BILL NUMBER: AB 221	CHAPTERED
	BILL TEXT

	CHAPTER  671
	FILED WITH SECRETARY OF STATE  OCTOBER 14, 2007
	APPROVED BY GOVERNOR  OCTOBER 14, 2007
	PASSED THE SENATE  SEPTEMBER 6, 2007
	PASSED THE ASSEMBLY  SEPTEMBER 10, 2007
	AMENDED IN SENATE  SEPTEMBER 4, 2007
	AMENDED IN SENATE  JULY 18, 2007
	AMENDED IN SENATE  JUNE 14, 2007
	AMENDED IN ASSEMBLY  JUNE 1, 2007
	AMENDED IN ASSEMBLY  MAY 1, 2007
	AMENDED IN ASSEMBLY  APRIL 17, 2007
	AMENDED IN ASSEMBLY  MARCH 12, 2007
	AMENDED IN ASSEMBLY  MARCH 5, 2007

INTRODUCED BY   Assembly Member Anderson
   (Principal coauthors: Assembly Members Levine, Lieber, Lieu, Ma,
and Solorio)
   (Coauthors: Assembly Members Adams, Benoit, Caballero, Cook, De
Leon, DeVore, Duvall, Emmerson, Evans, Feuer, Gaines, Garrick,
Horton, Houston, Huffman, Jeffries, Keene, Leno, Plescia, Portantino,
Sharon?Runner, Silva, Spitzer, Strickland, Tran, and Villines)
   (Coauthors: Senators Aanestad, Ashburn, Battin, Cogdill, Dutton,
Oropeza, Romero, Runner, Steinberg, and Wyland)

                        JANUARY 29, 2007

   An act to amend Section 16642 of, and to add Section 7513.7 to,
the Government Code, relating to investments.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 221, Anderson. Public retirement systems: investments: Iran.
   The California Constitution provides that the Legislature may by
statute prohibit retirement board investments if it is in the public
interest to do so, and providing that the prohibition satisfies
specified fiduciary standards.
   Existing law prohibits the Public Employees' Retirement System and
the State Teachers' Retirement System from investing public employee
retirement funds in a company with active business operations in
Sudan, as specified. Existing law also requires these retirement
systems to sell or transfer any investments in a company with
business operations in Sudan. Existing law requires these retirement
systems to submit an annual report to the Legislature regarding any
investments in a company with business operations in Sudan and the
sale or transfer of those investments. Existing law requires the
state to indemnify, from the General Fund, and hold harmless the
present, former, and future board members, officers, and employees
of, and investment managers under contract with, these retirement
systems by reason of any decision to restrict, reduce, or eliminate
investments in Sudan, as specified.
   This bill would create the California Public Divest from Iran Act
and additionally prohibit the Public Employees' Retirement System and
the State Teachers' Retirement System from investing public employee
retirement funds in a company with business operations in Iran that
is invested in or engaged in business operations with entities in the
defense or nuclear sectors of Iran, or the company is invested or
engaged in business operations with entities involved in the
development of petroleum or natural gas resources of Iran, and that
company is subject to sanctions under federal law, as specified, or
the company is engaged in business operations with an Iranian
organization that has been labeled as a terrorist organization by the
United States government. The bill would require the Board of
Administration of the Public Employees' Retirement System and the
Teachers' Retirement Board of the State Teachers' Retirement System
to sell or transfer any investments in a company with business
operations in Iran, until Iran is removed from the United States
Department of State's list of countries that have been determined to
repeatedly provide support for acts of international terrorism and
the President of the United States determines and certifies that Iran
has ceased its efforts to design, develop, manufacture, or acquire a
nuclear explosive device or related materials and technology, as
specified. The bill would make related legislative findings and
declarations.
   This bill would require these boards to report to the Legislature
any investments in a company with specified business operations in
Iran and the sale or transfer of those investments, subject to the
fiduciary duty of these boards, by January 1, 2009, and every year
thereafter.
   This bill would indemnify from the General Fund and hold harmless
the present, former, and future board members, officers, and
employees of, and investment managers under contract with, these
retirement systems.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares as follows:
   (a) The Securities and Exchange Commission has determined that
business activities in foreign states such as Iran sponsoring
terrorism and that are subject to sanctions by the United States may
materially harm the share value of foreign companies. Shares in these
foreign companies may be held in the portfolio of public retirement
systems in this state.
   (b) Publicly traded companies in the United States are
substantially restricted in doing business in or with foreign states
such as Iran that the United States Department of State has
identified as sponsoring terrorism.
   (c) Public retirement systems in this state currently invest on
behalf of the citizens of California in publicly traded foreign
companies that may be at risk due to business ties with foreign
states such as Iran that sponsor terrorism and are involved in the
proliferation of weapons of mass destruction.
   (d) Investments in publicly traded foreign companies that have
business operations in or with foreign states such as Iran are liable
for sanctions under United States law and risk the pensions of the
dedicated public employees of this state.
   (e) Excluding companies with business activities in foreign states
such as Iran that sponsor terrorism and divesting from public
portfolios will help protect the public retirement systems in this
state from investment losses related to these business activities and
may improve the investment performance of the public retirement
systems.
