Comptroller's Corner,William C. Thompson

This column marks the first in a series I will be writing for The Jewish Press. In these essays I will describe my work as the city comptroller, a position that places on my shoulders the responsibility of safeguarding the fiscal health of our great city. As comptroller, I am the chief investment adviser to New York City's five retirement systems, managing some 100 billion dollars in pension monies for the City.

Our responsibility to protect retiree assets requires a constant effort to pursue the highest standards of corporate responsibility at companies in which we invest. We have argued that when companies fail to consider the reputational damage resulting from their operations - whether directly (through their hiring policies, for example) or indirectly (through policies of the countries in which they operate) - they put their shareholders' investments at risk.

In this context, our clout as a large institutional investor has enabled us to help safeguard the security of nations such as Israel by supporting the fight against international terrorism. As comptroller, I have recently pressured corporations we invest in that do business with state sponsors of terrorism to change their policies. New York City pension funds have taken on a number of corporate giants who were doing business with rogue nations such as Iran and Syria.

Americans have been hearing for years that there's a connection between money and terrorism, but most don't realize that their investments, including their retirement nest eggs, could be financing regimes that condone widespread violence and bloodshed.

It certainly came as a shock to New York City's police and firefighters, who suffered the loss of hundreds of their colleagues on September 11, 2001. The New York City Police and Fire Department Pension Funds own thousands of shares in Halliburton Co. And Halliburton, as is now well known, was doing substantial business in Iran, a nation that had been identified by the U.S. State Department as a state sponsor of terrorism.

Halliburton was not alone. Because of a loophole in federal law, other Fortune 500 companies, like General Electric and ConocoPhillips, were doing the same. How did this happen? Our government forbids American companies from doing business with or in countries it identifies as terror sponsors. However, that ban does not apply to any foreign or offshore subsidiary, so long as non-Americans run it. This loophole was exploited by these companies.

In February 2000, Halliburton opened an office in Tehran under the name of its Cayman Islands-based subsidiary. However, the Cayman Islands address is merely a mailbox - and barely that. When mail arrives there, it is rerouted to Halliburton headquarters in Houston. The actual "headquarters" for the subsidiary is in Abu Dhabi in the Persian Gulf, where it shares office space, fax and phone numbers with its U.S. parent. Given this evidence, the notion that Halliburton's subsidiary was independent of its parent was laughable.

Halliburton owed an explanation to thousands of current and retired New York City police and firefighters, who hold $31.4 million worth of Halliburton shares. On their behalf, my office called on Halliburton in 2003 to review the potential financial and reputational risks of operating in Iran. Halliburton agreed, and as a result, my office withdrew a proposal that would have allowed shareholders to urge the company to conduct the review.

Halliburton subsequently produced a report that, rather than addressing the broader risks inherent to doing business with rogue states, offered a narrow, legalistic explanation of how its operations fall within the bounds of the law. Halliburton was clearly unwilling to address the broader implications of its activities in Iran for both its shareholders and the country.

I am pleased to say that as a result of pressure by our pension systems - and the publicity it generated - Halliburton eventually caved in to the pressure. We also convinced ConocoPhillips, General Electric, Aon and Foster Wheeler to likewise cease their backdoor dealings with state sponsors of terrorism.

Ultimately, we must close the loophole in Federal law that allows companies to continue this behavior, and New Jersey Senator Frank Lautenberg's "Stop Business with Terrorists Act of 2005" is designed to do just that. I support that legislation and will continue to argue for its passage.

In this time of crisis, when Israeli cities and towns are being targeted by the Hizbullah militia with missiles many believe are supplied by Iran and Syria, I am convinced that our efforts to curtail the ability of these nations and others to engage in acts of terror, whether within their own countries or through the export of weapons, technology and militants abroad, is more important than ever before.

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Comptroller's Corner , William C. Thompson