Transcript of CNBC Divest Terror debate

The following is a transcipt of a debate on CNBC’s "Morning Call."  The debate featured the Center’s President Frank Gaffney and focused on the need to encourage divestment from companies that do business with state sponsors of terror.  This transcript was produced by the Video Monitoring Services of America, Inc.

LIZ CLAMAN, co-anchor: Anti-terror investing: should states withdraw pension money from companies dealing with the likes of Iran and the Sudan? Some say, ‘absolutely, of course,’ while others say it has no impact at all when you do that. We’ve got a spirited debate coming up.

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CLAMAN: OK. Should state pension plans withdraw, take it out, withdraw the money from companies doing business in rouge nations? Some say yes. Others say it has absolutely no impact. But we will look at both sides of the anti-terror investing issue.

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CLAMAN: All right. I’m going pose a question to you.  What if you found out that your state pension plan was investing in a company that does business with a country that sponsors terrorism? It’s happened enough that now some states are saying no more terror investing. But should states adopt this terror-free investing type of program? State treasurer of Missouri Sarah Steelman is doing just that from Missouri’s pension fund. Frank Gaffney, president of the Center for Security Policy has the list of the so-called "dirty dozen" companies doing business with terror countries. We’ll show you that list.  And William Reinsch, is president of the National Foreign  Trade Council. He says terror-free investing absolutely does not work.  Glad to have all of you.  Treasurer Steelman, I’ll begin with you. Tell us what steps you’ve imposed to make Missouri’s investing terror-free.

Ms. SARAH STEELMAN (Missouri State Treasurer): Well, Liz, we’ve taken a number of steps here in Missouri. We have created the nation’s first terror-free fund which screens out companies that are doing business with governments of countries that are sanctioned by the United States Government. And we’ve also taken steps in our–in our public pension, our state retirement fund, to divest those same kind of companies from that fund because there’s billions of dollars in this country that are going into investments of these companies that are also supporting governments like Iran, Sudan, and Syria and North Korea.  And we feel, in Missouri, that we should–that taxpayer money should not be used for that purpose; plus the fact there’s a security risk involved.

(Graphic on screen): State Sponsors Of Terrorism – Iran, Syria, Sudan, North Korea, Cuba.  Source: U.S. Department of State

Ms. STEELMAN: There’s a shareholder risk to holding these stocks, and as state treasurer, I believe I had a fiduciary responsibility to protect these pension funds.

CLAMAN: And these countries are the ones the US State Department has identified as sponsoring terrorism.  All right. Frank Gaffney, you’ve compiled this so-called list of "dirty dozen" companies. I want to show these companies to our viewers. You say they’re doing business with companies that the State Department says sre bad countries to do business with.

(Graphic on screen): "Dirty Dozen" – Alcatel SA Lundin Petroleum, BNP Paribas Oil & Natrual Gas Corp., ENI SPA PetroChina, Hyundai Siemens AG, Statoil ASA Stolt Nielsen, Technip Coflexip Total SA.

CLAMAN: Why should states divest from these companies?  And I wanted to show our viewers, BNP Paribas, Hyundai, Siemens. A lot of people invest in these companies right now. Why should they get out?

Mr. FRANK GAFFNEY (President, Center for Security Policy): Well, I think we ought to signal to these companies that they should have a choice. They can do business with people trying to kill us or they can do business with us.  If the companies want to continue to do business with our enemies, then I would suggest that our state funds and for that matter a lot of other people, nstitutional investors like college endowments, mutual funds, the college savings plans of the–of the states, the life insurance portfolios, personal investment as well all ought to exercise the option to invest terror-free.  And this list, by the way, Liz, is–is illustrative.  They’re among the most egregious examples of this process. There are probably about 440 or so companies worldwide, many of them like these, blue chips…

CLAMAN: Sure. Sure.

Mr. GAFFNEY: …profitable and so on, but they’re only, I’m afraid, doing this at the moment because they can both do business with America and do business with its enemies.

CLAMAN: OK. So you’re saying use the dollar vote, get out of these companies, and maybe force their hand.

Mr. GAFFNEY: Right.

CLAMAN: William Reinsch, you’re against this terror-free initiative. What do you see as being wrong with doing it?

Mr. WILLIAM RIENSCH (President, National Foreign Trade Council): Well, they don’t work. They get in the way of the president’s effort to try to approach difficult countries multilaterally. When states do them they’re unconstitutional. And to the extent they have an affect, they tend to hurt retired firefighters and police officers in the United States who have already made a lot of sacrifices for their community.

Mr. GAFFNEY: What rott.

CLAMAN: Well, wait a minute here. I want Mr. Reinsch to continue.  So, at some point, though, how–how can you possibly give your money and invest in a company that you find out is maybe selling important secrets or maybe setting up a network of some sort that now that bad country can go ahead and use against the US and our troops?

Mr. REINSCH: The important goal, here, is to get those countries to stop doing bad things. Iran and Sudan are the two that most people are talking about these days. If you look at Iran, which is the country of the month if you will as far as these proposals, the president, I think, is doing the right thing. He’s trying to create a multilateral front to get everybody, our European allies and our Asian friends, particularly those on the Security Council, to all take the same approach toward Iran to impose sanctions multilaterally.  The co–where are the companies on Frank’s list? The companies that are on Frank’s list are in the same countries that we’re trying to get to cooperate with us.

Mr. GAFFNEY: That’s correct.

Mr. REINSCH: And so what he’s proposing, essentially, is to poke a stick in the eye of the very governments that we’re asking for help.

