Are Vermont's Pension Funds Financing Genocide?
VERMONT -- By all accounts, Sudan is facing the world's worst humanitarian crisis. Since the country's brutal dictator, Omar al-Bashir, seized power in a 1989 coup, his regime has been accused of killing more than 2 million innocent civilians -- 400,000 in the last two years alone -- and displacing 4 million others. In 1997, President Clinton made it illegal for American companies to do business in the East African nation. And last year, the Bush administration finally described the ongoing violence in Sudan's Darfur region as "genocide."
So why are Vermont's three state pension funds still invested in companies that do business there?
That question arose earlier this month when State Senator Matt Dunne (D-Hartland) introduced a resolution calling on the state treasurer and Vermont's three retirement boards to divest of all companies with ties to Sudan. The Senate adopted the nonbinding measure with 13 cosponsors.
"To me, as someone who tries to follow the international press, this felt a million miles away," says Dunne. "But I was so surprised to find out that it's OK for Vermont taxpayers' money to be going to companies that are doing things U.S.-based companies can't do."
U.S.-based companies are only allowed to do business in Sudan if it's related to humanitarian efforts, such as selling food, medicine and agricultural supplies. But, as Dunne discovered recently, there is nothing prohibiting American investors, including public pension funds, from owning shares in foreign companies that support the Sudanese government.
Those companies include Siemens, a Germany-based telecommunications corporation. International human rights groups have placed Siemens on a "suspect list" of businesses with direct ties to the Bashir regime. According to Dunne, Vermont's three state pension funds own assets worth between $2 million and $100 million in foreign companies that are active in Sudan -- Siemens among them.
The Center for Security Policy, a Washington, D.C.-based think tank, puts Vermont's retirement holdings in "Sudan-active" companies even higher. According to a CSP report published last year, the Vermont State Retirement System owns more than $106 million in assets in 17 different companies that operate in the country.
Vermont Treasurer Jeb Spaulding says he's well aware of the allegations made about the state's pension funds, which serve more than 30,000 current and former teachers and civil servants. However, he considers divestiture "a very last resort." Spaulding says that before the state retirement boards take any action, he first wants to be sure that taking such action wouldn't do more harm than good.
"Members of the board, myself included, are horrified by what has happened, and what's continuing to happen [in Sudan]," he says. "But if you're going to inadvertently hurt the people you're trying to help, that's not something you want to do lightly."
Part of the problem, Spaulding explains, is that it's difficult to find out which companies and/or subsidiaries are directly helping the Sudanese government or are simply engaged in legitimate business operations. Neither the U.S. State Department nor the Securities and Exchange Commission offer any guidance to investors about which companies to avoid. And while there are private consulting firms that will analyze portfolios looking for "suspect companies," Spaulding says they often charge thousands of dollars, and their findings are questionable.
Spaulding says he's contacted representatives from Siemens, but has yet to receive a satisfactory reply to his queries about their activities in Sudan. Still, he's not convinced that divestiture -- a policy that was so effective in convincing the government of South Africa to end apartheid in the 1980s -- is appropriate yet. The state treasurer believes that in some cases, shareholder initiatives are more effective in urging companies to do the right thing.
Vermont's nascent divestiture effort is part of a growing campaign among U.S. colleges, universities and state governments to exert financial pressure on companies that may be helping to fund the Sudanese genocide. In April, for example, Harvard University announced that it was selling its $4.4 million interest in PetroChina, a Beijing-based oil company with major operations in Sudan. Then in early June, Stanford University's board of trustees voted to divest of four petroleum companies with ties to the Bashir dictatorship.
But the largest divestiture effort to date occurred in May, when the Illinois Legislature overwhelmingly approved a bill requiring that state to sell off approximately $1 billion in holdings in companies that do business in Sudan. That bill is still awaiting the governor's signature. Similar legislation is pending in about a dozen other states.