Major Texas Public Pension Funds Invest Millions in Terrorist States
by Ken Bell

Earlier this month the Washington-based Center for Security Policy released a stunning report on public pension fund investments in corporations that do business in terrorist-sponsoring states. “Terrorism Investments of the 50 States” documents that “America’s 100 largest and most prominent public pension systems hold in their portfolios some $200 billion worth of stock in public companies that do business in terrorist-sponsoring states.”

The report, which focuses on investments in six nations (Iran, Iraq, Libya, North Korea, sudan, and Syria; no data was available for Cuba) draws the conclusion that “this investment translates conservatively into $73 billion worth of business with—and financial support for—the regimes in question and vital resources for the terrorists they aid and abet.”

Among the supreme ironies of this situation is that many of these public pension funds are held for policemen and firemen, among the frontline defenders of our homefront against acts of terrorist aggression.

Simultaneously with the release of this report, the Center for Security Policy’s president Frank J. Gaffney, Jr., announced a nationwide grassroots campaign seeking to persuade public pension funds to divest themselves of all investments linked to states sponsoring terrorism. CSP has established a website at www.DivestTerror.org which reproduces the report and provides a means to “empower millions of American investors to play a role in the financial war on terror” through participation in its divestiture campaign.

As of the date of publication of this report, six major Texas public pension funds had reported their holdings to CSP. Among these six, only the Texas Municipal Retirement System, which as a matter of policy invests only in such fixed income instruments as corporate and sovereign bonds, had no exposure to equities of a company with ties to terrorist-sponsoring states.

In contrast, the Austin-headquartered Teacher Retirement System of Texas held stock in 166 companies with terror state links and 16 companies with ties to nuclear proliferator states for a total exposure of $11.8 billion, nearly 20% of their total portfolio. Among the companies involved were Alcatel SA, Total SA, BNP Paribas, ENI and Technip, collectively involved in projects worth a minimum of $34.7 billion in Iran (121 companies), Iraq under Saddam Hussein (24 companies), Libya (43 companies), North Korea (14), Sudan (35) and Syria (45).

Similarly, the Employees’ Retirement System of Texas, also headquartered here in Austin, owned the equities of 105 companies with ties to terror states and 15 companies engaged in activities in proliferator states, with a total exposure of $3 billion, or 26% of total holdings. The $22 billion worth of projects performed by these companies take place in Iran (73 companies), Iraq under Saddam (17), Libya (25), North Korea (8), Sudan (26) and Syria (33).

The remaining three Texas funds examined in the Center for Security Policy’s report are the Houston Police Pension System, with investments in 35 companies at just under $200 million of exposure, or 15% of its total holdings; the Dallas Police & Fire Pension System with 82 companies worth $237 million or 24 % of total holdings; and the San Antonio Fire & Police Pension Fund, with 9% of total holdings or $62.8 million invested in 65 companies.

It is important to emphasize that the Center for Security Policy is raising no allegations of illegality on the part of any of these pension funds. There is no question that their conduct is permissible under the law. CSP is raising, instead, two fundamental questions. The first is whether it is ethical for a fund to continue to invest in the equities of companies which do substantial business in states which sponsor terrorism. During the 1980s many funds divested themselves of the stocks of companies which did business with South Africa because of its abhorrent apartheid policies. Should they continue to invest in Iran as it works to develop nuclear weapons, with Syria as it occupies Lebanon and infiltrates jihadists into Iraq where they kill American soldiers, with North Korea as it starves its own people and threatens us and our allies with nuclear war?

The second point is the more pragmatic case for divestment. Does it make sense to aid, however indirectly, those very states who intend to do us harm? Iran has been waging a unilateral war against us for a quarter of a century. The slave state Sudan is conducting genocide in its Darfur province. But more to the point, perhaps, under extraordinary duress Libya has yielded up its weapons of mass destruction programs and renounced terrorism. Could a strong divestiture campaign put sufficient added pressure on other terror states to induce a change in their behavior as well?

Texas’ public pension funds should look at their investment practices with such questions in mind.

–From the August 2004 Austin Review