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Introduced Version House Bill 4096 History

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Key: Green = existing Code. Red = new code to be enacted
hb4096 intr
H. B. 4096


(By Delegates Brown, Hatfield, Doyle, Caputo,
Ashley, Guthrie, Fragale, Morgan and Moore)

[Introduced January 21, 2008; referred to the
Committee on Finance.]



A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated §12-6D-1, §12-6D-2, §12-6D-3, §12-6D-4, §12-6D-5, §12-6D-6, §12-6D-7, §12-6D-8, §12-6D-9 and §12-6D-10, all relating to creating a "Sudan Divestment Procedure"; and providing the method for how the state funds or trustees of those funds, including pension fund systems or other affected entities of the state shall address certain investments relating to Sudan and the divestment thereof; providing legislative findings and definitions; identification of scrutinized companies; requiring certain other actions by the public funds, including reporting; providing for expiration of provisions of article and enforcement of article; and a severability clause.

Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new article, designated §12-6D-1, §12-6D-2, §12-6D-3, §12-6D-4, §12-6D-5, §12-6D-6, §12-6D-7, §12-6D-8, §12-6D-9 and §12-6D-10, all to read as follows:
ARTICLE 6D. SUDAN DIVESTMENT PROCEDURE.
§12-6D-1. Legislative findings.
(a) On the twenty-third day of July, two thousand four, the United States Congress declared that "the atrocities unfolding in Darfur, Sudan, are genocide."
(b) On the ninth day of September, two thousand four, Secretary of State Colin L. Powell told the U.S. Senate Foreign Relations Committee that "genocide has occurred and may still be occurring in Darfur" and "the Government of Sudan and the Janjaweed bear responsibility."
(c) On the twenty-first day of September, two thousand four, addressing the United Nations General Assembly, President George W. Bush affirmed the Secretary of State's finding and stated, "At this hour, the world is witnessing terrible suffering and horrible crimes in the Darfur region of Sudan, crimes my government has concluded are genocide."
(d) On the seventh day of December, two thousand four, the U.S. Congress noted that the genocidal policy in Darfur has led to reports of "systematic rape of thousands of women and girls, the abduction of women and children, and the destruction of hundreds of ethnically African villages, including the poisoning of their wells and the plunder of their crops and cattle upon which the people of such villages sustain themselves."
(e) Also on the seventh of December, two thousand four, Congress found that "the Government of Sudan has restricted access by humanitarian and human rights workers to the Darfur area through intimidation by military and security forces, and through bureaucratic and administrative obstruction, in an attempt to inflict the most devastating harm on those individuals displaced from their villages and homes without any means of sustenance or shelter."
(f) On the twenty-fifth day of September, two thousand six, Congress reaffirmed that "the genocide unfolding in the Darfur region of Sudan is characterized by acts of terrorism and atrocities directed against civilians, including mass murder, rape and sexual violence committed by the Janjaweed and associated militias with the complicity and support of the National Congress Party-led faction of the Government of Sudan."
(g) On the twenty-sixth day of September, two thousand six, the U.S. House of Representatives stated that "an estimated three hundred thousand to four hundred thousand people have been killed by the Government of Sudan and its Janjaweed allies since the [Darfur] crisis began in two thousand three, more than two million people have been displaced from their homes, and more than two hundred fifty thousand people from Darfur remain in refugee camps in Chad."
(h) The Darfur crisis represents the first time the United States Government has labeled ongoing atrocities a genocide.
(i) The federal government has imposed sanctions against the Government of Sudan since one thousand nine hundred ninety-seven. These sanctions are monitored through the U.S. Treasury Department's Office of Foreign Assets Control (OFAC).
(j) According to a former chair of the U.S. Securities and Exchange Commission, "the fact that a foreign company is doing material business with a country, government or entity on OFAC's sanctions list is, in the SEC staff's view, substantially likely to be significant to a reasonable investor's decision about whether to invest in that company."