CLAMAN: OK.  Frank.

Mr. GAFFNEY: Well, what I’m actually proposing is that Americans do what their government is doing in it’s own way which is using financial pressure on exactly these same governments and on their companies to stop doing business with companies like Iran at the moment.  What we’re talking about is empowering the American people. And I must tell you, Bill, I’ve heard you shill for our actual and potential enemies for decades but that was really over the top to suggest that Americas firefighters and police officers really want to be investing their pension funds unwittingly in the companies that you represent that are doing business with our enemies? That’s a bridge too far, my friend.

CLAMAN: OK. Well, let me then deflect it to Treasurer Steelman because it is the pension funds of states like Missouri and New Jersey which is interested in doing these types of things.  You know, Treasurer, you start going down that road of moral investment and there are no shortage of countries where there are some real problems with human rights situations. You may find yourself pricing yourself out of many, many companies in many countries if you start trying to figure out who doesn’t have the best human rights records.

Ms. STEELMAN: Well, Liz, contrary to what your guest said, the State Department has sanctioned these countries.  These–these four countries are sanctioned by the State Department as state sponsors of terrorism.

Mr. GAFFNEY: That’s right.

Ms. STEELMAN: And that’s where we’re drawing the line here in Missouri. And since they are, that means that American can’t do business in those countries. So this is completely consistent with what President Bush is doing because we are saying that we don’t want any taxpayer dollars from pension funds going into investments in those countries–in those companies that are helping governments like Iran. I mean, I think we too often forget that this is really about the security of our families and our children and our American soldiers who are fighting over there where terrorism–these governments are funding the terrorism that is–that is going to come back against us. And I can’t believe that your guest has said that he thinks that firefighters would be upset about this. What they’re upset about is when they find out that their taxpayer dollars are going into pension funds supporting governments like Iran.

Mr. GAFFNEY: Absolutely.

CLAMAN: Go ahead, William. Answer that.

Mr. REINSCH: They were upset enough to join us as co-plaintiffs when we sued Illinois for the same matter.  So you might want to talk to your firefighters and police officers before you make some–

Ms. STEELMAN: I have talked our firefighters and police officers.

Mr. REINSCH: Well, so have we and the ones that we’ve talked to are on our side. But, the point about this is–

Mr. GAFFNEY: The leadership is out of touch with its constituents if that’s the case, Bill. And just like your representation that this is unconstitutional, which is not true according to a federal judge, your representing these firefighters in a way that is inimical to their interest and the country’s interests is reprehensible.

CLAMAN: But, Frank, let me–

Mr. REINSCH: This is some kind of 1984-reading of the judge’s decision.

Mr. GAFFNEY: It’s not. It’s what the judge said.

Mr. REINSCH: The decision was to toss the case–toss the Illinois one out of court on the grounds that it was unconstitutional.

Mr. GAFFNEY: Two technical provisions that are (cross talk) despite your best efforts.

CLAMAN: Hold on. Hold on. It doesn’t help when everyone talks over each other.

Ms. STEELMAN: If I may just–Liz–

CLAMAN: Hold on for just a second.  Frank, do you end up punishing the rogue nation or the company who may employ Americans when you pull out of there?

Mr. GAFFNEY: Look. I’m saying give them a choice. If they want to continue doing business with Americans, they don’t have to be punished in anyway. They don’t have to be divested. They don’t have to fire employees. What they have to do is signal to these countries that are trying to kill Americans that they’re not going to continue to enable them with cash flow, with investments, with military or other kinds of material that they’re transferring. That’s the problem here. And I think the beauty of this is it enables Americans to contribute to the war effort and to do so at a time when in particular in Iran it can make a difference.

CLAMAN: William, let me–let me ask you to make investors feel better about something. What if they were to find out that they were investing in a company or they’ve got a company in their pension that is selling something to Iran that could help Iran battle the US in some way? How should they absorb that? How should they feel about that?

Mr. REINSCH: Well, if investors want to make that choice to take their money out of something they disapprove of, that’s fine.

Mr. GAFFNEY: Absolutely.

Mr. REINSCH: They can do that. The legislation that Frank is talking about doesn’t give investors the choice.  It makes that choice for them by fiat of the state government.

Mr. GAFFNEY: In the state level, we’re suggesting that should be (cross talk) over the private level.

Ms. STEELMAN: Look, I–

CLAMAN: Sarah–let Sarah talk, please. Let Sarah talk, please. Sarah.

Ms. STEELMAN: Liz, we–I–I’m an institutional investor as the state treasurer and we made that choice. Our boards have made that choice. We–no on is imposing anything on us. We do it–we are not under any legislative mandate.  We made the choice. And in fact, what we’re advocating is–is taking this to Wall Street. What we did here in Missouri is say give us a terror-free fund. We want to screen out stocks that have direct financial relationships with countries and governments of countries that our State Department has sanctioned: Iran, North Korea, Syria, and–

CLAMAN: OK. The Sudan as well.

Ms. STEELMAN: So what we are doing is we asked for it, Wall Street gave it to us and we–the choice was there. It was totally a choice. We’re not under any mandate.

CLAMAN: And you’re–you’re not the only state. You’re not the only state.  Sarah Steelman, Frank Gaffney, and William Reinsch thank you so much for discussing this.

Mr. GAFFNEY: We need more of those choices.

CLAMAN: Hey, hot-button topic. Thank you.

Mr. GAFFNEY: Thanks, Liz.

Mr. REINSCH: Thank you, Liz.

CLAMAN: We’ll be back with much more on MORNING CALL.

Stay tuned.