State to divest pension funds from Iran

sacramento -- As Iranian President Mahmoud Ahmadinejad paid his controversial visit to New York on Monday, Gov. Arnold Schwarzenegger moved to steal some of the spotlight by announcing that California would sever ties with companies doing business in Iran.

Schwarzenegger, who like Ahmadinejad went to New York to address the United Nations, announced in a written statement after his speech that he would sign legislation requiring California’s multibillion-dollar state pension funds to divest from the country.

The move, pushed by a diverse coalition of activists who argued that the federal government has not done enough to keep multinational corporations out of Iran, puts California at the forefront of a national movement.

The bill, AB 221, which passed the Legislature with no opposition, follows the state’s divestment from Sudan last year.

“California has a long history of leadership and doing what’s right with our investment portfolio,” the governor said in his statement. “Last year, I was proud to sign legislation to divest from the Sudan to take a powerful stand against genocide. I look forward to signing legislation to divest from Iran to take an equally powerful stand against terrorism.”

The bill has not yet reached Schwarzenegger’s desk, a spokesman said, but the governor will sign it shortly after it arrives from the Legislature, possibly this week.

Schwarzenegger announced his decision as politicians from across the country jockeyed to outdo one another in condemning the Iranian president, who is scheduled to address the United Nations today. Ahmadinejad, whom the U.S. government accuses of leading a terrorist regime that arms Iraqi insurgents and is developing nuclear weapons, has called the Holocaust a “myth” and said Israel should be “wiped off the map.”

Schwarzenegger’s decision to sign the divestiture bill “will keep him in the limelight,” said Jonathan Aronson, professor of communication and international relations at USC. But Aronson is skeptical that the policy will do much to deter Iran from terrorism and human rights violations.

“These kind of things are helpful to the politicians doing them,” he said. “Whether it is helpful to the State Department as it tries to deal with Iran, which is already as difficult as can be, is less clear.”

Supporters of the measure, however, contend that it could ultimately lead to the withdrawal of billions of dollars of investment from Iran, forcing the country’s leaders to reconsider how they rule. California’s public pension funds, worth more than $350 billion, are the retirement accounts of teachers and other government employees.

‘Powerful message’

“No one should underestimate the clout of the state of California and its pension funds,” said Danielle Pletka, vice president for foreign and defense policy studies at the American Enterprise Institute, a conservative Washington think tank that has helped lead a bipartisan push for divestment. “This is an enormous amount of money. Divesting from companies that do business in places like Iran will be a powerful message.”

Pletka said California would enact a law similar to one in Florida. Divestment legislation is being weighed by a dozen other states, as well. In Missouri, the state treasurer was able to enact such a policy on her own authority. And at least five divestment bills are pending in Congress.

Pletka said the legislation was necessary because pension funds, however well intentioned, often are unaware of the holdings of every company they put money into -- especially as the funds invest more globally.

Beverly Hills Mayor Jimmy Delshad, a leader in Southern California’s Iranian Jewish community, celebrated Schwarzenegger’s decision, a month after he helped persuade his City Council to support the divestiture legislation. He called Iran “the greatest threat in the world today.”

“By signing this legislation, the governor is sending a great big message to Iran that we’re watching you,” said Delshad, who immigrated to the United States in 1959.

But Hooshang Amirahmadi, director of the Center for Middle Eastern Studies at Rutgers University in New Jersey and president of the Iranian American Council in Princeton, called the measure “another step in the wrong direction.”

He said the U.S. would lose out to foreign competitors in Iran’s markets for oil, agriculture, pharmaceuticals and other products through boycotts that only inflame tensions.

“What is the purpose of all this? To send a message to Iran that we don’t like you?” Amirahmadi said. “What we are doing is piecemeal, ineffective policy.”

Lengthy process

The legislation would require the pension fund managers to hire a research firm to comb through their investments and root out links to companies involved with the Iranian defense or nuclear industries. The pension fund leaders, who will be charged with implementing the bill, fought the measure.

They say it will cost the state tens of millions of dollars in staffing and lost profits. And they maintain that it will ultimately diminish the state’s clout over rogue companies that might otherwise be persuaded to change their investment policies.

“Our philosophy is you don’t have a voice if you don’t own the stock,” said Pat Macht, spokeswoman for the California Public Employees Retirement System.

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Times staff writer Teresa Watanabe in Los Angeles contributed to this report.