Robinson Testifies Before California Legislature on Global “Bad Actors” Penetrating State Portfolios

In testimony delivered last week (excerpts attached) alongside high-ranking officials of California’s Public Employees Retirement System (CalPERS) pension fund, a delegation invited by State Sen. Ray Haynes and led by Casey Institute Chair Roger W. Robinson, Jr. illuminated for members of the California state legislature’s Joint Legislative Audit Committee (JLAC) a distressing prospect: Many millions of dollars in CalPERS’ and other American investment portfolios are being unwittingly invested in companies engaged in behavior inconsistent with this country’s fundamental human rights precepts and national security interests.

Thanks in no small measure to Mr. Robinson’s educational efforts on this front — and those of others like Dr. Paul Marshall of Freedom House and Brian Kennedy of the Claremont Institute, who appeared with him at the JLAC hearing — investors have begun to "vote with their feet" by divesting equity holdings in such companies. Notably, in the course of that 5 January hearing, representatives of CalPERS made the stunning revelation that only five days before, the fund had liquidated its entire position (i.e., 203,500 shares valued at more than $5 million) in Talisman Energy, Inc. That Canadian firm has become notorious for its estimated $750-800 million investment in the oil infrastructure of slavery- and terrorist-sponsoring Sudan.

While the official line was that this step was taken as a function of normal year-end "indexing," the real impetus was clear: By mid-December, the stock experienced a roughly 29% decline from its peak value on 6 September1 — despite reasonably strong earnings — thanks to an international divestment campaign waged against a company seen to be providing indispensable new revenue streams to one of the planet’s most odious regimes. These funds are enabling it to prosecute its sixteen-year-old, genocidal war against Christians and animists in southern Sudan. It seems no coincidence that sell-offs of Talisman stock were also taken during the past sixty days by the world’s largest pension fund, TIAA-CREF, and Texas Teacher’s Retirement System.

The Joint Legislative Audit Committee hearing suggests that the State of California and its public employee retirement funds may play a critical role in fashioning a template for a truly national effort to introduce new national security- and human rights-minded "due diligence" into debt and equity purchasing decisions. The Committee has given a deadline of 21 January for CalPERS to respond to ten hard-hitting questions aimed at better understanding the process employed by that fund’s managers in making international debt and equity purchasing decisions (including the account histories of several questionable holdings). Answers to these questions are expected to inform a follow-on JLAC hearing presently scheduled for 1 February.

1A similar phenomenon seems to be at work in connection with a $5.5-7 billion initial public offering expected to be made in February by the China National Petroleum Company (aka: "PetroChina"). According to the Financial Times of 12 January, the price-earnings (p/e) ratio of the prospective offering is anticipated to be in the range of 10 times expected Year 2000 earnings for the parent company. While such a p/e ratio falls into line with some high-tech and other recent IPO’s, a ratio of this nature falls well-short of that of most global energy companies, which are, according to a Bloomberg energy industry composite, priced on average at 26 times earnings. Evidently, this sort of deal-sweetening is deemed essential to market an increasingly controversial offering. See the Casey Institute’s Security Forum entitled The Bloom Comes Off the Rose of ‘China, Inc.’ (No. 00-F 04, 11 January 2000).