June 18, 2008, Introduced by Senators CROPSEY, ALLEN, JACOBS, HUNTER and GILBERT and referred to the Committee on Commerce and Tourism.
A bill to amend 1984 PA 270, entitled
"Michigan strategic fund act,"
by amending section 88c (MCL 125.2088c), as added by 2005 PA 225.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 88c. (1) The fund board shall exercise the duties of a
fiduciary with respect to 21st century investments consistent with
the purposes of this chapter. The prudent investor rule shall be
applied by the fund board and any agent of the fund board in the
management of 21st century investments. The prudent investor rule
as applied to 21st century investments means that in making 21st
century investments, the fund board shall exercise the judgment and
care under the circumstances then prevailing that an institutional
investor of ordinary prudence, discretion, and intelligence would
exercise in similar circumstances in a like position. The fund
board shall maintain a reasonable diversification among 21st
century investments consistent with the requirements of this
chapter.
(2) The fund board shall select qualified private equity
funds, qualified venture capital funds, and qualified mezzanine
funds by issuing a request for proposal. At a minimum, the request
for proposal shall require a responding entity to disclose any
conflict of interest, disclose any criminal convictions, disclose
any investigations by the internal revenue service, the securities
and exchange commission, or any other federal or state taxing or
securities regulatory body, or court, or pertinent litigation
regarding the conduct of the person or entity. The fund board shall
establish a standard process to evaluate proposals submitted as a
result of a request for proposal and appoint a committee to review
the proposals.
(3) The fund board shall ensure that a recipient of money
under sections 88d, 88e, 88f, and 88g agrees as a condition of
receiving the money not to use the money for any of the following:
(a) The development of a stadium or arena for use by a
professional sports team.
(b) The development of a casino regulated by this state under
the
Michigan gaming control and revenue act, the Initiated Law of
1996 IL 1, MCL 432.201 to 432.226, a casino at which gaming is
conducted under the Indian gaming regulatory act, Public Law 100-
497,
102 Stat. 2467, or property associated or affiliated with the
operation of either type of casino described in this subdivision,
including, but not limited to, a parking lot, hotel, motel, or
retail store.
(4) The fund board shall establish requirements to ensure that
money expended under sections 88d, 88e, 88f, and 88g shall not be
used for any of the following:
(a) Provision of money to a person who has been convicted of a
criminal offense incident to the application for or performance of
a state contract or subcontract. As used in this subdivision, if a
person is a business entity, person includes affiliates,
subsidiaries, officers, directors, managerial employees, and any
person who, directly or indirectly, holds a pecuniary interest in
that business entity of 20% or more. A director or officer of a
nonprofit entity may satisfy the requirements of this subdivision
if he or she files an affidavit with the fund affirming that he or
she has not been convicted of a criminal offense incident to the
application for or performance of a state contract or subcontract.
(b) Provision of money to a person who has been convicted of a
criminal offense, or held liable in a civil proceeding, that
negatively reflects on the person's business integrity, based on a
finding of embezzlement, theft, forgery, bribery, falsification or
destruction of records, receiving stolen property, or violation of
state or federal antitrust statutes. As used in this subdivision,
if a person is a business entity, person includes affiliates,
subsidiaries, officers, directors, managerial employees, and any
person who, directly or indirectly, holds a pecuniary interest in
that business entity of 20% or more. A director or officer of a
nonprofit entity may satisfy the requirements of this subdivision
if he or she files an affidavit with the fund affirming that he or
she has not been convicted of a criminal offense, or held liable in
a civil proceeding, that negatively reflects on the person's
business integrity, based on a finding of embezzlement, theft,
forgery, bribery, falsification or destruction of records,
receiving stolen property, or violation of state or federal
antitrust statutes.
(c) Provision of money to a business enterprise to induce
qualified businesses or small businesses to leave this state.
(d) Provision of money that would contribute to the violation
of internationally recognized workers rights, as defined in section
507(4) of the trade act of 1974, 19 USC 2467(4), of workers in a
country other than the United States, including any designated zone
or area in that country.
(e) Provision of money to a corporation or an affiliate of the
corporation who is incorporated in a tax haven country after
September 11, 2001, while maintaining the United States as the
principal market for the public trading of the corporation's stock.
As used in this section, "tax haven country" includes a country
with tax laws that facilitate avoidance by a corporation or an
affiliate of the corporation of United States tax obligations,
including Barbados, Bermuda, British Virgin Islands, Cayman
Islands, Commonwealth of the Bahamas, Cyprus, Gibraltar, Isle of
Man, the principality of Liechtenstein, the principality of Monaco,
and the Republic of the Seychelles.
