HF 1332

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to the State Board of Investment; requiring divestment from certain
investments relating to Sudan; proposing coding for new law in Minnesota
Statutes, chapter 11A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [11A.243] INVESTMENT IN SUDAN.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the following items
have the meanings given them in this subdivision.
new text end

new text begin (b) "Active business operations" means all business operations that are not inactive
business operations.
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new text begin (c) "Business operations" means engaging in commerce in any form in Sudan,
including by acquiring, developing, maintaining, owning, selling, possessing, leasing, or
operating equipment, facilities, personnel, products, services, personal property, real
property, or any other apparatus of business or commerce.
new text end

new text begin (d) "Company" means any sole proprietorship, organization, association,
corporation, partnership, joint venture, limited partnership, limited liability partnership,
limited liability company, or other entity or business association, including all wholly
owned subsidiaries, majority-owned subsidiaries, parent companies, or affiliates of such
entities or business associations, that exists for profit-making purposes.
new text end

new text begin (e) "Complicit" means taking actions during any preceding 20-month period that
have directly supported or promoted the genocidal campaign in Darfur, including, but not
limited to, preventing Darfur's victimized population from communicating with each
other, encouraging Sudanese citizens to speak out against an internationally approved
security force for Darfur, actively working to deny, cover up, or alter the record on human
rights abuses in Darfur, or other similar actions.
new text end

new text begin (f) "Direct holdings" in a company means all securities of that company held directly
by the State Board of Investment or in an account or fund in which the State Board of
Investment owns all shares or interests.
new text end

new text begin (g) "Government of Sudan" means 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
national unity government agreed upon in the comprehensive peace agreement for Sudan,
and does not include the regional government of southern Sudan.
new text end

new text begin (h) "Inactive business operations" means the mere continued holding or renewal of
rights to property previously operated for the purpose of generating revenues but not
presently deployed for such purpose.
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new text begin (i) "Indirect holdings" in a company means all securities of that company held in an
account or fund, such as a mutual fund, managed by one or more persons not employed by
the State Board of Investment, in which the State Board of Investment owns shares or
interests together with other investors not subject to the provisions of this section.
new text end

new text begin (j) "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.
new text end

new text begin (k) "Military equipment" means weapons, arms, military supplies, and equipment
that readily may be used 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.
new text end

new text begin (l) "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 the
provision of supplies or services in support of such activities.
new text end

new text begin (m) "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 the provision of
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.
new text end

new text begin (n) "Power production activities" means any business operation that involves 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 the provision of supplies or services in support of such activities.
new text end

new text begin (o) "Scrutinized company" means any company that meets the criteria in clause
(1), (2), or (3):
new text end

new text begin (1) the company has business operations that involve contracts with or provision
of supplies or services to:
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new text begin (i) the government of Sudan;
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new text begin (ii) companies in which the government of Sudan has any direct or indirect equity
share;
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new text begin (iii) government of Sudan-commissioned consortiums or projects; or
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new text begin (iv) companies involved in government of Sudan-commissioned consortiums or
projects; and
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new text begin (A) more than ten percent of the company's revenues or assets linked to Sudan
involve oil-related activities or mineral extraction activities; less than 75 percent 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; or
new text end

new text begin (B) more than ten percent of the company's revenues or assets linked to Sudan
involve power production activities; less than 75 percent 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;
new text end

new text begin (2) the company is complicit in the Darfur genocide; or
new text end

new text begin (3) 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 implements rigorous and verifiable safeguards to prevent use of that
equipment by forces actively participating in armed conflict, for example, through postsale
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.
new text end

new text begin Notwithstanding any other provision to the contrary in this section, a social development
company that is not complicit in the Darfur genocide shall not be considered a scrutinized
company.
new text end

new text begin (p) "Social development company" means a company whose primary purpose
in Sudan 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 that are unrelated to oil-related activities, mineral extraction activities,
or power production activities.
new text end

new text begin (q) "Substantial action" means adopting, publicizing, and implementing a formal
plan to cease scrutinized business operations within one year and to refrain from any such
new business operations; undertaking significant humanitarian efforts on behalf of one or
more marginalized populations of Sudan; or through engagement with the government
of Sudan, materially improving conditions for the genocidally victimized population
in Darfur.
new text end

