BILL NUMBER: AB 2650	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MARCH 17, 2016

INTRODUCED BY   Assembly  Member   Nazarian
  Members   Nazarian,   Achadjian,
  and Wilk 

                        FEBRUARY 19, 2016

   An act to amend Section  7513.6 of   16642
of, and to add Section 7513.76 to,  the Government Code,
relating to public employee retirement systems.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2650, as amended, Nazarian. Public employee retirement systems:
prohibited  investments.   investments: Turkey.

   The California Constitution grants the retirement board of a
public employee retirement system plenary authority and fiduciary
responsibility for investment of moneys and administration of the
retirement fund and system. The California Constitution qualifies
this grant of powers by reserving to the Legislature the authority to
prohibit investments if it is in the public interest and the
prohibition satisfies standards of fiduciary care and loyalty
required of a retirement board. Existing law prohibits 
specified   the boards of administration of the Public
Employees' Retirement System and State Teachers' Retirement System
from making  investments in certain  countries,
including Sudan.   countries and in thermal coal
companies, as specified, subject to the boards' plenary authority and
fiduciary responsibility for investment of moneys and administration
of the systems.  
   This bill would prohibit the boards of administration of the
Public Employees' Retirement System and State Teachers' Retirement
System from making additional or new investments, or renewing
existing investments, of public employee retirement funds in an
investment vehicle in Turkey that is issued by the government of
Turkey or that is owned, controlled, or managed by the government of
Turkey. The bill would require the boards to liquidate existing
investments in Turkey in these types of investment vehicles on or
before July 1, 2018, subject to engagement with the government of
Turkey regarding whether it is transitioning to publicly accepting
its responsibility for the Armenian Genocide. The bill would require
these boards, on or before January 1, 2019, to make a specified
report to the Legislature and the Governor regarding these actions.
The bill would provide that its provisions do not require a board to
take any action that the board determines in good faith is
inconsistent with its constitutional fiduciary responsibilities to
the retirement system. The 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, in connection with actions relating to these investments. 

   This bill would make technical, nonsubstantive changes to
provisions prohibiting investment in the Sudan. 
   Vote: majority. Appropriation: no. Fiscal committee:  no
  yes  . State-mandated local program: no.


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

   SECTION 1.    The Legislature finds and declares the
following:  
   (a) The State of California has officially recognized the Armenian
Genocide each year for decades and has repeatedly urged the Republic
of Turkey to acknowledge the facts of the Armenian Genocide and work
toward a just resolution, honor its obligations under international
treaties and human rights laws, end all forms of religious
discrimination and persecution, and return Christian church
properties to their rightful owners.  
   (b) Genocide is defined by the United Nations as an act "committed
with intent to destroy, in whole or in part, a national, ethnical,
racial or religious group."  
   (c) Genocide denial is widely viewed as among the final stages of
genocide and serves to perpetuate the effects of genocide even after
the active phases of extermination, massacres, forced marches, and
deportation have ended.  
   (d) The government of Turkey has engaged and continues to engage
in an ongoing campaign of genocide denial and historical revisionism
by refusing to acknowledge its responsibility for the Armenian
Genocide, refusing to compensate its victims, and actively pursuing a
well-funded political lobbying campaign throughout the United
States, including in California, to rewrite history and defeat
legislation recognizing the Armenian Genocide.  
   (e) The government of Turkey has engaged and continues to engage
in efforts to effect Armenian cultural erasure since the founding of
the Republic of Turkey, including, but not limited to, ethnic
cleansings and the destruction of sacred Armenian religious sites.
 
   (f) Reference in Turkey by any scholar, journalist, or other
person to the massacre and deportation of Armenians in 1915 to 1923,
inclusive, as genocide can be criminally prosecuted under Article 301
of the Turkish Penal Code.  
   (g) The State of California is home to the largest Armenian
American population in the United States, and Armenians living in
California, most of whom are direct descendants of the survivors of
the Armenian Genocide, have enriched our state through their
leadership and contributions in business, agriculture, academia,
government, and the arts, yet continue to suffer the effects of the
continued denial campaign by the government of Turkey.  
   (h) The State of California, as the world's eighth largest
economy, and in accordance with principles of human rights and
justice, has taken the lead in adopting legislation to divest from
South Africa for its policy of apartheid, Sudan for its genocide in
Darfur, and Iran for its support of international terrorism, imposing
economic consequences upon regimes that engage in conduct and policy
that violate human rights or constitute crimes against humanity.
 
