Title
An Ordinance of the County of Allegheny, Commonwealth of Pennsylvania, amending and supplementing the Allegheny County Code of Ordinances, through the creation of a new Chapter 492, entitled "Contract Policy," in order to establish a County policy for contracting with companies doing business with state sponsors of terrorism.
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WHEREAS, in 2001, the United States Securities and Exchange Commission determined that companies with business operations in terrorist-sponsoring states are exposed to a special risk category known as Global Security Risk, which is the risk to share value and corporate reputation stemming from the intersection of a publicly traded company's international business activities and security-related concerns, such as terrorism and weapons proliferation; and
WHEREAS, in response to the financial risk posed by investments in companies doing business with a state that sponsors terrorists, the Securities and Exchange Commission
established its Office of Global Security Risk to provide for enhanced disclosure of material information regarding such companies; and
WHEREAS, according to a former chair of the Securities and Exchange Commission, the fact that a foreign company is doing material business with a country, government or entity on the Office of Foreign Assets Control's (OFAC) sanctions list is, in the Securities and Exchange Commission staff's view, substantially likely to be significant to a reasonable
investor's decision about whether to invest in that company; and
WHEREAS, a 2006 report by the United States House of Representatives states that "a company's association with sponsors of terrorism and human rights abuses, no matter how
large or small, can have a materially adverse result on a public company's activities, financial condition, earnings, and stock prices, all of which can negatively affect the value of an investment;" and
WHEREAS, on July 23, 2004, the United States Congress declared that "the atrocities unfolding in Darfur, Sudan, are genocide;" and
WHEREAS, on September 9, 2004, Secretary of State Colin L. Powell told the United States Senate Foreign Relations Committee that "genocide has occurred and may still be
occurring in Darfur" and "the Government of Sudan and the Janjaweed bear responsibility;" and
WHEREAS, on September 21, 2004, addressing the United Nations General Assembly, President George W. Bush affirmed the Secretary of State's findings and stated, "At this hour, the world is witnessing terrible suffering and horrible crimes in the Darfur region of Sudan, crimes my government has concluded are genocide; and"
WHEREAS, on December 7, 2004, Congress found that "the Government of Sudan has restricted access by humanitarian and human rights workers to the Darfur area through intimidation by military and security forces, and through bureaucratic and administrative obstruction, in an attempt to inflict the most devastating harm on those individuals displaced from their villages and homes without any means of sustenance or shelter;" and
WHEREAS, on September 25, 2006, Congress reaffirmed that "the genocide unfolding in the Darfur region of Sudan is characterized by acts of terrorism and atrocities directed
against civilians, including mass murder, rape, and sexual violence committed by the Janjaweed and associated militias with the complicity and support of the National Congress Party-led faction of the Government of Sudan;" and
WHEREAS, on September 26, 2006, the United States House of Representatives stated that "an estimated 300,000 to 400,000 people have been killed by the Government of Sudan and its Janjaweed allies since the Darfur crisis began in 2003, more than 2,000,000 people have been displaced from their homes, and more than 250,000 people from Darfur remain in refugee camps in Chad;" and
WHEREAS, Iran tops the United States State Department's list of state sponsors of terrorism, funding such groups as Hamas, Hezbollah and Islamic Jihad, as well as fueling the
insurgency in Iraq via its Al-Qaeda force; and
WHEREAS, the United States imposed sanctions on Iran by designating the Islamic Revolutionary Guard Corps, its Al-Qaeda Force and three state-owned banks as weapons
proliferators and supporters of terrorism; and
WHEREAS, the United Nations Security Council has three times voted unanimously to impose sanctions on Iran for its failure to suspend its uranium enrichment activities and called for an embargo on Iranian arms exports, a freeze on assets abroad of an expanded list of individuals and companies involved in Iran's nuclear and ballistic missile programs and barring new grants or loans to Iran except for humanitarian and developmental purposes; and
WHEREAS, foreign entities have invested in Iran's petroleum energy sector despite United States and United Nations sanctions against Iran; and
WHEREAS, although North Korea was removed from the List of State Sponsors of Terrorism in late 2008 in order to facilitate an international agreement on monitoring North Korean nuclear arms development, the country has been deemed to have "repeatedly provided support for acts of international terrorism" since 1987; and
WHEREAS, it is a fundamental responsibility of Allegheny County to decide where, how and by whom financial resources in its control should be invested, taking into account numerous pertinent factors; and
WHEREAS, divestiture should be considered with the intent to improve investment performance and, by the rules of prudence, fiduciaries must take into account all relevant substantive factors in arriving at an investment decision; and
WHEREAS, the County is deeply concerned about investments in publicly traded companies that have investments in state sponsors of terrorist activities as a financial risk to shareholders; and
WHEREAS, if it were to invest publicly raised revenue in companies having investments in state sponsors of terrorism, the County could put the funds they oversee at financial risk; and
WHEREAS, divestiture from markets that are vulnerable to embargo, loan restrictions and sanctions from the United States and the international community, including the United
Nations Security Council, is in accordance with the rules of prudence; and
WHEREAS, to protect the County's assets, it is in the best interest of the County to enact a statutory prohibition regarding the investments in companies doing business with state sponsors of terrorism.
