PRIOR PRINTER'S NO. 2407 PRINTER'S NO. 2436
No. 1584 Session of 2008
INTRODUCED BY ARMSTRONG, FUMO, SCARNATI, WONDERLING, ORIE,
STACK, GREENLEAF, EICHELBERGER, COSTA, LAVALLE, FONTANA AND
PIPPY, SEPTEMBER 19, 2008
SENATOR ARMSTRONG, APPROPRIATIONS, RE-REPORTED AS AMENDED,
SEPTEMBER 23, 2008
AN ACT
1 Providing for divestiture by the State Treasurer, THE <--
2 PENNSYLVANIA MUNICIPAL RETIREMENT SYSTEM, the State
3 Employees' Retirement System and the Public School Employees'
4 Retirement System of investments in companies doing business
5 in Iran and Sudan.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. Short title.
9 This act shall be known and may be cited as the Protecting
10 Pennsylvania's Investments Act.
11 Section 2. Definitions.
12 The following words and phrases when used in this act shall
13 have the meanings given to them in this section unless the
14 context clearly indicates otherwise:
15 "Board." As defined in section 102 of the act of February 1,
16 1974 (P.L.34, No.15), known as the Pennsylvania Municipal
17 Retirement Law; 24 Pa.C.S. § 8102 (relating to definitions); or
18 71 Pa.C.S. § 5102 (relating to definitions).
1 "Business activities." Owning or controlling property or
2 assets located in, having employees or facilities located in,
3 providing goods or services to, having distribution agreements
4 with, issuing credit or loans to, purchasing bonds or commercial
5 paper issued by, investing in or having equity ties to or with
6 Iran, Sudan or any company domiciled in Iran or Sudan.
7 "Company." Any sole proprietorship, organization,
8 association, corporation, partnership, joint venture, limited
9 partnership, limited liability partnership, limited liability
10 company or other entity or business association that exists for
11 the purpose of making a profit.
12 "Direct holdings." All securities of a company that are held
13 directly by the public fund.
14 "FOREIGN COMPANY." AN ENTITY WHICH IS NOT ORGANIZED UNDER <--
15 THE LAWS OF THE UNITED STATES.
16 "Government of Iran." The government of Iran and its
17 instrumentalities and companies owned or controlled by the
18 government of Iran.
19 "Government of Sudan." The government in Khartoum, Sudan,
20 which is led by the National Congress Party, formerly known as
21 the National Islamic Front, or any successor government formed
22 on or after October 13, 2006, including the coalition the
23 National Unity Government agreed upon in the Comprehensive Peace
24 Agreement for Sudan. The term does not include the regional
25 government of southern Sudan.
26 "Inactive business activities." The continued holding or
27 renewal of rights to property previously operated for the
28 purpose of generating revenues but not presently deployed for
29 that purpose.
30 "Indemnitee." Each current or former board member, duly
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1 appointed designee of a board member, officer, employee,
2 including, without limitation, the attorneys in the Office of
3 Chief Counsel that serve a public fund, agent, research firm or
4 investment manager of a public fund who was or is a party to, or
5 is threatened to be made a party to, or is otherwise involved in
6 any proceeding by reason of the fact that the person is or was a
7 board member, designee of a board member, officer, employee,
8 agent, research firm or investment manager of a public fund.
9 "Iran." The Islamic Republic of Iran.
10 "List of State Sponsors of Terrorism." The list of countries
11 designated by the United States Secretary of State as having
12 repeatedly provided support for acts of international terrorism
13 as reported annually in Country Reports on Terrorism under
14 section 140 of the Foreign Relations Authorization Act, Fiscal
15 Years 1988 and 1989 (Public Law 100-24, 26 U.S.C. § 2656(f)).
16 "Marginalized populations of Sudan." Include, but are not
17 limited to, the portion of the population in the Darfur region
18 that has been genocidally victimized; the portion of the
19 population of southern Sudan victimized by Sudan's North-South
20 civil war; the Beja, Rashidiya and other similarly underserved
21 groups of eastern Sudan; the Nubian and other similarly
22 underserved groups in Sudan's Abyei, Southern Blue Nile and Nuba
23 Mountain regions; and the Amri, Hamadab, Manasir and other
24 similarly underserved groups of northern Sudan.