(k) Since one thousand nine hundred ninety-three, the U.S. Secretary of State has determined that Sudan is a country the government of which has repeatedly provided support for acts of international terrorism, thereby restricting United States assistance, defense exports and sales, and financial and other transactions with the Government of Sudan.
(l) A two thousand six U.S. House of Representative report states that "a company's association sponsors of terrorism and human rights abuses, no matter how large or small, can have a materially adverse result on a public company's operations, financial condition, earnings, and stock prices, all of which can negatively affect the value of an investment."
(m) In response to the financial risk posed by investments in companies doing business with a terrorist-sponsoring state, the Securities and Exchange Commission established its Office of Global Security Risk to provide for enhanced disclosure of material information regarding such companies.
(n) The current Sudan Divestment movement encompasses nearly one hundred universities, cities, states and private pension plans.
(o) Companies facing such widespread divestment present further material risk to remaining investors.
(p) It is a fundamental responsibility of the State of West Virginia to decide where, how, and by whom financial resources in its control should be invested, taking into account numerous pertinent factors.
(q) It is the prerogative and desire of the State of West Virginia, in respect to investment resources in its control and to the extent reasonably, with due consideration for, among other things, return on investment, on behalf of itself and its investment beneficiaries, not to participate in an ownership or capital-providing capacity with entities that provide significant practical support for genocide, including certain nonUnited States companies presently doing business in Sudan.
(r) It is the judgment of the Legislature that this article should remain in effect only insofar as it continues to be consistent with, and does not unduly interfere with, the foreign policy of the United States as determined by the federal government.
(s) It is the judgment of the Legislature that mandatory divestment of public funds from certain companies is a measure that should be employed sparingly and judiciously. A Congressional and Presidential declaration of genocide satisfies this high threshold.
§12-6D-2. Definitions.
As used in this article, the following definitions shall apply:
(a) "Active business operations" means all business operations that are not inactive business operations.
(b) "Business operations" means engaging in commerce in any form in Sudan, including by acquiring, developing, maintained, owning, selling, possessing, leasing, or operating equipment, facilities, personnel, products, services, personal property, real property, or any other apparatus of business or commerce.
(c) "Company" means any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all wholly-owned subsidiaries, majority-owned subsidiaries, parent companies, or affiliates of such entities or business associations, that exists for profit-making purposes.
(d) "Complicit" means taking actions during any preceding twenty-month period which have 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 out against 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.
(e) "Direct holdings" in a company means all securities of that company held directly by the public fund or in an account or fund in which the public fund owns all shares or interests.
(f) "Government of Sudan" means the government in Khartoum, Sudan, which is led by the National Congress Party (formerly known as the National Islamic Front) or any successor government formed on or after the thirteenth day of October, two thousand six (including the coalition National Unity Government agreed upon the Comprehensive Peace Agreement for Sudan) and does not include the regional government of southern Sudan.
(g) "Inactive business operations" means the mere continued holding or renewal of rights to property previously operated for the purpose of generating revenues but not presently deployed for such purpose.
(h) "Indirect holdings" in a company means all securities of that company held in an account or fund, such as a mutual fund, managed by one or more persons not employed by the public fund, in which the public fund owns shares or interests together with other investors not subject to the provisions of this article.
(i) "Marginalized populations of Sudan" include, but are not limited to, the portion of the population in the Darfur region that has been genocidally victimized; the portion of the population of southern Sudan victimized by Sudan's North-South civil war; the Beja, Rashidiya, and other similarly underserved groups of eastern Sudan; the Nubian and other similarly underserved groups in Sudan's Abyei, Souther Blue File and Nuba Mountain regions; and the Amri, Hamadab, Manasir, and other similarly underserved groups of northern Sudan.
(j) "Military equipment" means weapons, arms, military supplies, and equipment that readily may be used for military purposes, including, but not limited to, radar systems or military-grade transport vehicles; or supplies or services sold or provided directly or indirectly to any force actively participating in armed conflict in Sudan.
