A D.C. Council plan to divert about $36 million of its pension funds out of foreign corporations that do business with Iran has run into opposition from the office that oversees the city’s massive retirement portfolio.
Roughly 1 percent of the D.C. retirement fund’s $3.7 billion in assets is tied up in nearly 20 companies involved in the Iranian oil industry. Legislation offered by at-large Councilman David Catania would require divestiture from companies with at least $20 million invested in the Iranian petroleum sector.
The Iranian economy is down, and its government is volatile, mismanaged and corrupt, Catania said during a hearing last week of the council’s Finance and Revenue Committee. These conditions, he said, “make Iran an unsuitable environment for public assets.”
“There have to be other ways to earn income to support our pensioners other than through a state that supports terrorism,” Catania said. “The lessons from the South Africa campaign teach us that economic pressures can and will produce regime change and change the behavior of certain nations.”
But Ian Lanoff, private counsel to the D.C. Retirement Board, told the council panel that the bill “could lead to financial hardship for the funds” and perhaps “personal liabilities for the board members.” From a strictly financial perspective, he said, “the fact that many of these stocks are in portfolios of a large number of public plans suggests that the investment experts do not consider them too risky.
“They are prudent to be included in the portfolio,” Lanoff said.
He suggested that the city divest from a company’s stock only if it can replace that investment with another of equal risk and rate of return, rendering moot the city’s political and social agenda.
Catania’s legislation “would likely have some negative financial consequences for DCRB’s investment funds,” D.C. Treasurer Lasana Mack said, but the effect is difficult to quantify.
“Some might argue it’s hardly worth taking this action over 1 percent of the portfolio,” said Virginia Del. David Englin, D-Arlington, who unsuccessfully offered similar legislation in the Old Dominion. “However, today that 1 percent is effectively supporting a regime that’s the world’s leading sponsor of terrorism.”
The council is expected to pass the bill before the end of the year. D.C. would join 14 states that have adopted similar legislation.
“We’ve done it for South Africa,” said Ward 2 Councilman Jack Evans, finance and revenue chairman. “We’ve done it for Sudan. We’re going to do it for this.”
