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AG Kilmartin Files Legislation to Divest State Pension Funds from Companies that do Business with Iran

Citing the Iranian regime policies to pursue nuclear weapons capability and state-sponsored terrorism worldwide, Attorney General Peter F. Kilmartin submitted legislation, H5620 sponsored by Representatives Mia Ackerman and Christopher Blazejewski and S0521sponsored by Senator Joshua Miller, to the General Assembly that would divest any and all state pension funds from companies that directly or indirectly do business with Iran. The legislation also prohibits the state to enter into any contracts with companies doing business with Iran.

Currently, 17 states and the District of Columbia have enacted Iran divestiture legislation, with similar bills pending in three additional states.

"Corporations and investors that do business with Iran support and strengthen a dangerous regime that is developing nuclear weapons, brutally repress its own people and sponsor terrorism worldwide," said Attorney General Kilmartin. "Companies that wish to continue 'business as usual' in Iran should be subject to debarment from state government contracts. The prospect of debarment is one of the most effective ways to compel corporations to end their Iran business."

"I commend Attorney General Kilmartin for recognizing the importance of ending ties with companies that do business with Iran. State leaders have a fiduciary and moral responsibility to reduce the financial exposure to risky investments, and clearly companies investing in Iran are high risk. More importantly, by adding Rhode Island to the growing number of states that have taken legislative action, as compared to the weaker and less accountable approach of rules and regulation, we stand united with our fellow states and federal government in tightening the financial noose around Iran," said Senator Joshua Miller (D-Dist 28, Cranston, Providence).

"There is a serious lack of awareness about what is happening abroad and this bill is going to make a strong statement about the very real threat the nation faces from Iran's potential nuclear capabilities," Rep. Mia A. Ackerman (D-Dist. 45, Cumberland, Lincoln) said. "With the blessing of Congress, we are joining 17 other states in solidarity to make a strong statement about the cost of Iran's trajectory toward nuclear armament. I don't want to be an alarmist, but it's important to tell the world that we will not take peace for granted. In order to do that, Rhode Island can't continue to engage in contracts with businesses who do not share the same philosophy."

In July 2010, the US Congress passed the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010, representing the most stringent sanctions regime the United States has imposed on Iran. The bill targets companies selling refined petroleum products to Iran, as well as international banks with ties to the extreme Revolutionary Guard and other nefarious actors within Iran. The Act gave states express legal permission for state and local governments to divest from companies that do business with Iran, specifically noting that such efforts do not run afoul of the Employment Retirement Income Security Act. The Act also provides safe harbor for private asset managers who divest in a similar manner.

"The Community Relations Council of the Jewish Alliance of Greater Rhode Island supports this legislation," said Marty Cooper the community relations director for the Jewish Alliance. "We must all work together to isolate Iran in order to deter it for acquiring the nuclear weapons with which it can, and will threaten the world. This tremendous threat cannot be confronted by lawmakers in Washington D.C., or diplomats at the United Nations alone. Local communities, like Rhode Island, must adopt strong measures to ensure that Iran does not achieve nuclear capability."

The legislation would require, within 90 days of the effective date, the State Retirement Board to identify all companies in which the public fund has direct or indirect holdings in companies with business operations in Iran. If the company has direct holdings, the State Investment Commission must send written notice that the company may become subject to divestment. Such a company has 90 days to cease scrutinized operations or convert them to inactive operations. If not, the public fund shall divest according to a statutory schedule.

The legislation would also create a new chapter that would prohibit bidding or entering into contracts with the State for goods or services with entities determined to engage in investment activities in Iran. Within 90 days of the effective date, the General Treasurer must develop a list of entities who engage in investment activities in Iran. The General Treasurer must provide such entity with written notice of its addition to the list and an opportunity to respond. Entities who seek to bid or enter into contracts with the State must certify that the entity is not engaged in investment activities with Iran. An entity who provides a false certification or fails to demonstrate that it has ceased its investment activities are subject to a civil penalty of one million dollars ($1,000,000) or twice the amount of the contract, termination of the contract and ineligibility to bid on a contact for three years.

Iran divestiture has been an initiative of the National Attorneys General Association. "The Office of Attorney General is charged with protecting the state of Rhode Island and its taxpayers, and significant taxpayer money is lodged in pension funds, state investments and state contracts. It is imperative that those funds and investments are not put at unnecessary risk by investing in, or contracting with, companies doing business with Iran," continued Kilmartin.

Rhode Island has similar divestiture laws outlawing state funds be invested in companies that do business in South Africa and Northern Ireland.

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