   (i) The State of California, through its Public Employees'
Retirement System (PERS) and its State Teachers' Retirement System
(STRS), directly invests public funds in the government of Turkey,
which then reaps profits while actively denying the Armenian
Genocide, funding its continued campaign of denial, at least in part,
through these investments in its economy.  
   (j) By investing public funds in the government of Turkey, the
State of California as the embodiment of its citizens contradicts its
longstanding, just position of recognizing the Armenian Genocide and
urging the government of Turkey to acknowledge its responsibility
and work toward a just resolution by honoring its obligations under
international treaties and human rights laws, to end all forms of
religious discrimination and persecution, and to return Christian
church properties to their rightful owners.  
   (k) It is the government of Turkey, not the people of Turkey, that
is responsible for Turkey's continued egregious violations of human
rights and active pursuit of genocide denial, cultural erasure, and
historical revisionism.  
   (l) PERS currently has investment holdings in bonds directly
issued by the Republic of Turkey in excess of $185,000,000. 

   (m) STRS currently has investment holdings in bonds directly
issued by the Republic of Turkey in excess of several hundred million
dollars.  
   (n) Investment in the Republic of Turkey enables its government to
continue to deny justice to the Armenian people.  
   (o) Divesting these funds would ensure that the State of
California is in no way complicit in the continued denial of the
Armenian Genocide by the government of Turkey and would encourage
said government to acknowledge the Armenian Genocide and to reach a
fair and just resolution of reparations for the survivors of the
Armenian Genocide. 
   SEC. 2.    Section 7513.76 is added to the  
Government Code   , to read:  
   7513.76.  (a) As used in this section, the following terms have
the following meanings:
   (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) "Government of Turkey" means the government of Turkey or its
instrumentalities or political subdivisions. "Government of Turkey"
also includes any and all investment vehicles, government bonds, or
financial institutions and entities that are owned, controlled, or
operated by the government of Turkey.
   (3) "Turkey" means the Republic of Turkey or any territory under
the administration or control of Turkey.
   (4) "Public employee retirement funds" means the Public Employees'
Retirement Fund described in Section 20062 and the Teachers'
Retirement Fund described in Section 22167 of the Education Code.
   (b) The board shall not make additional or new investments or
renew existing investments of public employee retirement funds in any
investment vehicle in Turkey that meets either of the following
criteria:
   (1) The investment vehicle is issued by the government of Turkey.
   (2) The investment vehicle is owned, controlled, or managed by the
government of Turkey.
   (c) The board shall liquidate investments in Turkey in an
investment vehicle described in subdivision (b) on or before July 1,
2018. In making a determination whether to liquidate investments, the
board shall constructively engage with the government of Turkey to
establish whether the government of Turkey is transitioning to
publicly accepting its responsibility for the Armenian Genocide.
   (d) On or before January 1, 2019, the board shall file a report
with the Legislature, in compliance with Section 9795, and the
Governor, that shall include the following:
   (1) A list of investment vehicles in Turkey of which the board has
liquidated its investments pursuant to subdivision (c).
   (2) A list of investment vehicles in Turkey in connection with
which the board engaged with the government of Turkey pursuant to
subdivision (c), with supporting documentation to substantiate the
board's determination.
   (3) A list of investment vehicles in Turkey of which the board has
not liquidated its investments as a result of a determination made
pursuant to subdivision (e) that 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
and the board's findings adopted in support of that determination.
   (e) Nothing in this section shall require a 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 described in Section 17
of Article XVI of the California Constitution. 
   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   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, 7513.7,  and 7513.75. 
 7513.75, and 7513.76.  
  SECTION 1.    Section 7513.6 of the Government
Code is amended to read:
   7513.6.  (a) As used in this section:
   (1) "Active business operations" means a company engaged in
business operations that provide revenue to the government of Sudan
or a company engaged in oil-related activities.
   (2) "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.
   (3) "Business operations" means maintaining, selling, or leasing
equipment, facilities, personnel, or any other apparatus of business
or commerce in Sudan, including the ownership or possession of real
or personal property located in Sudan.
   (4) "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 Sudan, that is established or organized under the laws of or has
its principal place of business in the Republic of the Sudan.
   (5) "Government of Sudan" means the government of Sudan or its
instrumentalities.
   (6) "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 Sudan, 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.
   (7) "Military equipment" means weapons, arms, or military defense
supplies.
   (8) "Oil-related activities" means, but is not limited to, the
export of oil, extracting or producing oil, exploration for oil, or
the construction or maintenance of a pipeline, refinery, or other oil
field infrastructure.
   (9) "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.
   (10) "Research firm" means a reputable, neutral third-party
research firm.
   (11) "Substantial action" means a boycott of the government of
Sudan, curtailing business in Sudan until that time described in
subdivision (m), selling company assets, equipment, or real and
personal property located in Sudan, or undertaking significant
humanitarian efforts in the eastern, southern, or western regions of
Sudan.
   (12) "Sudan" means the Republic of the Sudan, a territory under
the administration or control of the Sudan, including but not limited
to, the Darfur region, or an individual, company, or public agency
located in Khartoum, northern Sudan, or the Nile River Valley that
supports the Republic of the Sudan.