(k) "Mineral extraction activities" include exploring, extracting, processing, transporting, or wholesale selling or trading of elemental minerals or associated metal alloys or oxides (ore), including gold, copper, chromium, chromite, diamonds, iron, iron ore, silver, tungsten, uranium and zinc, as well as facilitating such activities, including by providing supplies or services in support of such activities.
(l) Oil-related activities" include, but are not limited to, owning rights to oil blocks; exporting, extracting, producing, refining, processing, exploring for transporting, selling, or trading of oil; constructing, maintaining, or operating a pipeline, refinery, or other oil-field infrastructure; and facilitating such activities, including by providing supplies or services in support of such activities, provided that the mere retail sale of gasoline and related consumer products shall not be considered oil-relating activities.
(m) "Power production activities" means any business operation that involves a project commissioner by the National Electricity Corporation (NEC) of Sudan or other similar Government of Sudan entity whose purpose is to facilitate power generation and delivery, including, but not limited to, establishing power-generating plants or hydroelectric dams, selling or installing components for the project, providing service contracts related to the installation or maintenance of the project, as well as facilitating such activities, including by providing supplies or services in support of such activities.
(n) "Public fund" means the state's pension fund systems and other affected assets or the trustees and other appropriate designates in charge of the state's pension fund systems and other assets targeted by this article, and includes public securities as defined in section one, article five of this chapter, and all state funds subject to the administration by the West Virginia Investment Management Board in article six of this chapter.
(o) "Scrutinized" company means any company that meets the criteria in paragraph (l), paragraph (2), or paragraph (3) below:
(1) The company has business operations that involve contracts with or provision of supplies or services to: (A) The Government of Sudan; (B) companies in which the Government of Sudan has any direct or indirect equity share; (C) Government of Sudan-commissioned consortiums or projects; or (D) companies involved in Government of Sudan-commissioned consortiums or projects:
(i) More than ten percent of the company's revenues or assets linked to Sudan involve oil-related activities or mineral extraction activities; less than seventy-five percent of the company's revenues or assets linked to Sudan involve contracts with or provision of oil-related or mineral extracting products or services to the regional government of southern Sudan or a project or consortium created exclusively by that regional government; and the company has failed to take substantial action; or
(ii) More than ten percent of the company's revenues or assets linked to Sudan involve power production activities; less than seventy-five percent of the company's power production activities include projects whose intent is to provide power or electricity to the marginalized populations of Sudan; and the company has failed to take substantial action.
(2) The company is complicit in the Darfur genocide.
(3) The company supplies military equipment within Sudan, unless it clearly shows that the military equipment cannot be used to facilitate offensive military actions in Sudan or the company implements rigorous and verifiable safeguards to prevent us of that equipment by forces actively participating in armed conflict, for example, through postsale tracking of such equipment by the company, certification from a reputable and objective third party that such equipment is not being used by a party participating in armed conflict in Sudan, or sale of such equipment solely to the regional government of southern Sudan or any internationally recognized peacekeeping force or humanitarian organization.
Notwithstanding anything herein to the contrary, a social development company which is not complicit in the Darfur genocide shall not be considered a scrutinized company.
(p) "Social development company" means a company whose primary purpose in Sudan is to provide humanitarian goods or services, including medicine or medical equipment, agricultural supplies or infrastructure, educational opportunities, journalism-related activities, information or information materials, spiritual-related activities, services of a purely clerical or reporting nature, food, clothing or general consumer goods that are unrelated to oil-related activities, mineral extraction activities or power production activities.
(q) "Substantial action" means adopting, publicizing and implementing a formal plan to cease scrutinized business operations within one year and to refrain from any such new business operations; or undertaking significant humanitarian efforts in conjunction with an international organization, the Government of Sudan, the regional government of southern Sudan, or a nonprofit entity and evaluated and certified by an independent third party to be substantial in relationship to the company's Sudan business operations and of benefit to one or more marginalized populations of Sudan; or through engagement with the Government of Sudan, materially improving conditions for the genocidally victimized population in Darfur.
§12-6D-3. Identification of companies.
