AB124: Bill Text

LRB-0823/1

ARG:lmk:jf

2007 - 2008 LEGISLATURE

2007 Assembly BILL 124

March 1, 2007 - Introduced by Representatives Kessler, Davis, Albers, Berceau, Boyle, Cullen, Fields, Grigsby, Hilgenberg, Hintz, Molepske, Nelson, Nygren, Pocan, Pope-Roberts, Seidel, Sheridan, Sinicki, Toles, Turner, A. Williams, Young, Zepnick and Richards, cosponsored by Senators Harsdorf, Coggs, Erpenbach, Grothman, Lehman, Risser and Sullivan. Referred to Committee on Financial Institutions.

AB124,1,3 An Act to amend 25.17 (intro.), 25.18 (1) (intro.) and 25.18 (2) (intro.); and to create 25.184 of the statutes; relating to: prohibiting the Investment Board from making certain investments relating to Sudan.

Analysis by the Legislative Reference Bureau

This bill generally prohibits the State of Wisconsin Investment Board (SWIB) from making certain future investments, and requires SWIB to divest itself of prior investments, related to Sudan. Within 90 days after the bill's effective date, SWIB must make its best efforts to identify all scrutinized companies in which SWIB has direct or indirect holdings. A "scrutinized company" is, with certain exceptions, a company that: 1) has business operations involving contracts with, or the provision of supplies or services to, the government of Sudan (not including the regional government of southern Sudan) or entities related to the government of Sudan if more than 10 percent of the company's revenues or assets linked to Sudan involve oil-related activities, mineral extraction activities, or power production activities; 2) is complicit in the Darfur genocide; or 3) supplies military equipment within Sudan. A "direct holding" is a security of a company held directly by SWIB in SWIB's name or in "street name" for SWIB or held in an account or fund in which SWIB owns all shares or interests. An "indirect holding" is a security of a company held in an account or fund, such as a mutual fund, managed by external managers in which SWIB owns shares or interests together with other investors. Best efforts by SWIB include, as applicable: reviewing and relying, as appropriate in SWIB'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; contacting asset managers contracted by SWIB that invest in companies with business operations in Sudan; and contacting other institutional investors that have divested from, or engaged with, companies that have business operations in Sudan. By the first regular meeting of SWIB trustees after this initial 90 day identification period, SWIB must assemble a list of all scrutinized companies that it has identified, and the list must be updated on a quarterly basis.

After the bill's effective date, with certain exceptions, SWIB may not acquire securities of scrutinized companies on SWIB's list unless the company merely holds property, including rights, not presently used to generate revenues. In addition, immediately after the first regular meeting of SWIB trustees described above, SWIB must do all of the following with respect to companies in which SWIB has direct or indirect holdings: 1) send written notice to each company on the list that merely holds property or rights not presently used to generate revenues of the provisions of this bill and encourage the company to continue to refrain from initiating active business operations in Sudan, with such correspondence repeated semiannually; and 2) send written notice to all other companies on the list to inform each company of its scrutinized company status and to advise the company that it may become subject to divestment by SWIB. With certain exceptions, SWIB must divest itself of all publicly-traded securities of a scrutinized company sent the notice identified as 2) above unless it ceases active business operations within 90 days of the notice. SWIB must accomplish 50 percent of this divestment within nine months of the company appearing on SWIB's list and full divestment within 15 months of the company appearing on SWIB's list. If, within this 90 day period, the company ceases those business operations making it a scrutinized company, SWIB must remove the company from its list and need not divest from the company unless it resumes such business operations, in which case it becomes subject to immediate and full divestment. However, if the company remains a scrutinized company but, within this 90 day period, stops revenue-generating activities in Sudan, the company remains on SWIB's list but is not subject to divestment.

The prohibitions on investment in, and requirement of divestment from, certain companies under the bill do not apply with respect to: 1) any company that is affirmatively declared by the federal government to be excluded from any federal sanctions regime relating to Sudan; 2) indirect holdings in actively managed investment funds, including private equity funds, although the bill requires SWIB to submit letters to the managers of such funds containing certain information and SWIB may, under specified circumstances, be required to replace investments in such funds. The requirement of divestment from certain companies under the bill also does not apply if clear and convincing evidence shows that the value for all assets under SWIB's management has decreased to 99.5 percent or less of the value of all assets under SWIB's management when calculated as if no divestment had occurred, but, in such case, the divestment requirement is only suspended to the extent necessary to avoid a decrease in the value of assets to or beyond this threshold. The provisions of the bill do not apply at all if the U.S. congress or president declares that the Darfur genocide has been halted for at least 12 months, the United States revokes all sanctions imposed against the government of Sudan, or the U.S. congress or president declares that mandatory divestment of the type provided for in the bill interferes with the conduct of U.S. foreign policy.