25 "Military equipment." Weapons, arms, military supplies and
26 equipment that may be used readily for military purposes,
27 including, but not limited to, radar systems or military-grade
28 transport vehicles; or supplies or services sold or provided
29 directly or indirectly to any force actively participating in
30 armed conflict in Sudan.
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1 "Mineral extraction activities." Include exploring,
2 extracting, processing, transporting or wholesale selling or
3 trading of elemental minerals or associated metal alloys or
4 oxides (ore), including gold, copper, chromium, chromite,
5 diamonds, iron, iron ore, silver, tungsten, uranium and zinc, as
6 well as facilitating such activities, including by providing
7 supplies or services in support of such activities.
8 "Oil-related activities." The term includes all of the
9 following:
10 (1) Development of petroleum or natural gas resources of
11 Iran or Sudan. This paragraph does not include the mere sale
12 of gasoline and related consumer products.
13 (2) Owning rights to oil or natural gas blocks.
14 (3) Exporting, extracting, producing, refining,
15 processing, exploring for, transporting, selling or trading
16 oil or natural gas.
17 (4) Constructing, maintaining or operating any pipeline,
18 refinery, liquefaction facility or other oil or natural gas
19 infrastructure.
20 (5) Facilitating activities referred to in paragraph
21 (1), (2), (3) or (4), including by supplying services in
22 support of the activities.
23 "Power production activities." Business operations that
24 involve a project commissioned by the National Electricity
25 Corporation (NEC) of Sudan or other similar government of Sudan
26 entity whose purpose is to facilitate power generation and
27 delivery, including, but not limited to, establishing power-
28 generating plants or hydroelectric dams, selling or installing
29 components for the project, providing service contracts related
30 to the installation or maintenance of the project, as well as
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1 facilitating such activities, including by providing supplies or
2 services in support of such activities.
3 "Proceeding." Any threatened, pending or completed action,
4 suit or proceeding, including, without limitation, an action,
5 suit or proceeding by or in the right of a public fund, relating
6 to compliance with any investment limitations imposed by
7 statute, whether civil, criminal, administrative, investigative
8 or through arbitration.
9 "Public fund." Any of the following:
10 (1) The State Employees' Retirement Fund established
11 pursuant to 71 Pa.C.S. Pt. XXV (relating to retirement for
12 State employees and officers).
13 (2) The Public School Employees' Retirement Fund
14 established pursuant to 24 Pa.C.S. Pt. IV (relating to
15 retirement for school employees).
16 (3) The Pennsylvania Municipal Retirement Fund.
17 (4) Any Commonwealth fund of which the State Treasurer
18 is the custodian.
19 "Scrutinized business activities." Business activities that
20 have resulted in a company becoming a scrutinized company.
21 "Scrutinized company." Any of the following:
22 (1) Any foreign company that has:
23 (i) invested at least $20,000,000 in the development
24 of the petroleum or natural gas resources of Iran in any
25 12-month period since August 5, 1996;
26 (ii) supplied military equipment to the government
27 of Iran within the 12-month period prior to the effective
28 date of this section; or
29 (iii) knowingly and intentionally violated the
30 United States export controls with respect to Iran during
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1 the 12-month period prior to the effective date of this
2 section.
3 (2) Any foreign company that meets the criteria set
4 forth either in subparagraph (i) or (ii):
5 (i) The company has business operations that involve
6 contracts with or provision of supplies or services to
7 the government of Sudan, companies in which the
8 government of Sudan has any direct equity share,
9 government of Sudan-commissioned consortiums or projects,
10 or companies involved in government of Sudan-commissioned
11 consortiums or projects; and
12 (A) More than 10% of the company's revenue or
13 assets linked to Sudan involve oil-related activities
14 or mineral extraction activities; less than 75% of
15 the company's revenues or assets linked to Sudan
16 involve contracts with or provision of oil-related or
17 mineral extracting products or services to the
18 regional government of southern Sudan or a project or
19 consortium created exclusively by that regional
20 government; and the company has failed to take
21 substantial action specific to Sudan; or
22 (B) More than 10% of the company's revenues or
23 assets linked to Sudan involve power production
24 activities; less than 75% of the company's power
25 production activities include projects whose intent
26 is to provide power or electricity to the
27 marginalized populations of Sudan; and the company
28 has failed to take substantial action specific to
29 Sudan.
30 (ii) The company supplies military equipment within
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1 Sudan, unless it clearly shows that the military
2 equipment cannot be used to facilitate offensive military
3 actions in Sudan or the company's implements rigorous and
4 verifiable safeguards to prevent use of that equipment by
5 forces actively participating in armed conflict, for
6 example, through post-sale tracking of such equipment by
7 the company, certification from a reputable and objective
8 third party that such equipment is not being used by a
9 party participating in armed conflict in Sudan, or sale
10 of such equipment solely to the regional government of
11 southern Sudan or any internationally recognized
12 peacekeeping force or humanitarian organization.
