LEGAL NEWSLINE

PROVIDENCE, R.I. (Legal Newsline) -- Rhode Island Attorney General Peter Kilmartin announced Wednesday he has submitted legislation to the state's General Assembly that would divest any and all state pension funds from companies that directly -- or indirectly -- do business with Iran.

Kilmartin, pointing to Iran's policies to pursue nuclear weapons capability and state-sponsored terrorism worldwide, has introduced House Bill 5620 -- sponsored by Reps. Mia Ackerman and Christopher Blazejewski, both Democrats -- and Senate Bill 0521 -- sponsored by Sen. Joshua Miller, also a Democrat.

The legislation also prohibits the state to enter into any contracts with companies doing business with Iran.

Currently, 17 states and the District of Columbia have enacted Iran divestiture legislation, with similar bills pending in three additional states, according to Kilmartin's office.

"Corporations and investors that do business with Iran support and strengthen a dangerous regime that is developing nuclear weapons, brutally repress its own people and sponsor terrorism worldwide," the attorney general said in a statement.

"Companies that wish to continue 'business as usual' in Iran should be subject to debarment from state government contracts. The prospect of debarment is one of the most effective ways to compel corporations to end their Iran business."

In July 2010, U.S. Congress passed the Comprehensive Iran Sanctions, Accountability and Divestment Act.

The law targets companies selling refined petroleum products to Iran, as well as international banks with ties to the extreme Revolutionary Guard and other "nefarious actors" within Iran.

The act gave states express legal permission for state and local governments to divest from companies that do business with Iran, specifically noting that such efforts do not run afoul of the Employment Retirement Income Security Act.

The act also provides safe harbor for private asset managers who divest in a similar manner.

According to Kilmartin's office, the legislation would require, within 90 days of the effective date, the State Retirement Board to identify all companies in which the public fund has direct or indirect holdings in companies with business operations in Iran.

If the company has direct holdings, the State Investment Commission must send written notice that the company may become subject to divestment.

Such a company has 90 days to cease scrutinized operations or convert them to inactive operations. If not, the public fund shall divest according to a statutory schedule.

Rhode Island's proposed legislation also would create a new chapter that would prohibit bidding or entering into contracts with the state for goods or services with entities determined to engage in investment activities in Iran.

Within 90 days of the effective date, the general treasurer must develop a list of entities who engage in investment activities in Iran. The general treasurer must provide such entity with written notice of its addition to the list and an opportunity to respond.

Entities that seek to bid or enter into contracts with the state must certify that the entity is not engaged in investment activities with Iran. An entity who provides a false certification or fails to demonstrate that it has ceased its investment activities are subject to a civil penalty of $1 million or twice the amount of the contract, termination of the contract and ineligibility to bid on a contact for three years.

Iran divestiture also has been an initiative of the National Attorneys General Association.

"The Office of Attorney General is charged with protecting the state of Rhode Island and its taxpayers, and significant taxpayer money is lodged in pension funds, state investments and state contracts. It is imperative that those funds and investments are not put at unnecessary risk by investing in, or contracting with, companies doing business with Iran," Kilmartin said.

Rhode Island has similar divestiture laws outlawing state funds be invested in companies that do business in South Africa and Northern Ireland.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.