May 29, 2007, Introduced by Reps. Alma Smith, Vagnozzi, Ward and Knollenberg and referred to the Committee on Government Operations.
A bill to amend 1965 PA 314, entitled
"Public employee retirement system investment act,"
(MCL 38.1132 to 38.1140m) by adding section 13c.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 13c. (1) As used in this section:
(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, maintaining,
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 20-
month period 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 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 retirement system or in an
account or fund in which the retirement system owns all shares or
interests.
(f) "Government of Sudan" means the government in Khartoum,
Sudan, which is led by the national congress party or any successor
government formed on or after October 13, 2006 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 1 or more persons not employed by the retirement system,
in which the retirement system owns shares or interests together
with other investors not subject to the provisions of this act.
(i) "Marginalized populations of Sudan" include, but are not
limited to, all of the following:
(i) The portion of the population in the Darfur region that has
been genocidally victimized.
(ii) The portion of the population of southern Sudan victimized
by Sudan's north-south civil war.
(iii) The Beja, Rashidiya, and other similarly underserved
groups of eastern Sudan.
(iv) The Nubian and other similarly underserved groups in
Sudan's Abyei, Southern Blue Nile, and Nuba Mountain regions.
(v) 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,
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-related
activities.
(m) "Power production activities" means any business operation
that involves a project commissioned by the national electricity
corporation 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) "Retirement system" means the Michigan legislative
retirement system created by the Michigan legislative retirement
system act, 1957 PA 261, MCL 38.1001 to 38.1080, the retirement
system created under the fire fighters and police officers
retirement act, 1937 PA 345, MCL 38.551 to 38.562, the retirement
system created under the judges retirement act of 1992, 1992 PA
234, MCL 38.2101 to 38.2670, the retirement system created under
the state employees retirement act, 1943 PA 240, MCL 38.1 to 38.61,
and the retirement system created under the public school employees
retirement act of 1979, 1980 PA 300, MCL 38.1301 to 38.1408.
(o) "Scrutinized company" means any company, except a social
development company that is not complicit in the Darfur genocide,
that meets the criteria in subparagraph (i), (ii), or (iii):
(i) The company has business operations that involve contracts
with or provision of supplies or services to 1 or more of the
following:
(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 consortia or projects.
(D) Companies involved in government of Sudan-commissioned
consortia or projects and that have 1 or more of the following:
(I) More than 10% of the company's revenues or assets linked
to Sudan involve oil-related activities or mineral extraction
activities, less than 75% 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.
(II) More than 10% of the company's revenues or assets linked
to Sudan involve power production activities, less than 75% 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.
(ii) The company is complicit in the Darfur genocide.
(iii) 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 use of
that equipment by forces actively participating in armed conflict.
(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 1 year and to refrain from any new business operations,
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 1 or more marginalized populations of Sudan, or through
engagement with the government of Sudan, materially improving
conditions for the genocidally victimized population in Darfur.
(2) Within 90 days after the effective date of the amendatory
act that added this section, the retirement system shall makes its
best efforts to identify all scrutinized companies in which the
retirement system has direct or indirect holdings or could possibly
have such holdings in the future. The efforts shall include 1 or
more of the following:
(a) Reviewing and relying, as appropriate in the retirement
system'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.
(b) Contacting asset managers contracted by the retirement
system that invest in companies with business operations in Sudan.
(c) Contacting other institutional investors that have
divested from or engaged with companies that have business
operations in Sudan.
(3) By the first meeting of the retirement system following
the 90-day period described in subsection (2), the retirement
system shall assemble all scrutinized companies identified into a
scrutinized companies list.
(4) The retirement system shall update the scrutinized
companies list on a quarterly basis based on evolving information
from, among other sources, those sources listed in subsection (2).
(5) The retirement system shall adhere to the following
procedure for companies on the scrutinized companies list:
(a) The retirement system shall immediately determine the
companies on the scrutinized companies list in which the retirement
system owns direct or indirect holdings.