(a) Within ninety days following passage of this article, the public fund shall make its best efforts to identify all scrutinized companies in which the public fund has direct or indirect holdings or could possibly have holdings in the future. These efforts shall include, as appropriate:
(1) Reviewing and relying, as appropriate in the public fund's judgment, on publicly available information regarding companies with business operations in Sudan, including information provided by nonprofit organizations, research firms, international organizations and government entities; or
(2) Contacting asset managers contracted by the public fund that invest in companies with business operations in Sudan; or
(3) Contacting other institutional investors that have divested from or engaged with companies that have business operations in Sudan.
(b) By the first meeting of the public fund following the ninety-day period described in subsection (a), the public fund shall assemble all scrutinized companies identified into a "scrutinized companies list."
(c) The public fund shall update the scrutinized companies list on a quarterly basis based on evolving information from, among other sources, those listed in subsection (a).
§12-6D-4. Required actions.
The public fund shall adhere to the following procedure for companies on the scrutinized companies list:
(a) Engagement.
(1) The public fund shall immediately determine the companies on the scrutinized companies list in which the public fund owns direct or indirect holdings.
(2) For each company identified in paragraph (1) with only inactive business operations, the public fund shall send a written notice informing the company of this article and encouraging it to continue to refrain from initiating active business operations in Sudan until it is able to avoid scrutinized business operations. The public fund shall continue correspondence on a semiannual basis.
(3) For each company newly identified in paragraph (1) with active business operations, the public fund shall send a written notice informing the company of its scrutinized company status and that it may become subject to divestment by the public fund. The notice shall offer the company the opportunity to clarify its Sudan-related activities and shall encourage the company, with ninety days, to either cease its scrutinized business operations or convert such operations to inactive business operations in order to avoid qualifying for divestment by the public fund.
(4) If, within ninety days following the public fund's first engagement with a company pursuant to paragraph (3), that company ceases scrutinized business operations, the company shall be removed from the scrutinized companies list and the provisions of this section shall ease to apply to it unless it resumes scrutinized business operations. If, within ninety days following the public fund's first engagement, the company converts its scrutinized active business operations to inactive business operations, the company shall be subject to all provisions relating thereto.
(b) Divestment.
(1) If, after ninety days following the public fund's first engagement with a company pursuant to subsection (a)(3), the company continues to have scrutinized active business operations, and only while such company continues to have scrutinized active business operations, the public fund shall sell, redeem, divest or withdraw all publicly-traded securities of the company, except as provided below, according to the following schedule:
(i) At least fifty percent of such assets shall be removed from the public fund's assets under management by nine months after the company's most recent appearance on the scrutinized companies list.
(ii) One hundred percent of such assets shall be removed from the public fund's assets under management within fifteen months after the company's most recent appearance on the scrutinized companies list.
(2) If a company that ceased scrutinized active business operations following engagement pursuant to subsection (a)(3) resumes such operations, paragraph (1) shall immediately apply, and the public fund shall send a written notice to the company. The company shall also be immediately reintroduced onto the scrutinized companies list.
(c) Prohibition.
At no time shall the public fund acquire securities of companies on the scrutinized companies list that have active business operations, except as provided below.
(d) Exemption.
No company which the United States Government affirmatively declares to be excluded from its present or any future federal sanctions regime relating to Sudan shall be subject to divestment or investment prohibition pursuant to subsections (b) (c).
(e) Excluded securities.
Notwithstanding anything herein to the contrary, subsections (b) and (c) shall not apply to indirect holdings in actively managed investment funds. The public fund shall, however, submit letters to the managers of these investment funds containing companies with scrutinized active business operations requesting that they consider removing these companies from the fund or create a similar actively managed fund with indirect holdings devoid of these companies. If the manager creates a similar fund, the public fund shall replace all applicable investments with investments in the similar fund in an expedited time frame consistent with prudent investing standards. For the purposes of this section, "private equity" funds shall be deemed to be actively managed investment funds.
§12-6D-5. Reporting.
(a) The public fund shall file a publicly-available report to the Legislature and Attorney General that includes the scrutinized companies list within thirty days after the list is crated.
