97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB0145

 

Introduced 1/18/2011, by Rep. Jack D. Franks

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/1-110.15

    Amends the Illinois Pension Code. Provides that no assets of any retirement system shall be invested in any foreign company that has an equity tie to the government of Iran or its instrumentalities and that is engaged in specified business activities. Exempts any foreign company providing humanitarian aid to the Iranian people through either a governmental or non-governmental organization. Requires the retirement system to sell, redeem, divest, or withdraw any investment held in violation. Provides that these provisions shall not be construed to require the premature or otherwise imprudent sale, redemption, divestment, or withdrawal of an investment but requires such sale, redemption, divestment, or withdrawal to be completed no later than 3 years after the effective date of the amendatory Act. Requires, within 60 days after the effective date of the amendatory Act and annually thereafter, each retirement system to file with the Public Pension Division and the General Assembly a report of all investments that violate these provisions. Provides that these provisions shall be of no effect if (i) the Congress or the President of the United States declares that the government of Iran has ceased to acquire or develop weapons of mass destruction and to support international terrorism or (ii) the United States revokes all sanctions imposed against the government of Iran. Indemnifies trustees and employees of the retirement systems from all claims, demands, suits, actions, damages, judgments, costs, charges, and expenses and against all liability, losses, and damages of any nature resulting from any decision to restrict, reduce, or eliminate investments. Effective immediately.


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FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB0145LRB097 05708 JDS 45772 b

1    AN ACT concerning public employee benefits.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Pension Code is amended by changing
5Section 1-110.15 as follows:
 
6    (40 ILCS 5/1-110.15)
7    Sec. 1-110.15. Transactions prohibited by retirement
8systems; Iran.
9    (a) As used in this Section:
10    "Defense sector" means every industry or company, be it
11private or owned in whole or in part by the government of Iran
12or its instrumentalities, that is involved in the purchase,
13sale, manufacturing, testing, or deployment of military
14supplies and weapons, including every company that provides
15military advisors and non-military personnel or that sells
16strategic information or services to companies that purchase,
17sell, manufacture, test, or deploy military supplies and
18weapons, to the government of Iran or its instrumentalities.
19    "Equity tie" means manufacturing or mining plants,
20employees or advisors, facilities, or an investment,
21fiduciary, monetary, or physical presence of any kind,
22including an ownership stake in one or more subsidiary or joint
23venture with one or more companies in the country.

 

 

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1    "Humanitarian aid" means the provision of goods and
2services intended to relieve human suffering or to promote
3general welfare and health.
4    "Natural gas or petroleum sectors" means those industries
5and companies that have as their business the owning rights to
6oil blocks or the exporting, extracting, producing, refining,
7processing, transporting, selling, or trading of, or exploring
8for, oil or natural gas or constructing, maintaining, or
9operating a pipeline, refinery, or other infrastructure and
10facilitating such activities, including supplies or services
11in support of such activities.
12    "Nuclear sector" means every industry or company, be it
13private or owned in whole or in part by the government of Iran
14or its instrumentalities, that is involved in the purchase,
15sale, development, testing, or deployment of nuclear
16technology of any kind or that provides advisors, researchers,
17scientists, or technicians who are involved in the purchase,
18sale, development, testing, or deployment of nuclear
19technology of any kind.
20    "Retirement system" means the State Employees' Retirement
21System of Illinois, the Judges Retirement System of Illinois,
22the General Assembly Retirement System, the State Universities
23Retirement System, and the Teachers' Retirement System of the
24State of Illinois.
25    (b) Notwithstanding any provision of law to the contrary,
26no assets of any retirement system shall be invested in any

 

 

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1foreign company that has an equity tie to the government of
2Iran or its instrumentalities and is engaged in business
3operations with entities in the defense sector or nuclear
4sector of Iran, or engaged in business operations with entities
5involved in the natural gas or petroleum sectors of Iran, in or
6with that government and its instrumentalities. This
7prohibition shall not apply to the activities of any foreign
8company providing humanitarian aid to the Iranian people
9through either a governmental or non-governmental
10organization.
11    (c) The retirement system, after reviewing the
12recommendations of and consulting with an independent research
13firm that specializes in global security risk for portfolio
14determinations selected by the State Treasurer, shall take
15appropriate action to sell, redeem, divest, or withdraw any
16investment held in violation of subsection (b) of this Section.
17This Section shall not be construed to require the premature or
18otherwise imprudent sale, redemption, divestment, or
19withdrawal of an investment, but such sale, redemption,
20divestment, or withdrawal shall be completed not later than 3
21years following the effective date of this amendatory Act of
22the 97th General Assembly.
23    (d) Within 60 days after the effective date of this
24amendatory Act of the 97th General Assembly, the retirement
25system shall file with the Public Pension Division and the
26General Assembly a report of all investments held on the