(5) Before adopting a resolution that establishes or
substantially changes a 21st century investment program, including
any fees, charges, or penalties attached to that program, the fund
board shall give notice of the proposed resolution to the governor,
to the clerk of the house of representatives, to the secretary of
the senate, to members of the senate and house of representatives
appropriation committees, and to each person who requested from the
fund in writing or electronically to be notified regarding proposed
resolutions. The notice and proposed resolution and all attachments
shall be published on the fund's internet website. The fund board
shall hold a public hearing not sooner than 14 days and not longer
than 30 days from the date notice of a proposed resolution is given
and offer a person an opportunity to present data, views,
questions, and arguments. Members of the fund board or 1 or more
persons designated by the fund board who have knowledge of the
subject matter of the proposed resolution shall be present at the
public hearing and shall participate in the discussion of the
proposed resolution. The fund board may act on the proposed
resolution no sooner than 14 days after the public hearing. The
fund board shall produce a final decision document that describes
the basis for its decision. The final resolution and all
attachments and the decision document shall be provided to the
governor, to the clerk of the house of representatives, to the
secretary of the senate, and to members of the senate and house of
representatives appropriation committees and shall be published on
the fund's internet website.
(6) The notice described in subsection (5) shall include all
of the following:
(a) A copy of the proposed resolution and all attachments.
(b) A statement that the addressee may express any data,
views, or arguments regarding the proposed resolution.
(c) The address to which written comments may be sent and the
date by which comments must be mailed or electronically
transmitted, which date shall not be before the date of the public
hearing.
(d) The date, time, and place of the public hearing.
(7) The fund board shall employ or contract with a fund
manager or other persons it considers necessary to implement this
section. The person employed or contracted under this subsection
shall have not less than 10 years' experience in commercial
lending, private equity, mezzanine funding, or venture capital. The
person employed or contracted under this section shall exercise the
duties of a fiduciary toward investments from the investment fund
under this section. Management fees payable by the fund and other
investors in a qualified private equity fund, a qualified mezzanine
fund,
or a qualified venture capital fund, or other investments
authorized by this chapter shall be considered an investment
expense and not an administrative cost incurred by the fund.
(8) Subject to subsection (9), a record received, prepared,
used, or retained by an investment fiduciary in connection with an
investment or potential investment of the investment fund that
relates to investment information pertaining to a portfolio company
in which the investment fiduciary has invested or has considered an
investment that is considered by the portfolio company and
acknowledged by the investment fiduciary as confidential, or that
relates to investment information whether prepared by or for the
investment fiduciary regarding loans and assets directly owned by
the investment fiduciary and acknowledged by the investment
fiduciary as confidential, is exempt from the disclosure
requirements of the freedom of information act, 1976 PA 442, MCL
15.231 to 15.246, if at least annually the fund provides to the
fund board, and makes available to the public, a report of fund
investments during the prior state fiscal year that includes all of
the following:
(a) The name of each portfolio company in which the investment
fund invested during the reporting period.
(b) The aggregate amount of money invested by the investment
fund in portfolio companies during the reporting period.
(c) The rate of return realized during the reporting period on
the investments of the investment fund in portfolio companies.
(d) The source of any public funds invested by the investment
fund in portfolio companies during the reporting period.
(9) If a record described in subsection (8) is an agreement or
instrument to which an investment fiduciary is a party, only those
parts of the record that contain investment information are exempt
from the disclosure requirements of the freedom of information act,
1976 PA 442, MCL 15.231 to 15.246.
(10) As used in subsections (8) and (9):
(a) "Investment fiduciary" means a person who exercises any
discretionary authority or control over an investment of the
investment fund or renders investment advice for the fund for a fee
or other direct or indirect compensation.
(b) "Investment information" means information that has not
been publicly disseminated or that is unavailable from other
sources, the release of which might cause a portfolio company or an
investment fiduciary significant competitive harm. Investment
information includes, but is not limited to, financial performance
data and projections, financial statements, list of coinvestors and
their level of investment, product and market data, rent rolls, and
leases.
(c) "Portfolio company" means an entity in which an investment
fiduciary has made or considered an investment on behalf of the
investment fund.
(d) "Record" means all or part of a writing, as that term is
defined in section 2 of the freedom of information act, 1976 PA
442, MCL 15.232.