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PRESS RELEASEOffice of Missouri State
Treasurer |
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PRESS RELEASEOffice of Missouri State
Treasurer |
JEFFERSON CITY – A 10-month effort by Missouri Treasurer Sarah Steelman to ensure Missouri’s tax dollars are not invested in companies or countries that are tied to terrorism has resulted in stronger polices and national media attention on her efforts to address the problem.
On Tuesday, Steelman served as a panelist on CNBC’s “On the Money” program, which focused on American, European and Asian companies that invest in Iran – a nation sanctioned by the U. S. as a state sponsor of terrorism. The program was hosted by Dylan Ratigan. Also appearing were Roger W. Robinson, Jr., president and CEO of Conflict Securities Advisory Group, and Kenneth Timmerman, author of Showdown With Iran.
“This is a huge problem facing every public investment fund in the nation,” Steelman said. “We should not be investing money in companies or countries that are supporting terror, placing both these investments and our citizens at risk.”
In the United States, approximately $3 trillion is held in public pension funds. These funds are invested in diverse and complex portfolios to balance risk and return. As much as one-fourth of these funds are placed in international or multinational companies that operate outside the restrictions of U.S. law.
No American company or citizen can legally have direct equity ties with Iran, or any other foreign nation sanctioned by the U. S. for sponsoring terrorism. The penalty for doing so is $100,000 in fines and up to 10 years in prison. Yet, international companies, multinational companies and even foreign subsidiaries of U. S. companies are not subject to those restrictions.
When asked about Halliburton, Steelman said “I don’t care if its Halliburton or any other company, if they are directly supporting terrorism or doing business with a sanctioned nation, we should not be investing in that company.”
In January, Steelman reviewed the Treasury’s investment policies and replaced Missouri’s top broker-dealer for repurchase agreements. That firm was owned by BNP, the French bank that managed the corrupt Iraqi oil-for-food program. BNP was also engaged in helping raise billions in loans for Iran and has had employees in Tehran for many years.
“It was completely unacceptable for our state to have as its top broker-dealer a firm owned by a bank that was raising billions for a nation that is sanctioned as a state sponsor of terrorism,” Steelman said. “One small policy change stopped that, and achieved a higher yield on this type of investment with other brokers.”
Steelman then began a comprehensive review of both investments placed by her office and by the Missouri State Employee’s Retirement System, MOSERS, on which she serves as a member of the board of trustees.
“Like most states, MOSERS had a policy that prohibited investments in companies listed by the U. S. as sponsors of terrorism,” Steelman said. “But federal lists contain only bogus charities and front companies no state would invest in. Other federal agencies, such as the SEC, note that federal law does not allow them to give investment advice to states or other public investors.
Last month, after extensive debate and research, the MOSERS board unanimously adopted a multiple-level screening process that uses existing staff and outside research companies to screen the investments to ensure they aren’t linked to countries or companies tied to terrorist activities. The process also requires due diligence research to now include any exposure the investments may face from terrorism-related risks.
“The new policy and process gives us the tools we need to make the best possible investment decisions,” Steelman said. “It empowers us to protect both our investments and our citizens against global security risks tied to terrorists and rogue states.”
Steelman noted that this policy pertains to MOSERS’ directly held investments – stocks that can be directly sold as individual holdings. Yet public dollars in MOSERS, the State and other public pension systems in Missouri are also invested in commingled funds that contain hundreds of different companies. Structured in much the same way as a mutual fund, commingled funds present a much greater challenge because a pro-rata share of the entire fund – not just a single stock – is held by each investor, making it more difficult to identify and divest individual companies tied to sanctioned nations or companies involved in terrorism.
To address the added challenge of public investments in commingled funds, Steelman has requested bids from different fund managers to offer commingled funds to the Missouri Investment Trust that are prescreened against any companies tied to terror. No state has yet done this, but Steelman says she believes Wall Street will respond if the demand for a terror-safe fund exists among public investors in the United States.
“I am confident the highly competitive investor market will quickly realize the appeal a terror-safe index fund would have for states, local governments and other investors,” Steelman said. “Such a fund would have tremendous appeal for public investors who want to ensure the share value of their pension funds or portfolios are not as risk by foreign investments tied to terrorist groups or sanctioned nations.”
Responses to the request for proposal for terror-safe international equity funds are due to the Missouri Treasurer’s Office by Nov. 7.
“Managing these funds requires making investment decisions to protect the citizens, protect the investment and protect the investment return,” Steelman said. “This means we must make sure the investments aren’t jeopardized by the threat terrorism poses to share value.”