new text begin Subd. 2. new text end

new text begin Identification of companies. new text end

new text begin (a) Within 90 days following the date of
enactment of this section, the State Board of Investment shall make its best efforts to
identify all scrutinized companies in which the State Board of Investment has direct or
indirect holdings or could possibly have such holdings in the future. Such efforts shall
include, as appropriate:
new text end

new text begin (1) reviewing and relying, as appropriate in the State Board of Investment's
judgment, on publicly available information regarding companies with business operations
in Sudan, including information provided by nonprofit organizations, research firms,
international organizations, and government entities;
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new text begin (2) contacting asset managers contracting with the State Board of Investment who
invest in companies with business operations in Sudan; or
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new text begin (3) contacting other institutional investors that have divested from or engaged with
companies that have business operations in Sudan.
new text end

new text begin (b) At the first meeting of the State Board of Investment after it has completed
the requirements of paragraph (a), the State Board of Investment shall assemble a list
of scrutinized companies.
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new text begin (c) The State Board of Investment shall update the scrutinized companies list each
quarter based on continuing information, including, but not limited to, information from
sources identified in paragraph (a).
new text end

new text begin Subd. 3. new text end

new text begin Engagement of scrutinized companies. new text end

new text begin The State Board of Investment
shall use the following procedure for companies on the scrutinized companies list:
new text end

new text begin (a) After completing the list required under subdivision 2, paragraph (a), the State
Board of Investment shall immediately identify the companies on the list in which the
State Board of Investment owns direct or indirect holdings.
new text end

new text begin (b) For each company identified in paragraph (a) with only inactive business
operations, the State Board of Investment shall send a written notice to the company with
information about this section and encourage it to continue to refrain from initiating active
business operations in Sudan until it is able to avoid scrutinized business operations. The
State Board of Investment shall continue such correspondence on a semiannual basis.
new text end

new text begin (c) For each company newly identified in paragraph (a) with active business
operations, the State Board of Investment shall send a written notice informing the
company of its scrutinized company status and that it may become subject to divestment
by the State Board of Investment. The notice shall offer the company the opportunity to
clarify its Sudan-related activities and shall encourage the company, within 90 days, to
either cease its scrutinized business operations or convert such operations to inactive
business operations in order to avoid qualifying for divestment by the State Board of
Investment.
new text end

new text begin (d) If, within 90 days following the State Board of Investment's first engagement
with a company under paragraph (c), that company ceases scrutinized business operations,
the company shall be removed from the scrutinized companies list and the provisions of
this section shall cease to apply to it unless it resumes scrutinized business operations. If,
within 90 days following the State Board of Investment's first engagement, the company
converts its scrutinized active business operations to inactive business operations, the
company shall be subject to all provisions of this section relating to inactive business
operations.
new text end

new text begin Subd. 4. new text end

new text begin Divestment. new text end

new text begin (a) If, after 90 days following the State Board of Investment's
first engagement with a company under subdivision 3, paragraph (c), the company
continues to have scrutinized active business operations, and only while the company
continues to have scrutinized active business operations, the State Board of Investment
shall sell, redeem, divest, or withdraw all publicly traded securities of the company, except
as provided in subdivisions 5 to 11, according to the following schedule:
new text end

new text begin (1) at least 50 percent of the assets in the company shall be removed from the State
Board of Investment's assets under management by nine months after the company's most
recent appearance on the scrutinized companies list; and
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new text begin (2) 100 percent of the assets in the company shall be removed from the State Board
of Investment's assets under management within 15 months after the company's most
recent appearance on the scrutinized companies list.
new text end

new text begin (b) If a company that ceased scrutinized active business operations following
engagement under subdivision 3, paragraph (c), resumes such operations, paragraph (a)
shall immediately apply to the company and the State Board of Investment shall send a
written notice to the company. The company shall also be immediately reintroduced
onto the scrutinized companies list.
new text end

new text begin Subd. 5. new text end

new text begin Prohibition on acquisition of certain securities. new text end

new text begin At no time shall the
State Board of Investment acquire securities of companies on the scrutinized companies
list that have active business operations, except as provided in this section.
new text end

new text begin Subd. 6. new text end

new text begin Exemption. new text end

new text begin If the federal government affirmatively excludes a company
from its present or any future federal sanctions regime relating to Sudan, the company is
exempt from the divestment and investment requirements of subdivisions 4 and 5.
new text end

