BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  AB 1650|
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                                 THIRD READING


          Bill No:  AB 1650
          Author:   Feuer (D), et al
          Amended:  8/31/10 in Senate
          Vote:     21

           
           SENATE GOVERNMENTAL ORG. COMMITTEE :  7-0, 6/29/10
          AYES:  Wright, Calderon, Florez, Negrete McLeod, Padilla,  
            Price, Yee
          NO VOTE RECORDED:  Harman, Denham, Oropeza, Wyland

           SENATE APPROPRIATIONS COMMITTEE  :  11-0, 8/12/10
          AYES: Kehoe, Ashburn, Alquist, Corbett, Emmerson, Leno,  
            Price, Walters, Wolk, Wyland, Yee

           ASSEMBLY FLOOR  :  74-0, 6/1/10 - See last page for vote


           SUBJECT  :    Public contracts:  state and local contract  
          eligibility:  energy
                      Sector investment activities in Iran

           SOURCE  :     Author


           DIGEST  :    This bill enacts the Iran Contracts Act of 2010  
          which prohibits a person from bidding or renewing contract  
          with a public agency entity for goods and services of $1  
          million who is identified on a list maintained by the  
          Department of General Services (DGS) and engaging in  
          investment activities in Iran, as specified (applies to a  
          person that provides goods and services for $20 million).   
          This bill also prohibits a person or entity that is a  
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          financial institution that extends $20 million or more in  
          credit to another person, for 45 days or more, if the  
          person will use the credit to invest in the energy sector  
          in Iran from bidding or renewing a contract with a public  
          entity for goods and services of $1 million or more, and is  
          also identified on the DGS list as a person engaging in  
          investment activities in Iran.  Requires DGS to develop  
          this list by June 1, 2011 and update it every 180 days as  
          specified.  This bill states the intent of the Legislature  
          to implement the authority granted in H.R.2194, 111th  
          Congress (2009-2010), the Comprehensive Iran Sanctions,  
          Accountability, and Divestment Act of 2010.

           ANALYSIS  :    Existing federal law requires the President of  
          the United States, under the federal Iran Sanctions Act of  
          1996, as subsequently amended, to impose specified  
          sanctions on foreign companies that make substantial  
          investments in Iran's energy sector.
           
          Existing law prohibits the California Public Employees'  
          Retirement System and the State Teachers' Retirement System  
          from investing public employee retirement funds in a  
          company with active business relations in Sudan or that has  
          invested or engaged in business operations with entities  
          involved in the development of petroleum or natural gas  
          resources of Iran. 
           
          Existing law authorizes contracting between state agencies  
          and private contractors and sets forth the requirements for  
          the procurement of goods and services and for the  
          solicitation and evaluation of bids and the awarding of  
          contracts by public entities.
           
          Existing law prohibits companies involved in specified  
          business activities in Sudan from entering into a contract  
          with a state agency for goods and services and requires a  
          prospective bidder for a state contract to certify that the  
          company is not engaged in such activities. Existing law  
          specifies penalties for submitting a false certification.  
           
           The United States and much of the international community  
          has condemned the Government of Iran for its human rights  
          violations, its support of international terrorism, and its  
          efforts to develop nuclear weapons under the guise of  







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          developing nuclear power for domestic energy uses.  The  
          Iran Sanctions Act expresses U.S. policy to work with  
          international organizations to pressure the government of  
          Iran to cease its illicit nuclear activity, and it  
          authorizes the President, by Executive Order, to impose  
          sanctions and limit the ability of U.S. persons and  
          business from engaging in business activities with the  
          Government of Iran and other designated groups.  In light  
          of recent confrontations between the Government of Iran and  
          the international community over its nuclear activity, its  
          support of international terrorism, and its suppression of  
          civil rights and liberties, legislation is currently  
          pending in Congress that would strengthen existing  
          sanctions and enable state and local governments to adopt  
          restrictions consistent with federal policy.

          This bill:

          1. Prohibits the State of California and its subdivisions  
             from contracting for over $1 million dollars with  
             companies that have specified business activities in  
             Iran's petroleum sector.  The prohibition applies to new  
             contracts or contract renewals.

