William C. Thompson, who as city comptroller is custodian of five pension funds with nearly $95 billion in assets, is likely to soon announce a limited divestment from stocks in some companies that do business with Iran, The Jewish Week has learned.
The action would be in concert with ongoing efforts by 10 states, including New York, and the cities of Los Angeles and Beverly Hills, which have recently enacted Iran divestment legislation or policies, encouraged by pending legislation in Congress. Such a step by New York City would send a powerful message because New York’s pension system is the largest in the nation.
Eighteen foreign corporations that have invested more than $20 million in Iran’s oil and natural gas industries since 1996 are at risk of U.S. sanctions, and most of those are part of the city pension funds’ portfolio. Thompson is expected to announce action against two or three of them and possibly freeze up to a dozen others, sources say.
The pension funds also have almost $1 billion invested in companies doing business with Sudan, which is the object of international boycott efforts because of the government-backed genocide of rebel tribes in Darfur; Thompson is also expected to announce a Sudan divestment.
Until now, Thompson has resisted divestment while taking other steps to pressure corporations to sever ties to rogue nations.
Last July, Thompson joined pension fund managers in California, North Carolina and Illinois in writing to eight companies with business ties in Iran, calling on them to explain how they will mitigate risk to investors posed by tightening economic sanctions against Iran and pending divestment legislation in Congress.
“As a result of this widespread campaign, public pension funds increasingly are faced with the prospect of having to divest their investments in foreign companies that are doing business in Iran,” Thompson wrote. “If some of the bills are passed in their broadest forms, pension funds might be forced to sell nearly $18 billion in affected assets.”
The letters were sent to Oil & Natural Gas Ltd. of India, Royal Dutch Shell of the Netherlands, Total SA of France, China Petroleum Company of China, Inpex Corporation of Japan, Gazprom of Russia, Respol YPF SA of Spain and Eni S.p.A. of Italy.
The comptroller has also used his influence in the effort to persuade U.S. companies to sever ties to terrorism-sponsoring nations, claiming credit for actions taken by General Electric, Halliburton, Aon Corporation, ConocoPhillips and others. He has also used his leverage as pension fund steward to push energy companies to investigate price gouging by their subsidiaries and whether executives are profiting from rising gas prices.
But Thompson, whose primary obligation as investment adviser is to maximize returns for the city’s employees and retirees, may now be prepared to shift from his policy of engagement with corporations to more drastic measures.
He has previously resisted appeals from AIPAC, the pro-Israel lobby, and other proponents of divestment as a means of convincing Iran to fully abandon its aspirations to be a nuclear power.
“He has said he is hesitant, afraid of a precedent that if he does it with Iran you have to do it with other places,” said Councilman David Weprin, a Queens Democrat, chair of the Finance Committee and a candidate to succeed Thompson in 2010. Weprin heard Thompson speak at a recent AIPAC forum on divestment, where he said the comptroller spelled out his position.
A likely Democratic candidate for mayor next year, Thompson recently said he was open to the idea of limited divestment, according to a source who has been keeping tabs on the issue and has spoken to the players involved.
“The only question now is which stocks” and how many, said the source, who said the comptroller would also divest from companies that trade with Sudan,
In an e-mail statement, Thompson spokesman Michael Loughran did not deny a pending divestment but said: “Discussions surrounding investments in Sudan and Iran have been ongoing for some time. However, nothing is finalized at this point.”
The unions whose funds are affected are also keeping quiet on divestment. Spokespersons for the police, firefighters and teachers unions declined to comment for this report; a spokesman for the United Federation of Teachers said no comment would be made prior to a statement by Thompson.
Federal legislation is pending that would indemnify fund managers from litigation by pensioners due to resulting financial losses if they divest from Iran-linked companies. The measure passed overwhelmingly in the House, sponsored by Massachusetts Democrat Barney Frank and Connecticut Republican Christopher Shays. A Senate version was sponsored by Barack Obama and Republican Sam Brownback of Kansas and awaits a vote.
In November, New York State Comptroller Tom DiNapoli, who is sole trustee of the $154 billion Common Retirement Fund, announced that he would identify investments tied to Iran’s energy or defense sectors; request from those companies an accounting of those activities and how they are consistent with a long-term investment strategy; and evaluate those responses with an eye toward divesting funds from companies that are not mitigating risk to the investor.
Representatives of AIPAC have been meeting with legislative leaders and investment officials around the country to press divestment as a key tool in confronting the possibility of a nuclear Iran whose leader, President Mahmoud Ahmadinejad, has threatened to destroy Israel.
“As part of a broader strategy of increasing the economic, diplomatic and political pressure on Iran, we believe divestment efforts are a good idea,” said Josh Block, an AIPAC spokesman.
Although many commentators construed the U.S. National Intelligence Estimate in December as downplaying the nuclear threat posed by Iran, the country’s weapons program remains a national security and international concern. The United Nations Security Council recently passed a third resolution calling on Iran to stop its enrichment of uranium.
Thompson will be forced by term limits to leave office at the end of 2009. Two of the Democratic candidates for the job, Weprin and David Yassky, a councilman from Brooklyn, said they would immediately divest from Iran-linked companies if elected.
“Public dollars should not be going to support the Iranian regime,” said Yassky. “These are not sound investments. Keeping pension funds terror-free is totally consistent with getting maximum return for retirees.”
Weprin said, “There has already been a precedent with South Africa during apartheid. The city pension funds divested stocks and major holdings already. The question is [when] to do it, when it rises to what level. We’ll have to deal with it on an individual basis.”
Three other expected Democratic contenders for comptroller, Councilwoman Melinda Katz, Assemblyman James Brennan and Bronx Borough President Adolfo Carrion, did not return calls for comment at press time.