How filthy is your 401(k)? | Cover Story | Salt Lake City | Salt Lake City Weekly

How filthy is your 401(k)? 

How Utahns' Retirement Dollars Profit From Genocide, Terrorism and Environmental Disasters.

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While SRI is growing, it’s far from universally accepted. Only one out of every $9 invested with a professional adviser in the United States are SRI, according to the Social Investment Forum, an SRI industry group. Oddly, some holdouts are steadfast that SRI is actually irresponsible. SRI requires a substantial up-front cost for researching the companies and an ongoing cost for continued monitoring. Also, investors may miss out on profits if they simply divest from all oil companies, for example, out of a concern for the environment.

That’s what worries traditionalists like URS’s Newman. Any commitment to something other than maximum profits violates fiduciary responsibility.

Newman has voiced that view multiple times in recent years. He believes members of the URS will not want to receive lower benefits or make larger contributions to pay for moral decisions made by legislators. And if the fund is harmed so badly that it can’t pay its obligations to retirees, state taxpayers would have to make up the difference.

“The Utah Retirement System is a trust fund. As the trustee of that fund, you have an undivided responsibility in administering that fund,” Newman says.

“The responsibility is to provide the biggest investment return you can, considering the risk involved in it. If you start considering other things over and above the return, you may be violating your fiduciary responsibility.”

Mixing morality with investing is a slippery slope, Newman said. How irresponsible must a company be before the state divests? For example, what if a large conglomerate owns a tobacco company and also sells Jell-O, which was the case until 2007, when Kraft Foods owned one of the world’s largest tobacco companies, Philip Morris. Should Utah have divested from Kraft because of Philip Morris? “It’s just difficult drawing lines on what is appropriate,” Newman says.

The same applies to Iran. Utah is home to Iranian refugees whose family members back home may experience a lower standard of living as a result of sanctions and divestment.

Conflicted Interests
It may be difficult to determine how much irresponsibility justifies divestment, but it’s also difficult to mete out seemingly contrary actions of various branches of government. During the Medicaid recovery lawsuits against the tobacco industry in the 1990s, the states were essentially suing little pieces of themselves—the tobacco companies that they, in part, owned.

“Advocates highlighted the contradictions between state justice departments suing the industry, and state health departments expanding tobacco control programs, while state treasurers invested in tobacco companies,” wrote Nathaniel Wander and Ruth Malone in a 2006 paper. Wander is a senior research fellow for the Center for Tobacco Control Research and Education at the University of California-San Francisco. Malone is a registered nurse, professor at UCSF and editor-in-chief of the peer-reviewed journal Tobacco Control.

Brigham Young University undergraduate and activist Greg Smith thinks a similar contradiction exists between Utah and Iran. The Pennsylvania native, economics major and returned LDS missionary has worked with Rep. Fisher on her Iran legislation and also volunteers for American Israel Public Affairs Committee (AIPAC). He says states that invest in companies that work in Iran are contributing to the death of American soldiers in Iraq and Afghanistan.

“My roommate is in Iraq right now and I think it’s completely asinine that the state workers of Utah are investing in the country that is the leading statesponsor of terror,” he says.

Newman says no divestment scheme has ever been approved by the Legislature, not even one to remove tobacco or alcohol stocks from the portfolio.

Fisher says she will return next session with a new bill regarding Iranian investments, though she wouldn’t discuss its specifics. Last year, she passed a bill that requires the Utah Retirement System to report each year how much money the system has invested in companies doing business in Iran’s oil sector.

Other states have dabbled in SRI, however. When the National Association of State Treasurer’s sent an e-mail inquiry to each of its members on City Weekly’s behalf, eight of the 14 who responded said they have divestment policies. The association’s director of federal relations, Jim Currie, responded to the survey, saying, “I have to admit to being surprised at how many states have policies on divestment.”

Indiana, for example, instructs its public retirement system to divest from any company doing business in a country listed on the U.S. State Department’s list of state-sponsors of terror, currently Syria, Cuba, Iran and Sudan. Georgia and others have passed laws demanding divestment from Iran only.

Iran and terrorism divestment appeared multiple times in the informal survey, followed closely by another country: Sudan.

Utah Rep. David Litvack, D-Salt Lake City, sponsored a bill in 2008 asking the URS to divest from companies working in Sudan that support genocide, directly or indirectly. He didn’t have a hard time convincing fellow lawmakers that Utahns’ investments were supporting genocide in Sudan’s Darfur region. The difficulty was convincing them on the basic premise of SRI: that investments should be used to further social goals.

Another objection to his bill was Newman’s view of a slippery slope, which Litvack acknowledges. When he originally conceived of his Sudan divestment bill, he wanted a moral slope built right into the law.

“When I first approached this issue a few years ago, my original thought was, ‘Gosh, this isn’t just a Sudan thing, it’s all genocide. We need to put a mechanism in place where, if there’s a genocide, this would go into effect,’” he says.

That sort of provision is probably unconstitutional, Litvack says, because it lacks specificity, so the bill was changed to target only Sudanese genocide. Any other slippery-slope arguments, Litvack said, are just a “distraction.”

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Jesse Fruhwirth

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