new text begin Subd. 7. new text end

new text begin Excluded securities. new text end

new text begin Notwithstanding any other provision in this section
to the contrary, subdivisions 4 and 5 do not apply to indirect holdings in actively managed
investment funds. The State Board of Investment shall submit letters to the managers
of investment funds containing companies with scrutinized active business operations
requesting the managers to consider removing such companies from the fund or to create a
similar actively managed fund with indirect holdings that do not include the companies. If
a manager creates a similar fund, the State Board of Investment shall promptly replace
all applicable investments with investments in the similar fund consistent with prudent
investing standards. For the purposes of this section, "private equity" funds shall be
deemed to be actively managed investment funds.
new text end

new text begin Subd. 8. new text end

new text begin Reporting. new text end

new text begin (a) Within 30 days after creating the scrutinized companies
list, the State Board of Investment shall submit the list to the chairs of the legislative
committees and divisions with jurisdiction over the State Board of Investment.
new text end

new text begin (b) By January 15, 2008, and on January 15 of each year thereafter, the State Board
of Investment shall submit a report to the chairs of the legislative committees and divisions
with jurisdiction over the State Board of Investment and send a copy of that report to
the United States Presidential Special Envoy to Sudan or the appropriate designee or
successor for the envoy. The report must include:
new text end

new text begin (1) a summary of correspondence with companies engaged by the State Board of
Investment under subdivision 3, paragraphs (b) and (c);
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new text begin (2) a list of all investments sold, redeemed, divested, or withdrawn in compliance
with subdivision 4;
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new text begin (3) a list of all prohibited investments under subdivision 5; and
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new text begin (4) a description of any progress made under subdivision 7.
new text end

new text begin Subd. 9. new text end

new text begin Expiration. new text end

new text begin This section shall expire upon the occurrence of any of the
following:
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new text begin (1) the Congress or president of the United States declares that the Darfur genocide
has been halted for at least 12 months;
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new text begin (2) the United States revokes all sanctions imposed against the government of Sudan;
new text end

new text begin (3) the Congress or president of the United States declares that the government
of Sudan has honored its commitments to cease attacks on civilians, demobilize and
demilitarize the Janjaweed and associated militias, grant free and unfettered access for
deliveries of humanitarian assistance, and allow for the safe and voluntary return of
refugees and internally displaced persons; or
new text end

new text begin (4) the Congress or president of the United States, through legislation or executive
order, declares that mandatory divestment of the type provided for in this section interferes
with the conduct of United States foreign policy.
new text end

new text begin Subd. 10. new text end

new text begin Other legal obligations. new text end

new text begin The State Board of Investment is exempt from
any statutory or common law obligations that conflict with actions taken in compliance
with this section, including all good-faith determinations regarding companies as required
by this section, including any obligations regarding the choice of asset managers,
investment funds, or investments for the State Board of Investment's securities portfolios.
new text end

new text begin Subd. 11. new text end

new text begin Reinvestment in certain companies with scrutinized active business
operations. new text end

new text begin Notwithstanding any provision of this section to the contrary, the State
Board of Investment shall be permitted to cease divesting from certain scrutinized
companies under subdivision 4 or to reinvest in certain scrutinized companies from
which it divested under subdivision 4 if clear and convincing evidence shows that the
value for all assets under management by the State Board of Investment is equal to or
less than 99.5 percent (50 basis points) of the hypothetical value of all assets under
management by the State Board of Investment without any divestment for any company
under subdivision 4. Cessation of divestment, reinvestment, or any subsequent ongoing
investment authorized by this subdivision shall be strictly limited to the minimum steps
necessary to avoid the contingency. For any cessation of divestment, reinvestment,
or subsequent ongoing investment authorized by this subdivision, the State Board of
Investment shall provide a written report to the chairs of the legislative committees
and divisions with jurisdiction over the State Board of Investment in advance of initial
reinvestment, updated semiannually thereafter as applicable, setting forth the reasons
and justification, supported by clear and convincing evidence, for its decisions to cease
divestment, reinvest, or remain invested in companies with scrutinized active business
operations. This subdivision does not apply to reinvestment in companies because they
have ceased scrutinized active business operations.
new text end