 

 

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1effective date of this amendatory Act of the 97th General
2Assembly that are in violation of subsection (b) of this
3Section. Every year thereafter, the retirement system shall
4report on all investments sold, redeemed, divested, or
5withdrawn in compliance with subsection (b) of this Section.
6Each report after the initial report shall provide a
7description of the progress that the retirement system has made
8since the previous report and since the enactment of this
9amendatory Act of the 97th General Assembly in implementing
10subsection (c) of this section.
11    (e) Notwithstanding the other provisions of this Section to
12the contrary, this Section shall be of no effect if:
13        (1) the Congress or the President of the United States,
14    affirmatively and unambiguously, declares, by means
15    including, but not limited to, legislation, executive
16    order, or written certification from the President to
17    Congress, that the government of Iran has ceased to acquire
18    or develop weapons of mass destruction and to support
19    international terrorism; or
20        (2) the United States revokes all sanctions imposed
21    against the government of Iran.
22    (f) Trustees and employees of the retirement systems shall
23be indemnified and held harmless by the State of Illinois from
24all claims, demands, suits, actions, damages, judgments,
25costs, charges, and expenses, including court costs and
26attorney's fees, and against all liability, losses, and damages

 

 

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1of any nature whatsoever that these trustees and employees
2shall or may at any time sustain by reason of any decision to
3restrict, reduce, or eliminate investments pursuant to this
4Section.
5    (a) As used in this Section:
6    "Active business operations" means all business operations
7that are not inactive business operations.
8    "Business operations" means engaging in commerce in any
9form in Iran, including, but not limited to, acquiring,
10developing, maintaining, owning, selling, possessing, leasing,
11or operating equipment, facilities, personnel, products,
12services, personal property, real property, or any other
13apparatus of business or commerce.
14    "Company" means any sole proprietorship, organization,
15association, corporation, partnership, joint venture, limited
16partnership, limited liability partnership, limited liability
17company, or other entity or business association, including all
18wholly owned subsidiaries, majority-owned subsidiaries, parent
19companies, or affiliates of those entities or business
20associations, that exists for the purpose of making profit.
21    "Direct holdings" in a company means all securities of that
22company that are held directly by the retirement system or in
23an account or fund in which the retirement system owns all
24shares or interests.
25    "Inactive business operations" means the mere continued
26holding or renewal of rights to property previously operated

 

 

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1for the purpose of generating revenues but not presently
2deployed for that purpose.
3    "Indirect holdings" in a company means all securities of
4that company which are held in an account or fund, such as a
5mutual fund, managed by one or more persons not employed by the
6retirement system, in which the retirement system owns shares
7or interests together with other investors not subject to the
8provisions of this Section.
9    "Mineral-extraction activities" include exploring,
10extracting, processing, transporting, or wholesale selling or
11trading of elemental minerals or associated metal alloys or
12oxides (ore), including gold, copper, chromium, chromite,
13diamonds, iron, iron ore, silver, tungsten, uranium, and zinc.
14    "Oil-related activities" include, but are not limited to,
15owning rights to oil blocks; exporting, extracting, producing,
16refining, processing, exploring for, transporting, selling, or
17trading of oil; and constructing, maintaining, or operating a
18pipeline, refinery, or other oil-field infrastructure. The
19mere retail sale of gasoline and related consumer products is
20not considered an oil-related activity.
21    "Petroleum resources" means petroleum, petroleum
22byproducts, or natural gas.
23    "Private market fund" means any private equity fund,
24private equity fund of funds, venture capital fund, hedge fund,
25hedge fund of funds, real estate fund, or other investment
26vehicle that is not publicly traded.

