State Sen. Hansen Clarke and Rep. Alma Wheeler Smith have introduced bills that would require state government to withdraw all invested funds in the state retirement system from companies that do business in Sudan. They estimate that about $180 million of the $60 billion retirement fund could be affected. The $180 million is based on a formula estimating how much states typically have invested in companies doing business in Sudan in ways that may aid the genocide. The House bill is expected to receive a committee hearing first, possibly next month.
For Clarke, D-Detroit, sponsor of SB 555, the money is the linchpin to stopping the atrocities in Darfur. “There are over $2 trillion in pension funds across the country. Collectively, we could make a big impact. You start pulling out the money and you could see a big change.”
The Sudan Divestment Task Force, a national activist network, says that 70 to 80 percent of Sudan's oil revenue, which is largely generated by foreign investment, goes to the country's military. The military, along with Janjaweed militias, have been attacking and killing tribal Sudanese villagers in the Darfur region. The United Nations estimates roughly 450,000 people have been killed and more than 2.5 million displaced.
No U.S. companies are known to do business directly with the Sudanese government. However, state pension funds often invest in foreign multinational companies. Fund managers within these companies handle the state's investments, not the states themselves, and can in turn invest in Sudan's government.
One of the biggest foreign investors in Sudan is the China National Petroleum Corp. In May, Fidelity Investments sold off 90 percent of its holdings in PetroChina, a CNPC subsidiary. Fidelity denies its motives were the result of the activist movement.
It's business like this that motivates the Sudanese divestment movement. “I want to stop the genocide in Darfur, and I want to encourage those companies that are doing business in Sudan to stop providing revenue to the Sudanese government,” says Clarke, and the idea seems to be catching on. Thirteen other states and 49 colleges and universities have already divested, as well as San Francisco, Philadelphia and Los Angeles County. Sixteen other states have similar campaigns in the works.
In most cases, support is plentiful. However, earlier this year, the National Foreign Trade Council filed suit against the state of Illinois, arguing that the state's 2005 bill violated existing federal legislation. It has been re-evaluated and is pending approval by Gov. Rod Blagojevich.
Economics Professor Robert J. Rossana of Wayne State University points out that sanctions can have unintended results. “The problem with Sudan is that when you put sanctions on them, you want to punish the government, but are you also going to punish the poor people who live there? You need to find if you can target the government,” he says. Finding a “choke point” worked in North Korea, he says, but in the case of Iraq between 1991 and 2003, sanctions were “perverted and distorted,” hurting the citizens and not the government as planned. “In order to have more effect, sanctions should be multilateral,” he says. “Suppose you shut off one banking system. Do they have other avenues?”
Says Clarke: “Poor people are being hurt by the atrocities.”
Clarke says the divestment bill has a “good chance,” in part because it has bipartisan support. “There are a couple of conservative Republicans that cosponsored the bill, and another Republican that wants to join.”
“This is just what happened with South Africa,” says Smith, D-Salem, referring to the economic sanctions to fight apartheid. “The states took the lead, the momentum hit the federal government, and they finally succumbed.”
Lindsey Hutchinson is the Michigan outreach coordinator for the national
Students Taking Action Now: Darfur organization. She cites the success in South Africa as hope that the bill will pass, also noting that the benefits far outweigh the costs. “This is something that will not cost the state of Michigan much money at all,” she says. “Divestment is not expensive for those divesting, only for the companies doing business with Sudan.”
According to the language of the bills, all business that state pension funds are invested in would be analyzed for holdings in companies that have taken actions “which have directly supported or promoted the genocidal campaign in Darfur, including, but not limited to, preventing Darfur's victimized population from communicating with each other, encouraging Sudanese citizens to speak our an internationally approved security force for Darfur, actively working to deny, cover up, or alter the record on human rights abuses in Darfur, or other similar actions.”
If they do not comply, at least 50 percent of the state's invested assets would be removed from the company within nine months, and the remainder within another six.
“For example,” Clarke says, “one of our fund managers could be putting money in a Chinese oil company doing business with Sudan. This will prevent such investments, and won't hurt retirement returns.”
Terry Stanton, spokesman for the Michigan Treasury Department, says “the purpose of the department is to gain the best investment returns possible.” He said the department supports the legislation's intent but the department needs “to insure that the legislation doesn't inadvertently infringe on the fiduciary system's responsibilities.” He added that at this time, “we're not aware of any direct investments in Darfur or with companies that support the genocide or the government there.”
“There is due diligence on any investing we do,” Stanton added. “That's always a bit sticky. Just as an example, Coca Cola has some sort of presence in most countries around the world but most people looking at the situation would see that you cannot not invest in Coca Cola.
“If you're invested in the S&P 500, you don't have a choice per se where some of that investment is done, but we take as many precautions as possible,” Stanton said, adding that the state studies information from the Security and Exchange Commission, the IRS and elsewhere to try to prevent investing in companies that support “rogue countries.”
