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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