(b) Annually thereafter, the public fund shall file a publicly-available report to the Legislature and Attorney General and send a copy of that report to the United States Presidential Special Envoy to Sudan (or an appropriate designee or successor) that includes:
(1) A summary of correspondence with companies engaged by the public fund under sections 4(a)(2) and (a)(3);
(2) All investments sold, redeemed, divested or withdrawn in compliance with section 4(b).
(3) All prohibited investments under section 4(c); and
(4) Any progress made under section 4(e).
§12-6D-6. Provisions for expiration of article.
This article shall expire upon the occurrence of any of the following:
(a) The Congress or President of the United States declares that the Darfur genocide has been halted for at least twelve months; or
(b) The United States revokes all sanctions imposed against the Government of Sudan; or
(c) The Congress or President of the United States declares that the Government of Sudan has honored its commitments to cease attacks on civilians, demobilize and demilitarize the Janjaweed and associated militias, grant free and unfettered access for deliveries of humanitarian assistance and allow for the safe and voluntary return of refugees and internally displaced persons; or
(d) The Congress or President of the United States, through legislation or executive order, declares that mandatory divestment of the type provided for in this article interferes with the conduct of United States foreign policy.
§12-6D-7. Other legal obligations.
With respect to actions taken in compliance with this article, including all good faith determinations regarding companies as required by this article, the public fund shall be exempt from any conflicting statutory or common law obligations, including any such obligations in respect to choice of asset managers, investment funds or investments for the public fund's securities portfolios.
§12-6D-8. Reinvestment in certain companies with scrutinized active business operations.

Notwithstanding anything herein to the contrary, the public fund shall be permitted to cease divesting from certain scrutinized companies pursuant to section 4(b) or reinvest in certain scrutinized companies from which it divested pursuant to section 4(b) if clear and convincing evidence shows that the value for all assets under management by the public fund becomes equal to or less than ninety-nine and one-half percent (fifty basis points) of the hypothetical value of all assets under management by the public fund assuming no divestment for any company had occurred under section 4(b). Cessation of divestment, reinvestment, or any subsequent ongoing investment authorized by this section shall be strictly limited to the minimum steps necessary to avoid the contingency set forth in the preceding sentence. For any cessation of divestment, reinvestment, or subsequent ongoing investment authorized by this section, the public fund shall provide a written report to the Legislature and Attorney General in advance of initial reinvestment, updated semiannually thereafter as applicable, setting forth the reasons and justification, supported by clear and convincing evidence, for its decisions to cease divestment, reinvest, or remain invested in companies with scrutinized active business operations. This section has no application to reinvestment in companies on the ground that they have ceased to have scrutinized active business operations.
§12-6D-9. Enforcement.
The Attorney General is charged with enforcing the provisions of this article and, through any lawful designee, may bring such actions in court as are necessary to do so.
§12-6D-10. Severability.
If any one or more provision, section, subsection, sentence, clause, phrase, or work of this legislation or the application thereof to any person or circumstance is found to be invalid, illegal, unenforceable or unconstitutional, the same is hereby declared to be severable and the balance of this legislation shall remain effective and functional notwithstanding such invalidity, illegality, unenforceability or unconstitutionality. The Legislature hereby declares that it would have passed this legislation, and each provision, section, subsection, sentence, clause, phrase or word thereof, irrespective of the fact that any one or more provision, section, subsection, sentence, clause, phrase, or word be declared invalid, illegal, unenforceable or unconstitutional, including, but not limited to, each of the engagement, divestment and prohibition provisions of this legislation.



NOTE: The purpose of this bill is to
create a "Sudan Divestment Task Procedure". It provides the method for how the state funds or trustees of those funds, including pension fund systems or other affected entities of the state shall address certain investments relating to Sudan and divestment. The bill further provides legislative findings and definitions; identification of scrutinized companies; requires certain other actions by the public funds, including reporting; provides for expiration of provisions of article and enforcement of article; and a severability clause.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.
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