   (f) Public Law 104-172, as renewed and amended in 2001 and 2006,
specifically provides for sanctions to be imposed on any entity that
has invested at least twenty million dollars ($20,000,000) in any
year since 1996 to develop petroleum or natural gas resources of
Iran.
   (g) It is unconscionable for this state to invest in foreign
companies with business activities benefiting foreign states such as
Iran that commit egregious violations of human rights and sponsor
terrorism.
   (h) It is the Government of Iran, and not the people of Iran, that
is responsible for Iran's support of terrorism and which commits
egregious violations of human rights under which its own citizens are
required to live.
  SEC. 2.  Section 7513.7 is added to the Government Code, to read:
   7513.7.  (a) As used in this section, the following definitions
shall apply:
   (1) "Board" means the Board of Administration of the Public
Employees' Retirement System or the Teachers' Retirement Board of the
State Teachers' Retirement System, as applicable.
   (2) "Business operations" means maintaining, selling, or leasing
equipment, facilities, personnel, or any other apparatus of business
or commerce in Iran, including the ownership or possession of real or
personal property located in Iran.
   (3) "Company" means a sole proprietorship, organization,
association, corporation, partnership, venture, or other entity, its
subsidiary or affiliate that exists for profitmaking purposes or to
otherwise secure economic advantage. "Company" also means a company
owned or controlled, either directly or indirectly, by the government
of Iran, that is established or organized under the laws of or has
its principal place of business in the Islamic Republic of Iran.
   (4) "Government of Iran" means the government of Iran or its
instrumentalities or political subdivisions. "Government of Iran"
also means an individual, company, or public agency located in Iran
that provides material or financial support to the Islamic Republic
of Iran.
   (5) "Invest" or "investment" means the purchase, ownership, or
control of stock of a company, association, or corporation, the
capital stock of a mutual water company or corporation, bonds issued
by the government or a political subdivision of Iran, corporate bonds
or other debt instruments issued by a company, or the commitment of
funds or other assets to a company, including a loan or extension of
credit to that company.
   (6) "Iran" means the Islamic Republic of Iran or a territory under
the administration or control of Iran.
   (7) "Military equipment" means weapons, arms, or military defense
supplies.
   (8) "Public employee retirement funds" means the Public Employees'
Retirement Fund described in Section 20062 of this code, and the
Teachers' Retirement Fund described in Section 22167 of the Education
Code.
   (9) "Substantial action" means a boycott of the government of
Iran, curtailing business in Iran until that time described in
subdivision (m), or selling company assets, equipment, or real and
personal property located in Iran.
   (b) The board shall not invest public employee retirement funds in
a company which has business operations in Iran as identified by the
board through, as the board deems appropriate, publicly available
information including, but not limited to, information provided by
nonprofit and other organizations and government entities, that meets
either of the following criteria:
   (1) The company (A) is invested in or engaged in business
operations with entities in the defense or nuclear sectors of Iran or
(B) is invested in or engaged in business operations with entities
involved in the development of petroleum or natural gas resources of
Iran, and that company is subject to sanctions under Public Law
104-172, as renewed and amended in 2001 and 2006.
   (2) The company has demonstrated complicity with an Iranian
organization that has been labeled as a terrorist organization by the
United States government.
   (c) On or before June 30, 2008, the board shall determine which
companies are subject to divestment.
   (d) After the determination described in subdivision (c), the
board shall determine, by the next applicable board meeting, if a
company meets the criteria described in subdivision (b). If the board
plans to invest or has investments in a company that meets the
criteria described in subdivision (b), that planned or existing
investment shall be subject to subdivisions (g) and (h).
   (e) Investments of the board in a company that does not meet the
criteria described in subdivision (b) are not subject to subdivision
(h) if the company does not subsequently meet the criteria described
in subdivision (b). The board shall identify the reasons why that
company does not satisfy the criteria described in subdivision (b) in
the report to the Legislature described in subdivision (i).
   (f) (1) Notwithstanding subdivisions (d) and (e), if the board's
investment in a company described in subdivision (b) is limited to
investment via an externally and actively managed commingled fund,
the board shall contact that fund manager in writing and request that
the fund manager remove that company from the fund as described in
subdivision (h). On or before June 30, 2008, if the fund or account
manager creates a fund or account devoid of companies described in
subdivision (b), the transfer of board investments from the prior
fund or account to the fund or account devoid of companies with
business operations in Iran shall be deemed to satisfy subdivision
(h).
   (2) If the board's investment in a company described in
subdivision (b) is limited to an alternative fund or account, the
alternative fund or account manager creates an actively managed
commingled fund that excludes companies described in subdivision (b),
and the new fund or account is deemed to be financially equivalent
to the existing fund or account, the transfer of board investments
from the existing fund or account to the new fund or account shall be
deemed to satisfy subdivision (h). If the board determines that the
new fund or account is not financially equivalent to the existing
fund, the board shall include the reasons for that determination in
the report described in subdivision (i).