13 The term does not include a foreign company that is a social
14 development company.
15 "Social development company." A company whose primary
16 purpose in Iran or Sudan is to provide humanitarian goods or
17 services, including medicine or medical equipment, agricultural
18 supplies or infrastructure; educational opportunities;
19 journalism-related activities; information or information
20 materials; spiritual-related activities; services of a purely
21 clerical or reporting nature; food, clothing or general consumer
22 goods.
23 "Substantial action specific to Iran." Adopting, publicizing
24 and implementing a formal plan to cease scrutinized business
25 activities within one year and to refrain from any such new
26 business activities in Iran.
27 "Substantial action specific to Sudan." Adopting,
28 publicizing and implementing a formal plan to cease scrutinized
29 business operations within one year and to refrain from any such
30 new business operations; undertaking significant humanitarian
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1 efforts in conjunction with an international organization, the
2 government of Sudan, the regional government of southern Sudan
3 or a nonprofit entity and evaluated and certified by an
4 independent third party to be substantial in relationship to the
5 company's Sudan business operations and of benefit to one or
6 more marginalized populations of Sudan; or through engagement
7 with the government of Sudan, materially improving conditions
8 for the genocidally victimized population in Darfur.
9 "Sudan." The Democratic Republic of Sudan.
10 Section 3. Identification of companies.
11 (a) Best effort.--Within 90 days after the effective date of
12 this section, a public fund shall make its best effort to
13 identify all scrutinized companies in which the public fund has
14 direct holdings. A public fund shall review, as appropriate in
15 the public fund's judgment, publicly available information
16 regarding foreign companies that have scrutinized business
17 activities, including information provided by nonprofit
18 organizations, research firms, international organizations and
19 government entities.
20 (b) Assembly.--By the first meeting of a public fund
21 following the time period under subsection (a), the public fund
22 shall assemble all scrutinized companies that fit the criteria
23 specified in paragraph (1) of the definition of "scrutinized
24 company" into a Scrutinized Companies with Activities in Iran
25 List and shall assemble all scrutinized companies that fit
26 criteria specified in paragraph (2) of the definition of
27 "scrutinized company" into a Scrutinized Companies with
28 Activities in Sudan List.
29 (c) Update.--A public fund shall, from the effective date of <--
30 this section, annually update and make publicly available its
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1 Scrutinized Companies with Activities in Iran List and
2 Scrutinized Companies with Activities in Sudan List based on
3 evolving information from, among other sources, those listed
4 under subsection (a). In addition, a public fund shall provide a
5 copy of its lists to all other public funds including all
6 updates.
7 Section 4. Required actions.
8 (a) Procedure.--A public fund shall adhere to the procedures
9 under this section for assembling DETERMINING companies on its <--
10 Scrutinized Companies with Activities in Iran List and
11 Scrutinized Companies with Activities in Sudan List WHICH <--
12 QUALIFY FOR DIVESTMENT.
13 (b) Engagement.--
14 (1) For each company on a public fund's Scrutinized
15 Companies with Activities in Iran List or Scrutinized
16 Companies with Activities in Sudan List in which the public
17 fund has direct holdings, the public fund shall send a
18 written notice informing the company of its scrutinized
19 company status and specify the business activities which have
20 resulted in this determination and that it may become subject
21 to divestment by the public fund. The notice must inform the
22 company of the opportunity to clarify its scrutinized
23 business activities and encourage the company, within 90 days
24 of the date of receipt of the notice, to cease its
25 scrutinized business activities in Iran, Sudan or both, or
26 convert the activities to inactive business activities in
27 order to avoid qualifying for divestment by the public fund.
28 The notice shall be sent no later than 120 days after the
29 effective date of this section.