The bill authorizes the attorney general to bring actions to enforce the provisions of the bill. The bill also provides a certain immunity to SWIB, including with respect to its standard of responsibility when investing money, in taking any action in compliance with the bill. The bill also requires SWIB to make certain reports to the legislature and to the attorney general.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB124, s. 1 Section 1. 25.17 (intro.) of the statutes is amended to read:

AB124,3,5 25.17 Powers and duties of board. (intro.) The "State of Wisconsin Investment Board" shall be a body corporate with power to sue and be sued in said name. The board shall have a seal with the words, "State of Wisconsin Investment Board". Subject to s. ss. 25.183 and 25.184, the board shall:

AB124, s. 2 Section 2. 25.18 (1) (intro.) of the statutes is amended to read:

AB124,3,8 25.18 (1) (intro.) In addition to the powers and duties enumerated in s. 25.17, but subject to s. ss. 25.183 and 25.184, the board may:

AB124, s. 3 Section 3. 25.18 (2) (intro.) of the statutes is amended to read:

AB124,3,11 25.18 (2) (intro.) In addition to the powers set forth in sub. (1) and s. 25.17, but subject to s. ss. 25.183 and 25.184, the board may:

AB124, s. 4 Section 4. 25.184 of the statutes is created to read:

AB124,3,14 25.184 Prohibited investments relating to Sudan. (1) Definitions. In this section:

AB124,3,16 (a) "Active business operations" means all business operations that are not inactive business operations.

AB124,4,2 (b) "Business operations" means engaging in commerce in any form in Sudan, including doing any of the following:

AB124,4,4 1. Acquiring, developing, maintaining, owning, selling, possessing, leasing, or operating equipment, facilities, products, or services, or real or personal property.

AB124,4,5 2. Maintaining personnel.

AB124,4,7 3. Acquiring, developing, maintaining, owning, selling, possessing, leasing, or operating any other apparatus of business or commerce.

AB124,4,9 (c) "Company" means any of the following if it exists for profit-making purposes:

AB124,4,12 1. Any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association.

AB124,4,14 2. Any wholly-owned subsidiary, majority-owned subsidiary, parent company, or affiliate of a company described in subd. 1.

AB124,4,20 (d) "Complicit in the Darfur genocide" means having taken any action during a preceding 20 month period that has directly supported or promoted the genocidal campaign in Darfur, including any action to prevent Darfur's victimized population from communicating with each other or to encourage Sudanese citizens to speak out against an internationally approved security force for Darfur, and including actively working to deny, cover up, or alter the record on human rights abuses in Darfur.

AB124,4,24 (e) "Direct holdings" by the board in a company means all securities of that company held directly by the board in the board's name or as nominee where the board is the beneficial owner or held in an account or fund in which the board owns all shares or interests.

AB124,5,6 (f) "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 the effective date of this paragraph .... [revisor inserts date], including the coalition National Unity Government agreed upon in the Comprehensive Peace Agreement for Sudan but not including the regional government of southern Sudan.

AB124,5,9 (g) "Inactive business operations" means the mere continued holding or renewal of rights to property previously operated or used for the purpose of generating revenues but not presently deployed for such purpose.

AB124,5,12 (h) "Indirect holdings" in a company means all securities of that company held in an account or fund, such as a mutual fund, managed by external managers in which the board owns shares or interests together with other investors.

AB124,5,13 (i) "Marginalized populations of Sudan" include any of the following:

AB124,5,15 1. The portion of the population in the Darfur region that has been genocidally victimized.

AB124,5,17 2. The portion of the population of southern Sudan victimized by Sudan's North-South civil war.

AB124,5,19 3. The Beja, Rashidiya, and other similarly underserved groups of eastern Sudan.

AB124,5,21 4. The Nubian and other similarly underserved groups in Sudan's Abyei, Southern Blue Nile, and Nuba Mountain regions.

AB124,5,23 5. The Amri, Hamadab, Manasir, and other similarly underserved groups of northern Sudan.

AB124,5,24 (j) "Military equipment" means any of the following:

AB124,6,2 1. Weapons, arms, military supplies, and equipment that readily may be used for military purposes, including radar systems or military-grade transport vehicles.

AB124,6,4 2. Supplies or services sold or provided directly or indirectly to any force actively participating in armed conflict in Sudan.

AB124,6,5 (k) "Mineral extraction activities" include any of the following:

AB124,6,9 1. Exploring for, extracting, processing, transporting, or wholesale selling or trading of elemental minerals or associated metal alloys or oxides, such as ore, including gold, copper, chromium, chromite, diamonds, iron, iron ore, silver, tungsten, uranium, and zinc.

AB124,6,11 2. Facilitating any activity described in subd. 1., including providing supplies or services in support of any such activity.

AB124,6,12 (L) 1. "Oil-related activities" include any of the following:

AB124,6,13 a. Owning rights to oil blocks.