This nation at war needs more security-minded political stalwarts like Assemblyman Joel Anderson, a freshman Republican legislator from San Diego, who is doing yeoman’s work to help stop the threat of terrorism from regimes such as the one in Tehran. Last January, he introduced crucial and innovative legislation, AB 221, to prohibit state retirement boards from investing in companies conducting business in Iran. In September, the bill finally passed unanimously in both the California Senate and Assembly, after indefatigable efforts by Anderson in overcoming opposition on several fronts. In October, Governor Arnold Schwarzenegger signed the bill into law.
Rite of Passage
It seemed to augur well for the passage of this legislation, when it was first put forth, that a similar California law restricting investments in the rogue state of Sudan already existed. However, the overwhelmingly negative and prevaricating response from the state’s two leading teachers unions quickly put to rest such hope. These unions News > State — Iran-linked divestment bill moves in Assembly&expire=&urlID=21741156&fb=Y&url=http://www.signonsandiego.com/news/state/20″>said that the pension fund boards should make such investment decisions. In an interview Anderson claimed that a union representative also portrayed the bill as a ruse, in order to portray Iran as a state sponsor of terrorism, in order to later justify a U.S. attack on Iran. The union further labeled as bogus, Anderson’s linking of Iran with the development of nuclear weapons. Forces in the legislature then piled on, making approval of the legislation all the more tenuous by simultaneously referring the bill to three separate committees.
But as opponents conspired to bury the bill, a veritable miracle took place. The head of the Teamsters Union, James Hoffa, Jr., decried Iranian involvement in shipping weapons to both Iraq and Afghanistan. He condemned their use in attacking and killing American soldiers, members of the military coalition, and Iraqi civilians. And, to his eternal credit, Hoffa called for public pension unions to divest themselves of investments in companies doing business with Iran. At one charged meeting over the bill, recalls Anderson, a representative of the Teamsters angrily yelled at an official of the teachers’ union that it was unconscionable for any public employee union not to “take the side of the American soldier.”
The Teamsters and many of their Democratic colleagues also shared the concern of numerous Republican legislators about the real possibility of another Holocaust. With the Iranian president maniacally calling for the elimination of Israel, and with Tehran long set on acquiring nuclear weapons and the means to deliver them, these leaders concluded that Anderson’s bill could indeed make a real difference in Israel’s survival.
More Democrats were persuaded to support the bill after viewing pictures and videos of Iranian government goons hanging homosexuals and stoning women to death.
A number of Republicans also had to be brought around. Generally this faction accepted that the Iranian support and funding of both Shia and Sunni (including Al-Qaeda) terror groups were obvious. For them the question was not whether U.S. citizens should be investing in companies that bolster Tehran’s terrorist budget, but rather how to reconcile the legislation with the dictates of fiduciary responsibility and non-intervention in the free market.
The Exceptional Provisions of the ‘Divest Iran’ Law
Enter again astute Assemblyman Anderson. While legislators elsewhere have pressed simply for divestment in securities of those companies doing business in Iran, he gave his bill a unique and promising twist. He grounded it in the United States law that already gives the U.S. the authority to sanction and, under some emergency conditions, even to prohibit the use of the assets of any U.S.-located corporate entity doing business in Iran, including that firm’s bank accounts, plant and equipment. California investment boards, Anderson then asserted, could not be acting responsibly from a fiduciary perspective if they approved investments owned by Californian public employees and teachers which could be sanctioned by the U.S. government. (It is of note that the U.S. has already fined one Dutch bank to the tune of $80 million for appearing to hide its laundering of Iranian assets.)
Also innovatively, the bill prohibits investments in Iran’s defense, nuclear, petroleum and natural gas sectors. It is thus much more expansive than legislation limited to the energy sector that is now being considered by the U.S. Congress. Although the California law does contain a $20 million threshold for business operations in Iran – a provision that mirrors the existing law allowing the U.S. to sanction firms doing such a level of business there – the bill’s inclusion of a ban in the defense and nuclear sectors is a singular and likely most useful tool in the struggle against terror-sponsoring states.
Despite these innovations and the unanimous passage of the bill in both the California Assembly and Senate, opponents of the new law (primarily the teachers unions) are now attempting to overturn the law in the courts. They are again claiming that the legislation usurps the responsibility of pension managers, placing lawmakers in the position of picking and choosing what stocks to purchase. Anderson and his co-sponsors respond that the legislation does no such thing but, instead, simply deems it irresponsible to own stocks whose issuing firms could be sanctioned by the U.S. government; they also caution that failure to heed this danger is explicitly contradictory to the requirements of the California Constitution.