30 (2) If, within 90 days of the date of receipt of a
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1 notice under paragraph (1), a company announces by public
2 disclosure substantial action specific to Iran or substantial
3 action specific to Sudan, the public fund may maintain its
4 holdings, but the company shall remain on the Scrutinized
5 Companies with Activities in Iran List or Scrutinized
6 Companies with Activities in Sudan List pending completion of
7 the companies' cessation of scrutinized business activities.
8 Following completion of a company's cessation of scrutinized
9 business activities, the public fund shall remove the company
10 from its Scrutinized Companies with Activities in Iran List
11 or Scrutinized Companies with Activities in Sudan List.
12 (c) Divestment.--
13 (1) If, after 90 days following the effective date of
14 receipt of the notice under subsection (b)(1), a company has
15 not announced by public disclosure substantial action
16 specific to Iran, substantial action specific to Sudan or
17 both as specified in the notice, or the public fund
18 determines or becomes aware that the company continues to
19 have scrutinized business activities, the public fund, within
20 15 months after the 90-day period, shall sell, redeem, divest
21 or withdraw from its direct holdings all securities of the
22 company.
23 (2) If a public fund determines or becomes aware that a
24 company that ceased scrutinized business activities following
25 engagement under subsection (b) has resumed the activities,
26 the public fund shall send a written notice to the company
27 under subsection (b), and the company shall be immediately
28 placed onto the public fund's Scrutinized Companies with
29 Activities in Iran List or Scrutinized Companies with
30 Activities in Sudan List.
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1 (3) A public fund shall monitor a scrutinized company
2 that has announced by public disclosure substantial action
3 specific to Iran, substantial action specific to Sudan or
4 both. If after one year the public fund determines or becomes
5 aware that the company has not implemented the plan, within
6 15 months after the expiration of the one-year period, the
7 public fund shall sell, redeem, divest or withdraw from its
8 direct holdings all securities of the company.
9 (d) Prohibition.--A public fund may not acquire securities
10 of a company on its Scrutinized Companies with Activities in
11 Iran List or Scrutinized Companies with Activities in Sudan
12 List.
13 (e) Excluded securities.--Nothing in this act shall apply to
14 the public fund's holdings in alternative investments.
15 Section 5. Reporting.
16 (a) Report to United States Attorney General.--Within 30
17 days of the passage of this act, administrators of the public
18 fund shall file a written report to the United States Attorney
19 General detailing the requirements contained in this act.
20 (b) Duty of public fund.--A public fund shall, within 30 <--
21 days of the creation ONE YEAR OF ASSEMBLY of its Scrutinized <--
22 Companies with Activities in Iran List and Scrutinized Companies
23 with Activities in Sudan List, AS DIRECTED UNDER SECTION 3(B), <--
24 provide a report to the Governor; the President pro tempore of
25 the Senate; the Speaker of the House of Representatives; and
26 each member of the boards of the Pennsylvania Municipal
27 Retirement System, the State Employees' Retirement System and
28 the Public School Employees' Retirement System. The report shall
29 include the items required under subsection (c). The report
30 shall be made available to the public.
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1 (c) Contents.--The report under subsection (b) shall include
2 the most recent Scrutinized Companies with Activities in Iran
3 List and Scrutinized Companies with Activities in Sudan List and
4 all of the following:
5 (1) A summary of correspondence with companies engaged
6 by the public fund under section 4.
7 (2) All investments sold, redeemed, divested or
8 withdrawn in compliance with section 4(c).
9 (3) All prohibited investments under section 4(d).
10 (4) A list of all publicly traded securities held by the
11 public fund.
12 (D) UPDATE.--A PUBLIC FUND SHALL DO ALL OF THE FOLLOWING: <--
13 (1) ANNUALLY UPDATE, BASED ON EVOLVING INFORMATION UNDER
14 SUBSECTION (C), AND MAKE PUBLICLY AVAILABLE ITS SCRUTINIZED
15 COMPANIES WITH ACTIVITIES IN IRAN LIST AND SCRUTINIZED
16 COMPANIES WITH ACTIVITIES IN SUDAN LIST.
17 (2) PROVIDE A COPY OF THE LISTS UNDER PARAGRAPH (1),
18 INCLUDING UPDATES, TO ALL OTHER PUBLIC FUNDS.
19 Section 6. Expiration.
20 (a) Recurrence of investment in Iran.--A public fund shall
21 have no obligations under this act with respect to a company
22 engaged in business activities in Iran upon the occurrence of
23 any of the following:
24 (1) Iran does not appear on the List of State Sponsors
25 of Terrorism.