The Council of the County of Allegheny hereby enacts as follows:
Section 1.
The Allegheny County Code of Ordinances, is hereby amended through the creation of a new Chapter 492, entitled "Contract Policy," and comprised as follows:
§491-1. Definitions.
The following words and phrases when used in this Chapter shall have the meanings given to them in this section unless the context clearly indicates otherwise:
"Business activities." Owning or controlling property or assets located in, having employees or facilities located in, providing goods or services to, having distribution agreements with, issuing credit or loans to, purchasing bonds or commercial paper issued by, investing in or having equity ties to or with Iran, Sudan or any company domiciled in Iran or Sudan or their affiliates.
"Company." Any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company or other entity or business association that exists for the purpose of making a profit.
"County Entity." Allegheny County, any County Authority delineated in §5-203.01 of the Administrative Code of Allegheny County, any retained County Agency delineated in §5-215-01 of the Administrative Code of Allegheny County, the Allegheny County Retirement Board, or the Allegheny County Investment Board.
"Direct holdings." All securities of a company that are held directly by the public fund or in an account or fund in which the public fund owns all shares and interests.
"Government of Sudan." The government in Khartoum, Sudan, which is led by the National Congress Party, formerly known as the National Islamic Front, or any successor government formed on or after October 13, 2006, including the coalition the National Unity Government agreed upon in the Comprehensive Peace Agreement for Sudan. The term does not include the regional government of southern Sudan.
"Inactive business activities." The continued holding or renewal of rights to property previously operated for the purpose of generating revenues but not presently deployed for
that purpose.
"Indirect holdings." All securities of a company that are held in an account or fund, such as a mutual fund, managed by one or more persons not employed by the public fund, in which the public fund owns shares or interests together with other investors not subject to the provisions of this Chapter.
"List of State Sponsors of Terrorism." The list of countries designated by the United States Secretary of State as having repeatedly provided support for acts of international terrorism as reported annually in Country Reports on Terrorism in accordance with 22 U.S.C. § 2656(f).
"Marginalized populations of Sudan." Include, but are not limited to, the portion of the population in the Darfur region that has been genocidally victimized; the portion of the
population of southern Sudan victimized by Sudan's North-South civil war; the Beja, Rashidiya and other similarly underserved groups of eastern Sudan; the Nubian and other similarly underserved groups in Sudan's Abyei, Southern Blue Nile and Nuba Mountain regions; and the Amri, Hamadab, Manasir and other similarly underserved groups of northern Sudan.
"Military equipment." Weapons, arms, military supplies and equipment that may be used readily for military purposes, including, but not limited to, radar systems or military-grade transport vehicles; or supplies or services sold or provided directly or indirectly to any force actively participating in armed conflict in Sudan.