 

 

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1    "Retirement system" means the State Employees' Retirement
2System of Illinois, the Judges Retirement System of Illinois,
3the General Assembly Retirement System, the State Universities
4Retirement System, and the Teachers' Retirement System of the
5State of Illinois.
6    "Scrutinized business operations" means business
7operations that have caused a company to become a scrutinized
8company.
9    "Scrutinized company" means the company has business
10operations that involve contracts with or provision of supplies
11or services to the Government of Iran, companies in which the
12Government of Iran has any direct or indirect equity share,
13consortiums or projects commissioned by the Government of Iran,
14or companies involved in consortiums or projects commissioned
15by the Government of Iran and:
16        (1) more than 10% of the company's revenues produced in
17    or assets located in Iran involve oil-related activities or
18    mineral-extraction activities; less than 75% of the
19    company's revenues produced in or assets located in Iran
20    involve contracts with or provision of oil-related or
21    mineral-extraction products or services to the Government
22    of Iran or a project or consortium created exclusively by
23    that government; and the company has failed to take
24    substantial action; or
25        (2) the company has, on or after August 5, 1996, made
26    an investment of $20 million or more, or any combination of

 

 

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1    investments of at least $10 million each that in the
2    aggregate equals or exceeds $20 million in any 12-month
3    period, that directly or significantly contributes to the
4    enhancement of Iran's ability to develop petroleum
5    resources of Iran.
6    "Substantial action" means adopting, publicizing, and
7implementing a formal plan to cease scrutinized business
8operations within one year and to refrain from any such new
9business operations.
10    (b) Within 90 days after the effective date of this
11Section, a retirement system shall make its best efforts to
12identify all scrutinized companies in which the retirement
13system has direct or indirect holdings.
14    These efforts shall include the following, as appropriate
15in the retirement system's judgment:
16        (1) reviewing and relying on publicly available
17    information regarding companies having business operations
18    in Iran, including information provided by nonprofit
19    organizations, research firms, international
20    organizations, and government entities;
21        (2) contacting asset managers contracted by the
22    retirement system that invest in companies having business
23    operations in Iran; and
24        (3) Contacting other institutional investors that have
25    divested from or engaged with companies that have business
26    operations in Iran.

 

 

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1    The retirement system may retain an independent research
2firm to identify scrutinized companies in which the retirement
3system has direct or indirect holdings. By the first meeting of
4the retirement system following the 90-day period described in
5this subsection (b), the retirement system shall assemble all
6scrutinized companies identified into a scrutinized companies
7list.
8    The retirement system shall update the scrutinized
9companies list annually based on evolving information from,
10among other sources, those listed in this subsection (b).
11    (c) The retirement system shall adhere to the following
12procedures for companies on the scrutinized companies list:
13        (1) The retirement system shall determine the
14    companies on the scrutinized companies list in which the
15    retirement system owns direct or indirect holdings.
16        (2) For each company identified in item (1) of this
17    subsection (c) that has only inactive business operations,
18    the retirement system shall send a written notice informing
19    the company of this Section and encouraging it to continue
20    to refrain from initiating active business operations in
21    Iran until it is able to avoid scrutinized business
22    operations. The retirement system shall continue such
23    correspondence semiannually.
24        (3) For each company newly identified in item (1) of
25    this subsection (c) that has active business operations,
26    the retirement system shall send a written notice informing

 

 

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1    the company of its scrutinized company status and that it
2    may become subject to divestment by the retirement system.
3    The notice must inform the company of the opportunity to
4    clarify its Iran-related activities and encourage the
5    company, within 90 days, to cease its scrutinized business
6    operations or convert such operations to inactive business
7    operations in order to avoid qualifying for divestment by
8    the retirement system.
9        (4) If, within 90 days after the retirement system's
10    first engagement with a company pursuant to this subsection
11    (c), that company ceases scrutinized business operations,
12    the company shall be removed from the scrutinized companies
13    list and the provisions of this Section shall cease to
14    apply to it unless it resumes scrutinized business
15    operations. If, within 90 days after the retirement
16    system's first engagement, the company converts its
17    scrutinized active business operations to inactive
18    business operations, the company is subject to all
19    provisions relating thereto.
20    (d) If, after 90 days following the retirement system's
21first engagement with a company pursuant to subsection (c), the
22company continues to have scrutinized active business
23operations, and only while such company continues to have
24scrutinized active business operations, the retirement system
25shall sell, redeem, divest, or withdraw all publicly traded
26securities of the company, except as provided in paragraph (f),

 

 