   (3) The board shall make a good faith effort to identify any
private equity investments that involve companies described in
subdivision (b), or are linked to the government of Iran. If the
board determines that a private equity investment clearly involves a
company described in subdivision (b), or is linked to the government
of Iran, the board shall consider, at its discretion, if those
private equity investments shall be subject to subdivision (h). If
the board determines that a private equity investment clearly
involves a company described in subdivision (b), or is linked to the
government of Iran and the board does not take action as described in
subdivision (h), the board shall include the reasons for its
decision in the report described in subdivision (i).
   (g) Except as described in subdivisions (e) and (f), the board, in
the board's capacity of shareholder or investor, shall notify any
company described in subdivision (d) that the company is subject to
subdivision (h) and permit that company to respond to the board. The
board shall request that the company take substantial action no later
than 90 days from the date the board notified the company under this
subdivision. If the board determines that a company has taken
substantial action or has made sufficient progress towards
substantial action before the expiration of that 90-day period, that
company shall not be subject to subdivision (h). The board shall, at
intervals not to exceed 90 days, continue to monitor and review the
progress of the company until that company has taken substantial
action in Iran. A company that fails to complete substantial action
within one year from the date of the initial notice by the board
shall be subject to subdivision (h).
   (h) If a company described in subdivision (d) fails to complete
substantial action by the time described in subdivision (g), the
board shall take the following actions:
   (1) The board shall not make additional or new investments or
renew existing investments in that company.
   (2) The board shall liquidate the investments of the board in that
company no later than 18 months after this subdivision applies to
that company. The board shall liquidate those investments in a manner
to address the need for companies to take substantial action in Iran
and consistent with the board's fiduciary responsibilities as
described in Section 17 of Article XVI of the California
Constitution.
   (i) On or before January 1, 2009, and every year thereafter, the
board shall file a report with the Legislature. The report shall
describe the following:
   (1) A list of investments the board has in companies with business
operations that satisfy the criteria in subdivision (b), including,
but not limited to, the issuer, by name, of the stock, bonds,
securities, and other evidence of indebtedness.
   (2) A detailed summary of the business operations a company
described in paragraph (1) has in Iran.
   (3) Whether the board has reduced its investments in a company
that satisfies the criteria in subdivision (b).
   (4) If the board has not completely reduced its investments in a
company that satisfies the criteria in subdivision (b), when the
board anticipates that the board will reduce all investments in that
company or the reasons why a sale or transfer of investments is
inconsistent with the fiduciary responsibilities of the board as
described in Section 17 of Article XVI of the California
Constitution.
   (5) Any information described in subdivisions (d) and (e).
   (6) A detailed summary of investments that were transferred to
funds or accounts devoid of companies with business operations in
Iran as described in subdivision (f).
   (7) An annual calculation of any costs or investment losses or
other financial results incurred in compliance with the provisions of
this section.
   (j) If the board voluntarily sells or transfers all of its
investments in a company with business operations in Iran, this
section shall not apply except that the board shall file a report
with the Legislature related to that company as described in
subdivision (i).
   (k) Nothing in this section shall require the board to take action
as described in this section unless the board determines, in good
faith, that the action described in this section is consistent with
the fiduciary responsibilities of the board as described in Section
17 of Article XVI of the California Constitution.
   (l) Subdivision (h) shall not apply to any of the following:
   (1) Investments in a company that is primarily engaged in
supplying goods or services intended to relieve human suffering in
Iran.
   (2) Investments in a company that promotes health, education, or
journalistic, religious, or welfare activities in Iran.
   (3) Investments in a United States company that is authorized by
the federal government to have business operations in Iran.
   (m) This section shall cease to be operative if both of the
following apply:
   (1) Iran is removed from the United States Department of State's
list of countries that have been determined to repeatedly provide
support for acts of international terrorism.
   (2) Pursuant to Public Law 104-172, as amended, the President of
the United States determines and certifies to the appropriate
committee of the Congress of the United States that Iran has ceased
its efforts to design, develop, manufacture, or acquire a nuclear
explosive device or related materials and technology.
   (n) This section shall be known and may be cited as the California
Public Divest from Iran Act.
  SEC. 3.  Section 16642 of the Government Code is amended to read:
   16642.  Present, future, and former board members of the Public
Employees' Retirement System or the State Teachers' Retirement
System, jointly and individually, state officers and employees,
research firms described in subdivision (d) of Section 7513.6, and
investment managers under contract with the Public Employees'
Retirement System or the State Teachers' Retirement System shall be
indemnified from the General Fund and held harmless by the State of
California from all claims, demands, suits, actions, damages,
judgments, costs, charges and expenses, including court costs and
attorney's fees, and against all liability, losses, and damages of
any nature whatsoever that these present, future, or former board
members, officers, employees, research firms as described in
subdivision (d) of Section 7513.6, or contract investment managers
shall or may at any time sustain by reason of any decision to
restrict, reduce, or eliminate investments pursuant to Sections
7513.6 and 7513.7.
  SEC. 4.  The provisions of this act are severable. If any provision
of this act or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given
effect without the invalid provision or application.