"Mineral extraction activities." Include exploring, extracting, processing, transporting or wholesale selling or trading of elemental minerals or associated metal alloys or oxides (ore), including gold, copper, chromium, chromite, diamonds, iron, iron ore, silver, tungsten, uranium and zinc, as well as facilitating such activities, including by providing
supplies or services in support of such activities.
"Oil-related activities." Include, but are not limited to, owning rights to oil blocks; exporting, extracting, producing, refining, processing, exploring for, transporting, selling or trading of oil; constructing, maintaining or operating a pipeline, refinery or other oil field infrastructure; and facilitating such activities, including by providing supplies or
services in support of such activities, provided that the mere retail sale of gasoline and related consumer products shall not be considered oil-related activities.
"Power production activities." Business operations that involve a project commissioned by the National Electricity Corporation (NEC) of Sudan or other similar government of Sudan entity whose purpose is to facilitate power generation and delivery, including, but not limited to, establishing power-generating plants or hydroelectric dams, selling or installing components for the project, providing service contracts related to the installation or maintenance of the project, as well as facilitating such activities, including by providing supplies or services in support of such activities.
"Scrutinized company." Any of the following:
(1) Any company headquartered outside the United States that has:
(i) Invested at least $10,000,000 in holdings located in any country appearing on the List of State Sponsors of Terrorism; or
(ii) Invested at least $10,000,000 in holdings located within North Korea, Iran or Sudan; or
(iii) Appears on the FTSE/Conflict Securities Advisory Group "Terror Free All-World Ex U.S. Index" with an index weight score below the median score of all indexed companies.
(2) Any company headquartered outside the United States that has business operations that involve contracts with or provision of supplies or services to the government of Sudan, companies in which the government of Sudan has any direct or indirect equity share, government of Sudan-commissioned consortiums or projects, or companies involved in government of Sudan-commissioned consortiums or projects; and
(i) More than 10% of the company's revenue or assets linked to Sudan involve oil-related activities or mineral extraction activities; less than 75% of the company's revenues or assets linked to Sudan involve contracts with or provision of oil-related or mineral extracting products or services to the regional government of southern Sudan or a project or consortium created exclusively by that regional government; and the company has failed to take substantial action specific to Sudan; or
(ii) More than 10% of the company's revenues or assets linked to Sudan involve power production activities; less than 75% of the company's power production activities include projects whose intent is to provide power or electricity to the marginalized populations of Sudan; and the company has failed to take substantial action specific to Sudan; or
(iii) The company supplies military equipment within Sudan, unless it clearly shows that the military equipment cannot be used to facilitate offensive military actions in Sudan or the company's implements rigorous and verifiable safeguards to prevent use of that equipment by forces actively participating in armed conflict, for example, through post-sale tracking of such equipment by the company, certification from a reputable and objective third party that such equipment is not being used by a party participating in armed conflict in Sudan, or sale of such equipment solely to the regional government of southern Sudan or any internationally recognized peacekeeping force or humanitarian organization.
The term "scrutinized company" does not include any company that is a social development company.
"Social development company." A company whose primary purpose in any nation on the List of State Sponsors of Terrorism is to provide humanitarian goods or services, including medicine or medical equipment, agricultural supplies or infrastructure; educational opportunities; journalism-related activities; information or information materials; spiritual-related activities; services of a purely clerical or reporting nature; food, clothing or general consumer goods.
"Substantial action." Adopting, publicizing and implementing a formal plan to cease scrutinized business operations within one year and to refrain from any such
new business operations.
"Sudan." The Democratic Republic of Sudan.
§491-2. Contracts forbidden.
Under no circumstances shall any County Entity enter a contractual agreement of any kind with any scrutinized company. In the event that a County Entity is a party to an existing contract with a scrutinized company as of the effective date of this Section, the term of such contract shall not be renewed, renegotiated, or otherwise extended.
Section 2. Effective date.
The provisions of this Ordinance shall take effect upon final approval.
Section 3. If any provision of this Ordinance shall be determined to be unlawful, invalid, void or unenforceable, then that provision shall be considered severable from the remaining provisions of this Ordinance which shall be in full force and effect.