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Divest Terror By: Frank J. Gaffney Jr.
Center For Security Policy | Tuesday, August 17, 2004

Ever wonder what you could do to help win the war on terror?  Are you sick and tired of waiting passively for the next devastating attack – perhaps against people you love and your community, or those of other Americans?

What if you could make a difference, possibly even diminish our enemies’ ability to conduct such attacks?  Would you be willing to try?

If your answer to these questions is “yes,” the Center for Security Policy has good news for you.  A Center report released last week, entitled Terrorism Investments of the 50 States (available at www.DivestTerror.org), suggests that virtually every one of us can contribute to victory in this war.  It turns out that the Nation’s leading public pension funds are heavily invested in some 400 publicly traded companies that do business with terrorist-sponsoring regimes – providing them with lifeblood in the form of vital resources, high technology and cash.  Cutting off such business could hurt the bad guys in material ways.

In fact, according to the Center’s analysis, the top 100 U.S. public pensions appear to hold in portfolio stock of such companies worth roughly $200 billion.  This investment helps the companies – the vast majority of whom are foreign-owned and operated (although about 30 are offshore subsidiaries of U.S. enterprises) – to do upwards of $73 billion worth of projects in states like Iran, Syria, Libya, Sudan and North Korea. 

Could these countries’ governments continue to provide safe haven, arms, training, intelligence and financial assistance to terrorist organizations, absent the wherewithal and moral cover provided by their Western business partners?  Hard to say for certain.  We do know, however, two things:

1) Twenty years ago, a U.S.-led campaign of shareholder activism denied South Africa’s apartheid regime the West’s corporate life-support upon which its economy heavily depended.  When public pension funds, college and university endowments and other institutional and private investors divested companies that did business in South Africa, change occurred there – resulting first in the dismantling of officially sanctioned racist policies and then in the fall of the government, itself.  And,

2) Until now, the Iranian and other rogue state regimes have not had to choose between supporting terror and garnering billions from Western companies and their investors.  All other things being equal, they can expect to continue to benefit from the latter, even as the proceeds help them enable murderous terror and other threats against this country.

It seems, therefore, that the time is ripe to apply to the terror-enablers the divestment campaign techniques that proved so effective in South Africa – and, for that matter, with respect to bringing about change on such issues as corporate governance and accountability and companies’ policies towards tobacco, environmental issues and so-called “sin” stocks. 

It would be a positive start if every American investor were simply to demand that their fund managers provide information about which companies held in portfolio do business in nations that the U.S. State Department has designated as state-sponsors of terror.  Unfortunately, if past experience is any guide, unless there is a concerted demand for such information, it is unlikely to be forthcoming.

If, on the other hand, American investors refuse to take “no” for an answer – which is what New York firefighters and police did when they discovered their pensions held stocks of companies doing business with terrorist-sponsoring states – they can get results.  Once equipped with an understanding of who such companies are, the investors can take action, perhaps through shareholder resolutions (the approach favored by the champion of New York City’s firemen and women and their police counterparts, Comptroller William Thompson) or via divestiture.

To be clear, the reason for taking such steps is not because the companies in question are doing anything illegal.  Rather, it’s because what they are doing is wrong.  Senator Frank Lautenberg (Democrat of New Jersey), one of the leaders in congressional efforts to halt U.S. and Western business dealings with terrorist-sponsors, goes even further.  In a recent letter to the 50 states’ governors and public pension fund managers, he called such activities “unconscionable.”

Whether from a moral perspective aiding those who aid our enemies is unconscionable or simply wrong, there can be no doubt that it is foolish strategically.  As it happens, moreover, holding stocks in those companies who underwrite the nations that underwrite the terrorists is also a bad risk for investors.  The Securities and Exchange Commission has warned several times about the material nature of this “Global Security Risk” and even created an office to monitor it.

In short, American investors have plenty of reasons to divest terror.  Now that they know doing so can help win the war on terror, who will fail to take this step?

Frank J. Gaffney, Jr. is President of the Center for Security Policy and a columnist for the Washington Times.

Frank J. Gaffney, Jr. is the founder, president, and CEO of The Center for Security Policy. During the Reagan administration, Gaffney was the Assistant Secretary of Defense for International Security, the Deputy Assistant Secretary of Defense for Nuclear Forces and Arms Control Policy, and a Professional Staff Member on the Senate Armed Services Committee, chaired by Senator John Tower (R-Texas). He is a columnist for The Washington Times, Jewish World Review, and Townhall.com and has also contributed to The Wall Street Journal, USA Today, The New Republic, The Washington Post, The New York Times, The Christian Science Monitor, The Los Angeles Times, and Newsday.

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