          2. Requires a company seeking to bid on state and local  
             government contracts to certify that they are not  
             engaged in developing Iran's petroleum resources.

          3. Requires the Department of General Services (DGS) to  
             maintain a list of companies engaged in the offending  
             investments, which will be available to companies  
             interested in bidding for contracts with the State.   
             Provides that any costs to DGS for maintaining the list  
             shall be recovered, as specified.

          4. Requires companies to be given 90 days written notice to  
             challenge their disqualification for prohibited  
             activities.

          5. Provides that companies that cease these activities  
             shall become eligible to do business with the State of  
             California and its subdivisions.

          6. Establishes fines for companies that submit a false  







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             certification in an amount that is equal to the greater  
             of $250,000 or twice the amount of the contract for  
             which a bid was submitted.

          7. Specifies that companies who submit a false  
             certification shall be ineligible to bid on government  
             contracts for three years.

           Background  

          The U.S. also has imposed sanctions on the Government of  
          Iran, determining that Iran's illicit nuclear activities,  
          combined with its support of international terrorism,  
          represent a serious threat to the security of the United  
          States, Israel and other United States allies in Europe,  
          the Middle East and around the world.

          On June 24, 2010, President Obama signed into law H. R.  
          2194, the "Comprehensive Iran Sanctions, Accountability,  
          and Divestment Act of 2010" (Public Law 111-195), which  
          enacted new sanctions legislation against Iran, authorizing  
          states and local governments to divest and otherwise  
          disassociate themselves from companies operating in Iran's  
          energy sector that support Iran's efforts to achieve a  
          nuclear weapons capability

           Comments

           According to the author's office, this bill is intended to  
          support federal and international efforts by precluding  
          private companies from entering into or renewing state  
          contracts if they have substantial business dealings in  
          Iran's energy sector, thereby "ensuring that California's  
          tax dollars do not support companies whose investments  
          either directly or indirectly support Iran's nuclear or  
          terrorist activities."

          The author's office contends that "it is the responsibility  
          of the State to decide how, where and by whom its financial  
          resources should be invested.  It also is the prerogative  
          of the State not to invest in, or do business with,  
          companies whose investments with Iran place those companies  
          at risk from the impact of economic sanctions imposed upon  
          the Government of Iran for sponsoring terrorism, committing  







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          egregious violations of human rights, and engaging in  
          illicit nuclear weapons development." 

          The author's office notes that for decades California has  
          engaged in socially responsible investing, ranging from  
          divesting state pension funds from companies that supported  
          apartheid in South Africa in the 1980s to sanctions for  
          human rights violations in Sudan.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           SUPPORT  :   (Verified  8/31/10)

          30 Years After 
          Anti-Defamation League 
          American Jewish committee - Los Angeles 
          Center for the Promotion of Democracy and Human Rights 
          City of Beverly Hills 
          City of Los Angeles 
          City of West Hollywood 
          County of Los Angeles 
          Jewish Community Relations Council of Sacramento
          Jewish Community Relations Council of San Francisco, the  
          Peninsula, Marin, Sonoma, Alameda, and Contra Costa  
          Counties
          Jewish Federation of San Diego
          Jewish Labor Committee, Western Region 
          Jewish Public Affairs Committee of California 
          Los Angeles County Board of Supervisors 
          Simon Wiesenthal Center 
          United Against a Nuclear Iran 


           ASSEMBLY FLOOR  :  
          AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill  
            Berryhill, Blakeslee, Block, Blumenfield, Bradford,  
            Brownley, Buchanan, Caballero, Charles Calderon, Carter,  
            Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,  
            DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,  
            Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman,  
            Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,  
            Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal,  
            Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello,  







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            Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas,  
            Saldana, Silva, Skinner, Smyth, Solorio, Swanson,  
            Torlakson, Torres, Torrico, Tran, Villines, Yamada, John  
            A. Perez
          NO VOTE RECORDED: Tom Berryhill, Fuentes, Fuller, Norby,  
            Audra Strickland, Vacancy


          DLW:nl  8/31/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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