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1from the retirement system's assets under management within 12
2months after the company's most recent appearance on the
3scrutinized companies list.
4    If a company that ceased scrutinized active business
5operations following engagement pursuant to subsection (c)
6resumes such operations, this subsection (d) immediately
7applies, and the retirement system shall send a written notice
8to the company. The company shall also be immediately
9reintroduced onto the scrutinized companies list.
10    (e) The retirement system may not acquire securities of
11companies on the scrutinized companies list that have active
12business operations, except as provided in subsection (f).
13    (f) A company that the United States Government
14affirmatively declares to be excluded from its present or any
15future federal sanctions regime relating to Iran is not subject
16to divestment or the investment prohibition pursuant to
17subsections (d) and (e).
18    (g) Notwithstanding the provisions of this Section,
19paragraphs (d) and (e) do not apply to indirect holdings in a
20private market fund. However, the retirement system shall
21submit letters to the managers of those investment funds
22containing companies that have scrutinized active business
23operations requesting that they consider removing the
24companies from the fund or create a similar actively managed
25fund having indirect holdings devoid of the companies. If the
26manager creates a similar fund, the retirement system shall

 

 

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1replace all applicable investments with investments in the
2similar fund in an expedited timeframe consistent with prudent
3investing standards.
4    (h) The retirement system shall file a report with the
5Public Pension Division of the Department of Financial and
6Professional Regulation that includes the scrutinized
7companies list within 30 days after the list is created. This
8report shall be made available to the public.
9    The retirement system shall file an annual report with the
10Public Pension Division, which shall be made available to the
11public, that includes all of the following:
12        (1) A summary of correspondence with companies engaged
13    by the retirement system under items (2) and (3) of
14    subsection (c).
15        (2) All investments sold, redeemed, divested, or
16    withdrawn in compliance with subsection (d).
17        (3) All prohibited investments under subsection (e).
18        (4) A summary of correspondence with private market
19    funds notified under subsection (g).
20    (i) This Section expires upon the occurrence of any of the
21following:
22        (1) The United States revokes all sanctions imposed
23    against the Government of Iran.
24        (2) The Congress or President of the United States
25    declares that the Government of Iran has ceased to acquire
26    weapons of mass destruction and to support international

 

 

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1    terrorism.
2        (3) The Congress or President of the United States,
3    through legislation or executive order, declares that
4    mandatory divestment of the type provided for in this
5    Section interferes with the conduct of United States
6    foreign policy.
7    (j) With respect to actions taken in compliance with this
8Act, including all good-faith determinations regarding
9companies as required by this Act, the retirement system is
10exempt from any conflicting statutory or common law
11obligations, including any fiduciary duties under this Article
12and any obligations with respect to choice of asset managers,
13investment funds, or investments for the retirement system's
14securities portfolios.
15    (k) Notwithstanding any other provision of this Section to
16the contrary, the retirement system may cease divesting from
17scrutinized companies pursuant to subsection (d) or reinvest in
18scrutinized companies from which it divested pursuant to
19subsection (d) if clear and convincing evidence shows that the
20value of investments in scrutinized companies with active
21scrutinized business operations becomes equal to or less than
220.5% of the market value of all assets under management by the
23retirement system. Cessation of divestment, reinvestment, or
24any subsequent ongoing investment authorized by this Section is
25limited to the minimum steps necessary to avoid the contingency
26set forth in this subsection (k). For any cessation of

 

 

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1divestment, reinvestment, or subsequent ongoing investment
2authorized by this Section, the retirement system shall provide
3a written report to the Public Pension Division in advance of
4initial reinvestment, updated semiannually thereafter as
5applicable, setting forth the reasons and justification,
6supported by clear and convincing evidence, for its decisions
7to cease divestment, reinvest, or remain invested in companies
8having scrutinized active business operations. This Section
9does not apply to reinvestment in companies on the grounds that
10they have ceased to have scrutinized active business
11operations.
12    (l) If any provision of this Section or its application to
13any person or circumstance is held invalid, the invalidity does
14not affect other provisions or applications of the Act which
15can be given effect without the invalid provision or
16application, and to this end the provisions of this Section are
17severable.
18(Source: P.A. 95-616, eff. 1-1-08; 95-876, eff. 8-21-08.)
 
19    Section 99. Effective date. This Act takes effect upon
20becoming law.