinized Companies with Activities in Sudan List.
8 (c) Divestment.--
9 (1) If, after 90 days following the effective date of
10 receipt of the notice under subsection (b)(1), a company has
11 not announced by public disclosure substantial action
12 specific to Iran, substantial action specific to Sudan or
13 both as specified in the notice, or the public fund
14 determines or becomes aware that the company continues to
15 have scrutinized business activities, the public fund, within
16 15 months after the 90-day period, shall sell, redeem, divest
17 or withdraw from its direct holdings all securities of the
18 company.
19 (2) If a public fund determines or becomes aware that a
20 company that ceased scrutinized business activities following
21 engagement under subsection (b) has resumed the activities,
22 the public fund shall send a written notice to the company
23 under subsection (b), and the company shall be immediately
24 placed onto the public fund's Scrutinized Companies with
25 Activities in Iran List or Scrutinized Companies with
26 Activities in Sudan List.
27 (3) A public fund shall monitor a scrutinized company
28 that has announced by public disclosure substantial action
29 specific to Iran, substantial action specific to Sudan or
30 both. If after one year the public fund determines or becomes
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1 aware that the company has not implemented the plan, within
2 15 months after the expiration of the one-year period, the
3 public fund shall sell, redeem, divest or withdraw from its
4 direct holdings all securities of the company.
5 (d) Prohibition.--A public fund may not acquire securities
6 of a company on its Scrutinized Companies with Activities in
7 Iran List or Scrutinized Companies with Activities in Sudan
8 List.
9 (e) Excluded securities.--Nothing in this act shall apply to
10 the public fund's holdings in alternative investments.
11 Section 5. Reporting.
12 (a) Report to United States Attorney General.--Within 30
13 days of the passage of this act, administrators of the public
14 fund shall file a written report to the United States Attorney
15 General detailing the requirements contained in this act.
16 (b) Duty of public fund.--A public fund shall, within 30
17 days of the creation of its Scrutinized Companies with
18 Activities in Iran List and Scrutinized Companies with
19 Activities in Sudan List, provide a report to the Governor; the
20 President pro tempore of the Senate; the Speaker of the House of
21 Representatives; and each member of the boards of the
22 Pennsylvania Municipal Retirement System, the State Employees'
23 Retirement System and the Public School Employees' Retirement
24 System. The report shall include the items required under
25 subsection (c). The report shall be made available to the
26 public.
27 (c) Contents.--The report under subsection (b) shall include
28 the most recent Scrutinized Companies with Activities in Iran
29 List and Scrutinized Companies with Activities in Sudan List and
30 all of the following:
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1 (1) A summary of correspondence with companies engaged
2 by the public fund under section 4.
3 (2) All investments sold, redeemed, divested or
4 withdrawn in compliance with section 4(c).
5 (3) All prohibited investments under section 4(d).
6 (4) A list of all publicly traded securities held by the
7 public fund.
8 Section 6. Expiration.
9 (a) Recurrence of investment in Iran.--A public fund shall
10 have no obligations under this act with respect to a company
11 engaged in business activities in Iran upon the occurrence of
12 any of the following:
13 (1) Iran does not appear on the List of State Sponsors
14 of Terrorism.
15 (2) The President or Congress of the United States,
16 through legislation or executive order, declares that
17 mandatory divestment of the type provided for in this act
18 interferes with the conduct of United States foreign policy.
19 (b) Recurrence of investment in Sudan.--A public fund shall
20 have no obligations under this act with respect to a company
21 engaged in business activities in Sudan upon the occurrence of
22 any of the following:
23 (1) The President or Congress of the United States
24 declares Darfur genocide has been halted for at least 12
25 months.
26 (2) The United States revokes all sanctions imposed
27 against the government of Sudan.
28 (3) The President or Congress of the United States
29 declares that the government of Sudan has honored its
30 commitments to cease attacks on civilians, demobilize and
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1 demilitarize the Janjaweed and associated militias, grant
2 free and unfettered access for deliveries of humanitarian
3 assistance and allow for the safe and voluntary return of
4 refugees and internally displaced persons.
5 (4) The President or Congress of the United States,
6 through legislation or executive order, declares that
7 mandatory divestment of the type provided for in this act
8 interferes with the conduct of United States foreign policy.
9 Section 7. Conflict with other laws.
10 A public fund may perform any action necessary to comply with
11 this act, notwithstanding the provisions of any other law,
12 including, but not limited to, any fiduciary or prudent
13 investing responsibilities as prescribed in 24 Pa.C.S. § 8521
14 (relating to management of fund and accounts) and 71 Pa.C.S. §
15 5931 (relating to management of fund and accounts) and any
16 obligations of a public fund with respect to choice of asset
17 managers, investment funds or investments for the public fund's
18 securities portfolios.
19 Section 8. 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 indemnification payments,
16 including any advancement of legal fees and expenses, within 30
17 days of demand therefor, a public fund shall make such payment
18 and the Commonwealth shall reimburse the public fund.
19 (e) Construction.--The repeal, expiration or amendment of
20 any provision of this section shall not limit the rights of any
21 indemnitee to indemnification, including advancement of
22 expenses, with respect to any action or failure to act occurring
23 prior to the effective date of such repeal or amendment.
24 Section 9. Reimbursement.
25 After the end of the fiscal year of each public fund, the
26 public fund shall submit to the Secretary of the Budget the
27 determination of the net losses, if any, costs and expenses
28 incurred by the public fund as a result of compliance with the
29 provisions of this act, and the Commonwealth shall, within 30
30 days, reimburse the public fund for those losses, costs and
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1 expenses from the General Fund.
2 Section 29. Severability.
3 If any provision of this act or its application to any person
4 or circumstances is held invalid, the invalidity shall not
5 affect other provisions or applications of this act that can be
6 given effect without the invalid provision or application.
7 Section 30. Effective date.
8 This act shall take effect immediately.
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