   (b) The board shall not invest public employee retirement funds in
a company with business operations in Sudan that meets all of the
following criteria:
   (1) The company is engaged in active business operations in Sudan.
If that company is not engaged in oil-related activities, that
company also lacks significant business operations in the eastern,
southern, and western regions of Sudan.
   (2) Either of the following apply:
   (A) The company is engaged in oil-related activities or energy or
power-related operations, or contracts with another company with
business operations in the oil, energy, and power sectors of Sudan,
and the company failed to take substantial action related to the
government of Sudan because of the Darfur genocide.
   (B) The company has demonstrated complicity in the Darfur
genocide.
   (c) Notwithstanding subdivision (b), the board shall not invest
public employee retirement funds in a company that supplies military
equipment within the borders of Sudan. If a company provides
equipment within the borders of Sudan that may be readily used for
military purposes, including, but not limited to, radar systems and
military-grade transport vehicles, there shall also be a strong
presumption against investing in that company unless that company
implements safeguards to prevent the use of that equipment for
military purposes.
   (d) (1) The board shall, without regard to the provisions
regarding competitive bidding, contract with a research firm or firms
to determine those companies that have business operations in Sudan.
Those research firms shall, in the aggregate, obtain data on a
majority of companies with business operations in Sudan. On or before
March 30, 2007, those research firms shall report any findings to
the board and those research firms shall submit further findings to
the board if there is a change of circumstances in Sudan.
   (2) In addition to the reports described in paragraph (1), the
board shall take all of the following actions no later than March 30,
2007:
   (A) Review publicly available information regarding companies with
business operations in Sudan.
   (B) Contact other institutional investors that invest in companies
with business operations in Sudan.
   (C) Send written notice to a company with business operations in
Sudan that the company may be subject to this section.
   (e) (1) The board shall determine, by the next applicable board
meeting and based on the information and reports described in
subdivision (d), if a company meets the criteria described in
subdivision (b) or (c). If the board plans to invest or has
investments in a company that meets the criteria described in
subdivision (b) or (c), that planned or existing investment shall be
subject to subdivisions (g) and (h).
   (2) Investments of the board in a company that does not meet the
criteria described in subdivision (b) or (c) or does not have active
business operations in Sudan are not subject to subdivision (h),
provided that the company does not subsequently meet the criteria
described in subdivision (b) or (c) or engage in active business
operations. The board shall identify the reasons why that company
does not satisfy the criteria described in subdivision (b) or (c) or
does not engage in active business operations in the report to the
Legislature described in subdivision (i).
   (f) (1) Notwithstanding subdivision (e), if the board's investment
in a company described in subdivision (b) or (c) 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, 2007, if the fund or account
manager creates a fund or account devoid of companies described in
subdivision (b) or (c), the transfer of board investments from the
prior fund or account to the fund or account devoid of companies with
business operations in Sudan shall be deemed to satisfy subdivision
(h).
   (2) If the board's investment in a company described in
subdivision (b) or (c) 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)
or (c), 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 (c) or are linked to the government of Sudan. If
the board determines that a private equity investment clearly
involves a company described in subdivision (b) or (c) or is linked
to the government of Sudan, 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
(c) or is linked to the government of Sudan 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 subdivision (f) or paragraph (2) of
subdivision (e), the board, in the board's capacity of shareholder or
investor, shall notify any company described in paragraph (1) of
subdivision (e) that the company is subject to subdivision (h) and
permit that company to respond to the information and reports
described in subdivision (d). 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 Sudan. A company that
fails to complete substantial action or continue to make sufficient
progress towards substantial action by the next time interval shall
be subject to subdivision (h).
   (h) If a company described in paragraph (1) of subdivision (e)
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
Sudan 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, 2008, 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 in Sudan, 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 Sudan and whether that company
satisfies all of the criteria in subdivision (b) or (c).
   (3) Whether the board has reduced its investments in a company
that satisfies the criteria in subdivision (b) or (c).
   (4) If the board has not completely reduced its investments in a
company that satisfies the criteria in subdivision (b) or (c), 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 subdivision (e).
   (6) A detailed summary of investments that were transferred to
funds or accounts devoid of companies with business operations in
Sudan as described in subdivision (f).
   (j) If the board voluntarily sells or transfers all of its
investments in a company with business operations in Sudan, 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
Sudan.
   (2) Investments in a company that promotes health, education,
journalistic, or religious activities in or welfare in the western,
eastern, or southern regions of Sudan.
   (3) Investments in a United States company that is authorized by
the federal government to have business operations in Sudan.
   (m) This section shall remain in effect only until one of the
following occurs, and as of the date of that action, is repealed:
   (1) The government of Sudan halts the genocide in Darfur for 12
months as determined by both the Department of State and the Congress
of the United States.
   (2) The United States revokes its current sanctions against Sudan.