These latest opponents of the new law find themselves in a flagrant politically-correct bind. On the one hand, they acknowledge supporting similar divestment legislation on Sudan and policies that encourage “green” and “tobacco free” investments; on the other hand – greatly embarrassingly – they shrink from admitting Iran’s status as a major state sponsor of terrorism, and that its burgeoning oil revenues are enabling Al-Qaeda and Hezbollah terrorists to murder their fellow Americans.
But, again, Anderson to the rescue. Having foreseen the threat of lawsuits, he also secured passage of a legislative provision that keeps the bill’s other features intact even if one section is struck down.
Greener Pastures for ‘Divest Iran’ Laws
The magnitude of funds currently invested in terrorist states is staggering. In California alone, the public pension system for public employees and teachers, which includes state universities and community colleges, last fall had approximately $24 billion News > State — Iran-linked divestment bill moves in Assembly&expire=&urlID=21741156&fb=Y&url=http://www.signonsandiego.com/news/state/20″>invested in international firms doing business in Iran. Conflict Securities Advisory Group, a firm in Washington, D.C. specializing in examining the extent to which investments in any particular portfolio are “terror free,” estimates that, nationwide, over $200 billion in public pension accounts are similarly at risk.
Nor should we underestimate the extent of the U.S. financial entanglement with Iran, which hardly stops at the investment of public pensions. An additional sector that urgently requires scrutiny is the endowment of the nation’s colleges and universities, with some $350 billion in total value. Conflict Securities found that in public state pension systems the amount of such investments was generally in the range of 12-15%. In the state of Maryland, for example, of the $14 billion in public pension assets, some $1.4 billion was invested in firms doing business in the four official state sponsors of terrorism as defined by the U.S. Department of State. If this ratio holds with respect to higher education institutions, then some $52 billion in investments in firms doing business in Iran, Sudan, North Korea, and Syria are in campuses’ endowment portfolios.
Mindful of these additional pernicious investments, Anderson informed us that he is working to introduce further legislation to divest the rest of the higher education pension systems, which he believes may contain some $45 billion in assets for the California campuses at issue. For example, UCLA, UC at San Diego, UC Davis, and Berkeley each have huge amounts of funds invested in companies doing business in Iran, all of which could be at risk. Auspiciously, even before Anderson’s bill became law, the pension systems of the government employees’ and teachers’ unions had actually begun the process of divestment. Hopefully, word will go out from California to other higher education pension systems that divestment is both sound fiscally and as a security policy.
Remarkable, too, is Anderson’s parallel effort to secure such divestment by California’s local county and city governments, and their pension funds. Although the state does not have direct control over these assets, Anderson is seeking to secure a resolution in the State Assembly and Senate to call on the counties and cities to follow the State Legislature’s lead and divest from Iranian investments. He is also visiting other states, asking their governors to lead their state-supported government and higher education systems in divesting in what could be tens, or even hundreds, of billions in investments in entities that do business with Iran.
America, Unite, in Terror-Free Investment
It is imperative that the American people provide whatever funding is needed to fight and win the war against terror. But it is indefensible, as R. James Woolsey, the former director of the Central Intelligence Agency, has said, that we continue – however unwittingly – to invest in corporations which in effect pay for the terror masters who seek to destroy us.
Our citizens, be they firemen, policemen, teachers, or other government employees, should be able to invest their retirement funds in “terror-free” investment vehicles which do not pose the risk of being confiscated by the U.S. government. Nor should these investments be subject to the major fluctuations in value due to the political risk of rogue regimes subject to revolutionary change. Of far more vital import, the relatives and friends of American soldiers should not be in the business of providing the financial help that allows our enemies to kill and maim them — those whom we have charged with protecting our freedom and liberty.
The nation should applaud Assemblyman Anderson for pointing the way to prevent our retirement investments and our donations to higher education institutions, from serving these patently self-destructive ends.
– Candace de Russy, Ph.D., is a higher education reformer and author, among other publications, of Campus Movement: Toward terror-free university investment, which appeared at National Review Online on July 31, 2007. Peter Huessy, President of GeoStrategic Analysis, is a specialist in combating nuclear terrorism. He contributed to drafting Assemblyman Joel Anderson’s “Divest Iran” legislation.