Auditor General Jack Wagner Urges All Pa. Public Pension Fund Managers to Divest from Iran

HARRISBURG, Pa., Feb. 19 /PRNewswire-USNewswire/ -- As Iran continues to defy the international community by enriching their uranium stockpiles, federal law may soon require further sanctions against foreign companies that have invested in Iran's energy/oil infrastructure. However, while the current federal legislation gives the White House the option to impose such sanctions, the U.S. Senate recently passed legislation that would mainly require mandatory sanctions on those foreign companies.

Noting that Pennsylvania's is the only one among the 12 largest state pension plans that has not enacted divestment from Iran, Pennsylvania Auditor General Jack Wagner is urging immediate action by all public pension fund managers to protect the interests of public workers. Such action may include divestiture of financial interests in foreign companies targeted by pending federal regulation.

"In these tough times, a secure investment is a sound investment. Investing in businesses that do business with Iran is not just morally wrong, it is financially irresponsible," said Wagner, who added that passage of U.S. House and Senate bills will increase the likelihood of triggering the State Department and U.S. Treasury to act.

Those sanctions, targeting foreign companies that have invested at least $20 million in Iran's energy/oil infrastructure over any one-year period, could wipe out those companies' stock value and thus seriously damage any funds holding them in their portfolio. Wagner pointed out that this divestment is not only a sound policy for the three main state pensions – the Pennsylvania Public School Employees' Retirement System, the State Employees Retirement System, and the Pennsylvania Municipal Retirement System – that the state legislature is already attempting to regulate, but also the thousands of public pension funds - like county and local firefighters, police and municipal employees – that are not part of those systems.

"The fundamental guiding principle in handling public funds is that they should never be exposed to this kind of risk," Wagner said, "especially due to investments in companies that are building the infrastructure of a dangerous, rogue nation like Iran."

The "Iran Sanctions Act" was signed into law on Aug. 5, 1996. It targets only foreign firms because American firms are already prohibited from investing in Iran under a trade and investment ban (Executive Order 12959 of May 6, 1995). The ISA gives the U.S. Executive branch the option to impose a variety of sanctions that hurt foreign companies' ability to secure loans or credit, import into the U.S., and get government contracts. Since 1999, about 20 foreign energy or oil firms, based mainly in Europe, Asia and South America, have engaged or attempted to engage in activities that would trigger the act, but only very limited action has been taken by the Treasury and State departments.

On Jan. 28, 2010, the U.S. Senate passed the Comprehensive Iran Sanctions, Accountability and Divestment Act (S.2799), echoing the Iran Refined Petroleum Sanctions Act (H.R.2194), which passed the House by a wide margin in December.  Unlike the ISA, the legislation mainly requires mandatory sanctions from the U.S. Executive branch.  The legislation also incorporates the language of the Iran Sanctions Enabling Act (H.R.1327) which passed in October. That language authorizes states' divestment efforts and provides a safe harbor from lawsuit for asset managers that create losses due to divestment.

"This action is not only a prudent investment standard," Wagner said. "It also helps protect the United States and our allies abroad."

Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly.  He is the Commonwealth's elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations.  The Department of the Auditor General conducts more than 5,000 audits per year.  To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department's Web site at www.auditorgen.state.pa.us

SOURCE Pennsylvania Department of the Auditor General