Anchorage Daily News

JUNEAU -- Lauren Tibbitts-Travis, a 16-year-old sophomore at the local high school, plans to use her Alaska Permanent Fund dividend to pay for college.

But she sees a problem -- a problem of conscience.

"Who wants to go to college on blood money?" she said.

Tibbitts-Travis is among supporters of a bill two state lawmakers from Anchorage are sponsoring to force managers of the $38 billion Permanent Fund to dump the stocks of companies doing business in Sudan, the African country whose government has been blamed for genocidal killings in the Darfur region.

To promote the bill, Tibbitts-Travis and fellow students a week ago hosted a documentary film on Darfur at a downtown theater. It played to a packed house.

Drawing attention to Darfur's plight has become a huge global cause, and the bill now pending in the Alaska Legislature is part of that movement. But it could clash with what state investment professionals say is the wisest way to manage public money.

Managers of the state's oil-wealth savings account as well as state retirement funds that also would be affected have come out against House Bill 287, saying it would complicate their work, raise expenses and, in the end, have little impact on the Darfur situation.

Managing money according to a social or political agenda is a bad bet, said Mike Burns, the Permanent Fund's chief executive.

"We've never done any social investing," he said. "It doesn't come free, and it's not good investment policy."

Rep. Les Gara, an Anchorage Democrat who is sponsoring the bill with Republican Rep. Bob Lynn, is furious that Burns is resisting his call to sell the few stocks in the fund's portfolio with Sudan ties.

"Mike Burns has been amazingly creative in coming up with excuses for investing in genocide," Gara said.

All concerned agree the Darfur province in western Sudan is caught in a nightmare.

The area has seen mass killings and huge displacements of people, particularly in 2003 and 2004. The conflict involves forces backed by the Sudanese government against rebels in Darfur. President Bush has used the word genocide for what's happened there.

"The Sudanese government's disastrous decision to arm, direct, and pay Northern Arab tribes, now called the Janjaweed, as their proxies in the war against Darfur's rebels led to genocide and resulted in the deaths of hundreds of thousands of innocent civilians and the destruction of their villages and livelihoods," the president's special envoy to Sudan told Congress last year.

WIDESPREAD POLICY SHIFT

HB 287 would require the Permanent Fund as well as state retirement fund managers to track, avoid and sell companies doing business in Sudan. The bill requires fund managers to keep a list of "scrutinized companies," and to make periodic reports to the Legislature, the president's envoy and others.

A legislative research report prepared at Gara's request says at least 41 states have adopted or are considering policies to divest state assets from Sudan.

As of the end of 2007, Permanent Fund holdings subject to a sell-off under the bill had a total market value of roughly $22 million, a tiny portion of the fund's overall worth.

Federal executive orders forbid U.S. companies from operating in Sudan, but the Permanent Fund owns shares in six foreign companies that do. The biggest stock holding is Sinopec, a giant Chinese oil company that last year backed an unsuccessful bid from an Anchorage construction company for a state natural gas pipeline license.

Institutional investors such as state pension and other funds moved $2.2 billion away from Sudan-linked companies between 2005 and 2007, according to a report from the Center for Retirement Research at Boston College. Now some states are applying "terror-free" divestment policies to other countries such as Iran.

The state capital is a long way from Sudan and few if any Alaska lawmakers have trekked to Darfur, but that doesn't matter -- the Legislature should pass HB 287, said Rep. Beth Kerttula, D-Juneau.

While Permanent Fund managers "do a tremendous job," she said, the bill addresses an issue that transcends sound investing.

"We're Alaskans. We don't believe in genocide or apartheid," said Kerttula, the House minority leader.

DIVIDED VIEWS IN JUNEAU

Burns, the Permanent Fund chief, told lawmakers in a hearing last month: "We are all disturbed by the incomprehensible situation that is taking place in Darfur."

But he said over 30 years, the Permanent Fund has been invested purely for the financial benefit of Alaskans and "never to enact a social or political agenda." He urged lawmakers to reject HB 287.

Burns gave lawmakers a research paper showing it wasn't extensive divestment but "many other forms of pressure" on the South African government that ended apartheid.

In an interview last week, Burns said weeding out companies working in Sudan could run up costs for the fund, as the money management firms it employs might raise fees to customize Permanent Fund stock portfolios.

While Burns didn't want to talk about possible lost profits, researchers say that can happen when dumping stocks for social reasons but usually a fund's performance change is "negligible," the Boston College report says.

Alaska lawmakers have grappled with the question of social investing before.

In 1981, a legal opinion prepared for the Legislature concluded that "any departure from the goal of maximizing economic return ... is suspect." In 1985, a South Africa divestment bill was filed but never passed, said Permanent Fund spokeswoman Laura Achee.

Burns said the Permanent Fund will do whatever lawmakers ask.

"It's their call -- it's the Legislature's call," he said.

Rep. John Coghill, R-North Pole, said he can't support HB 287.

If investments in Sudan are bad, he said, how about investments in tobacco companies, oil companies or other types of businesses out of favor with some people?

"I'm a Christian. There's a lot of Christians over there getting hammered. So I am very, very sympathetic," Coghill said, citing his missionary friends working in Africa.

But portfolio management is best left to professionals, not politicians, he said.

Gara promises that his bill isn't the start of more investment mandates from lawmakers. "We're drawing the line at one genocide," he said.

HB 287 currently sits in the House State Affairs Committee. The Legislature is scheduled to adjourn April 13.

Tibbitts-Travis, the high school student, was among those who testified before the committee last month. She didn't come away feeling good about the bill's chances of passing.

"I was really disappointed," she said. "The committee members didn't seem too enthusiastic."

Find Wesley Loy online at adn.com/contact/wloy or call him in Juneau at 1-907-586-1531.

More than $22 million in investments

Permanent Fund stocks subject to Sudan divestment under HB 287:

Company Market value

Sinopec (China) $10.5 million

Alstom (France) $9.3 million

Petrofac (United Kingdom) $1.3 million

Wartsila (Finland) $868,000

Lundin Petroleum (Sweden) $68,000

CNPC (Hong Kong) $26,000

Note: Values as of Dec. 31, 2007

Sources: Alaska Legislative Research Services, Alaska Permanent Fund Corp.

ADVERTISEMENT