Bipartisan Congressional Letter Is Wake-up Call To State Officials Re: Portfolio Security Concerns

Investor’s Business Daily Takes on ‘CalPERS’

(Washington, D.C.): On Monday, Representatives Spencer Bachus
(R-AL) and Dennis
Kucinich (D-LA) sent the State Treasurers and Attorney Generals of every one of the
50 states a
letter putting them on notice that they — or organizations for which they each have fiduciary
responsibility — could unwittingly be helping to finance activities harmful to U.S. security
interests. It is to be hoped that the Bachus-Kucinich letter will prompt these state officials to
examine with care the extent to which foreign entities that have ties to their respective host
government’s military and intelligence agencies are attracting substantial funding on the U.S.
capital markets, a largely unprecedented national security challenge first identified by the Casey
Institute over three years ago. ¹

Notice Now Served

In addition to delineating the substance of this complex subject matter, the letter describes
bipartisan legislation the two authors recently introduced, the “U.S. Market Security Act of
1999″ (H.R. 2204). They describe the purpose of this bill as follows:

Our legislation would advance the sensible objectives of strengthened disclosure and
monitoring by establishing a quarterly reporting mechanism and an Office of National
Security at the Securities and Exchange Commission. It is designed to do so in a
way that avoids disruption of the free flow of capital into and out of the United
States. H.R. 2204 would, nonetheless, help those of us in the Congress with financial-
and security-related oversight responsibilities to obtain a better understanding of the
scope of this new national security challenge and how it might be remedied primarily
through greater awareness and volunteerism.

‘CalPERS’: A Case In Point?

Reinforcing the need for this type of disclosure-oriented legislation, and a security-minded
review of state portfolios, was a front page article in the 27 July edition of the Investor’s
Business Daily (IBD) (see attached). It details how the Nation’s largest public pension
fund, the
California Public Employees’ Retirement System (CalPERS) holds offerings from several
Chinese firms with alleged direct or indirect ties to the People’s Liberation Army and/or Chinese
intelligence agencies.

The Bottom Line

The bipartisan Cox Committee and Deutch
Commission have recently reaffirmed the
seriousness of this major, new national security concern, the latter doing so in the context of
possible funding of proliferators of weapons of mass destruction. The Casey Institute strongly
recommends that state governments waste no time in initiating comprehensive audits of their
respective pension and investment funds to ensure that they have not been penetrated by the
ever-more sophisticated funding mechanisms of actual or potential adversaries of this country.

¹ See the Casey Institute Perspective entitled
If You like the Rigging of the Lebed Dismissal,
You’ll Love the Rigging of the Global Credit and Securities Markets ( href=”index.jsp?section=papers&code=96-C_100″>No. 96-C 100, 17
October 1996).