26 (2) The President or Congress of the United States,
27 through legislation or executive order, declares that
28 mandatory divestment of the type provided for in this act
29 interferes with the conduct of United States foreign policy.
30 (b) Recurrence of investment in Sudan.--A public fund shall
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1 have no obligations under this act with respect to a company
2 engaged in business activities in Sudan upon the occurrence of
3 any of the following:
4 (1) The President or Congress of the United States
5 declares Darfur genocide has been halted for at least 12
6 months.
7 (2) The United States revokes all sanctions imposed
8 against the government of Sudan.
9 (3) The President or Congress of the United States
10 declares that the government of Sudan has honored its
11 commitments to cease attacks on civilians, demobilize and
12 demilitarize the Janjaweed and associated militias, grant
13 free and unfettered access for deliveries of humanitarian
14 assistance and allow for the safe and voluntary return of
15 refugees and internally displaced persons.
16 (4) The President or Congress of the United States,
17 through legislation or executive order, declares that
18 mandatory divestment of the type provided for in this act
19 interferes with the conduct of United States foreign policy.
20 Section 7. Conflict with other laws.
21 A public fund may perform any action necessary to comply with
22 this act, notwithstanding the provisions of any other law,
23 including, but not limited to, any fiduciary or prudent
24 investing responsibilities as prescribed in 24 Pa.C.S. § 8521
25 (relating to management of fund and accounts) and 71 Pa.C.S. §
26 5931 (relating to management of fund and accounts) and any
27 obligations of a public fund with respect to choice of asset
28 managers, investment funds or investments for the public fund's
29 securities portfolios.
30 Section 8. Indemnification.
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1 (a) General rule.--Each indemnitee shall be indemnified and
2 held harmless by the Commonwealth for all good faith actions
3 taken by the indemnitee and for all good faith failures to take
4 action, regardless of the date of any such action or failure to
5 take action, in connection with attempts to comply with any
6 investment limitations imposed by statute against all expense,
7 liability and loss, including, without limitation, attorney
8 fees, judgments, fines, taxes, penalties and amounts paid or to
9 be paid in settlements reasonably incurred or suffered by the
10 indemnitee in connection with any proceeding.
11 (b) Advance payment.--The right to indemnification provided
12 in this section shall include the right to have the expenses
13 reasonably incurred by the indemnitee in defending any
14 proceeding paid by the Commonwealth in advance of the final
15 disposition of the proceeding upon the receipt by the
16 Commonwealth of a written undertaking by the indemnitee to
17 refund the amounts so advanced if it is ultimately determined
18 that the indemnitee is not entitled to indemnification under
19 this section.
20 (c) Persons entitled.--Indemnification pursuant to this
21 section shall continue as to an indemnitee who has ceased to be
22 a board member, designee of a board member, officer or employee
23 of a public fund and shall inure to the benefit of such person's
24 legal representatives, heirs, executors and administrators.
25 (d) Reimbursement to public funds.--To the extent that the
26 Commonwealth does not make any indemnification payments,
27 including any advancement of legal fees and expenses, within 30
28 days of demand therefor, a public fund shall make such payment
29 and the Commonwealth shall reimburse the public fund.
30 (e) Construction.--The repeal, expiration or amendment of
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1 any provision of this section shall not limit the rights of any
2 indemnitee to indemnification, including advancement of
3 expenses, with respect to any action or failure to act occurring
4 prior to the effective date of such repeal or amendment.
5 Section 9. Reimbursement.
6 After the end of the fiscal year of each public fund, the
7 public fund shall submit to the Secretary of the Budget the
8 determination of the net losses, if any, costs and expenses
9 incurred by the public fund as a result of compliance with the
10 provisions of this act, and the Commonwealth shall, within 30
11 days, reimburse the public fund for those losses, costs and
12 expenses from the General Fund.
13 Section 29. Severability.
14 If any provision of this act or its application to any person
15 or circumstances is held invalid, the invalidity shall not
16 affect other provisions or applications of this act that can be
17 given effect without the invalid provision or application.
18 Section 30. Effective date.
19 This act shall take effect immediately.
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