House endorses Iran divestment with Cahill support

Citing threats to Israel by Iranian President Mahmoud Ahmadminejad, Treasurer Tim Cahill on Tuesday endorsed legislative efforts to pull state pension funds from companies that deal with Iran, a move backed earlier in the day by the House and one that Cahill had previously opposed.

Cahill, who oversees the state's $44 billion pension fund, said administrators would be able to withdraw investments from companies that do business with Tehran without negative consequences for the retirees who depend on the fund.

In 2008, Cahill warned divestment from Iran could jeopardize as much as $1 billion in pension investments, but he said in a Thursday phone interview that circumstances had "changed pretty aggressively over the last year."

In remarks on the House floor Tuesday, Rep.
Antonion Cabral estimated that the proposal, if enacted, would require the pension fund to redistribute about $500 million of investments.

"If this helps tighten the noose around Iran's move into nuclear weapons and it protects Israel, then I'm going to support it," Cahill said, adding that he contacted House budget chief Charles Murphy earlier Tuesday to lend his support.

"This is the right time to do it. I won't do it lightly. I don't want people to think we're trying to play politics with the fund or make political decisions. I think we can do it in a way that will not significantly impact our investment opportunities. If we're making money in Iran, honestly, we probably shouldn't be."

Under the bill, pension divestment would cease if the U.S. State Department removed Iran from its list of state sponsors of terrorism and certified that Iran is no longer pursuing a nuclear capability in violation of its international commitments and obligations, or if the president of the United States declared that the state act interfered with the conduct of the United States foreign policy.

State lawmakers have undertaken divestment twice before - once from South Africa to protest Apartheid, and in 2007 from Sudan to protest mass killings in the Darfur region. The 2007 divestment forced reallocation of about $80 million, according to pension fund officials.

Supporters say it is important for Massachusetts to take a stand against companies that commit genocide or fund terrorism. They argue even if Massachusetts represents a small portion of investments in Iran, a collective effort by other states and entities could have an effect. Critics say moves by individual states to pull funds from Iran circumvent U.S. foreign policy, hurt local pension investments and wouldn't impact the target country.

The House endorsed pension fund divestment from Iran with a 130-15 vote Tuesday, sending the bill to the Senate. A similar measure cleared the House 125-27 in 2008 with less than three hours remaining on July 31, the final day of formal sessions, and died without action in the Senate.
In 2007, the Senate voted 7-29 to keep Iran out of the proposal to divest from Sudan.

Rep. Eugene O'Flaherty (D-Chelsea), co-chair of the Judiciary Committee, said during Tuesday's session he had long opposed divestment from Iran but, given Ahmadinejad's increasing isolation of Iran from the West, would support the move this time. Rep. Jeffrey Perry (R-Sandwich) forcefully rejected assertions that the move would subvert national foreign policy, calling such arguments "disturbing." Rep. Hank Naughton (D-Clinton) said the measure would support troops fighting in the Middle East.

A bid by Rep. Denise Provost (D-Somerville), who said the measure should only take effect with the blessing of the federal government, fell short in the House.

Cahill said he would raise the issue with the pension fund's nine-member board during a meeting next week. He said that if lawmakers fail to adopt the measure, he would "look into" whether it's possible to accomplish administratively, although he acknowledged such a move would set precedent.

The pension fund is run by a nine-member board that Cahill chairs and includes three gubernatorial appointees and representatives of the state retirement board, the state teachers retirement system and state employee retirees.

The previous executive director of the fund, Michael Travaglini, who departed earlier this year, had been a loud critic of divestment, arguing that it has little effect on the targeted country and limits the scope of fund investments.
Asked about Travaglini's position, Cahill said he's "no longer the executive director."

Cahill's call to support divestment is the second time he changed his tune on the issue. In 2007, after a private meeting with Israeli Prime Minister Benjamin Netanyahu - who was out of office at the time - Cahill emerged optimistic about the prospects of divestments.

"It would be something we think we could do as a pension fund without impacting negatively our returns," he said.

Six months later, however, Cahill criticized efforts to limit Massachusetts's investment options, particularly in Iran, only supporting divestment from Sudan because of widespread support.

"Iran is the big one," he said at the time. "It would force us to sell billions of dollars in returns."

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