(b) For each company identified in subdivision (a) with only
inactive business operations, the retirement system shall send a
written notice informing the company of this section and
encouraging it to continue to refrain from initiating active
business operations in Sudan until it is able to avoid scrutinized
business operations. The retirement system shall continue the
correspondence on a semiannual basis.
(c) For each company newly identified in subdivision (a) with
active business operations, the retirement system shall send a
written notice informing the company of its scrutinized company
status and that it may become subject to divestment by the
retirement system. The notice shall offer the company the
opportunity to clarify its Sudan-related activities and shall
encourage the company, within 90 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 retirement system.
(d) If, within 90 days following the retirement system's first
engagement with a company pursuant to subdivision (c), that company
ceases scrutinized business operations, the company shall be
removed from the scrutinized companies list and this section shall
cease to apply to it unless it resumes scrutinized business
operations. If, within 90 days following the retirement system's
first engagement, the company converts its scrutinized active
business operations to inactive business operations, the company
shall be subject to this section.
(e) If, after 90 days following the retirement system's first
engagement with a company pursuant to subdivision (c), the company
continues to have scrutinized active business operations, and only
while the company continues to have scrutinized active business
operations, the retirement system shall sell, redeem, divest, or
withdraw all publicly traded securities of the company, according
to the following schedule:
(i) At least 50% of the assets shall be removed from the
retirement system's assets under management within 9 months after
the company's most recent appearance on the scrutinized companies
list.
(ii) 100% of the assets shall be removed from the retirement
system's assets under management within 15 months after the
company's most recent appearance on the scrutinized companies list.
(f) Except as provided in subdivisions (g) and (h), at no time
shall the retirement system acquire securities of companies on the
scrutinized companies list that have active business operations.
(g) 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 subdivisions
(e) and (f).
(h) Subdivisions (e) and (f) shall not apply to indirect
holdings in actively managed investment funds. The retirement
system shall, however, submit letters to the managers of such
investment funds containing companies with scrutinized active
business operations requesting that they consider removing
identified companies from the fund or create a similar actively
managed fund with indirect holdings devoid of identified companies.
If the manager creates a similar fund, the retirement system 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.
(6) The retirement system shall file a publicly available
report to the legislature and attorney general that includes the
scrutinized companies list within 30 days after the list is
created. Annually thereafter, the retirement system 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 that includes all of the following:
(a) A summary of correspondence with companies engaged by the
retirement system under this section.
(b) All investments sold, redeemed, divested, or withdrawn in
compliance with this section.
(c) All prohibited investments under this section.
(d) Any progress made under subsection (5)(h).
(7) This section is effective until the first occurrence of
any of the following:
(a) The United States congress or the president of the United
States declares that the Darfur genocide has been halted for at
least 12 months.
(b) The United States revokes all sanctions imposed against
the government of Sudan.
(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.
(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 act interferes with the conduct of
United States foreign policy.
(8) With respect to actions taken in compliance with this
section, including all good faith determinations regarding
companies as required by this section, the retirement system shall
be exempt from any conflicting statutory or common law obligations,
including any obligations in respect to choice of asset managers,
investment funds, or investments for the retirement system's
securities portfolios.
(9) Notwithstanding anything herein to the contrary, the
retirement system shall be permitted to cease divesting from
certain scrutinized companies pursuant to this section and reinvest
in certain scrutinized companies from which it divested pursuant to
this section if clear and convincing evidence shows that the value
for all assets under management by the retirement system becomes
equal to or less than 99.50% of the hypothetical value of all
assets under management by the retirement system assuming no
divestment for any company had occurred under this section.
Cessation of divestment, reinvestment, and any subsequent ongoing
investment authorized under 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, and subsequent ongoing investment authorized by this
section, the retirement system shall provide a written report to
the legislature and attorney general in advance of initial
reinvestment, updated semiannually, 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
have ceased to have scrutinized active business operations.
(10) The attorney general shall enforce the provisions of this
section and, through any lawful designee, may bring such actions in
court as are necessary to do so.
(11) If any provision, section, subsection, sentence, clause,
phrase, or word of this legislation or its application 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.