On the Lege

Texas and Sudan: In or Out?

A sticky political question has emerged in Gov. Rick Perry's endorsement of legislation that would divest the state's holdings in companies doing business in Sudan. Here's the dilemma: Should the proposed policy also extend to the governor's Texas Enterprise Fund, which last week awarded an $8.5 million grant to a major shareholder of Chinese oil companies operating in Sudan? The short answer is a squirmy "let's not go there." In fairness to Perry and the bipartisan crew of lawmakers sponsoring the legislation, Texas is just now catching the wind of a national grassroots campaign targeting the recipient of the state grant – Fidelity Investments – the nation's largest mutual fund company and a top investor in two Chinese oil concerns that help finance the Sudanese-government-backed genocide in Darfur. Fidelity received the state grant as an incentive to expand its Texas operations in Tarrant County, and create 1,500 new jobs. Perry's press announcement credited the Enterprise Fund with clinching the deal.

While Perry was deal-making, another Fidelity-related activity was in the works. The Massachusetts Coalition to Save Darfur launched its Fidelity out of Sudan campaign (www.fidelityoutofsudan.com) four weeks ago, and quickly captured the attention of national business magazines and major dailies. Boston-based campaign organizers Eric Cohen and Susan Morgan, both former Fidelity investors, said in an interview that they decided to go public with their concerns about the company's holdings after spending three months writing cautiously diplomatic letters to more than 50 company executives. They had hoped to get their foot in the door for a meeting at Fidelity's flagship office in downtown Boston. At the very least, they wanted Fidelity officials to use their investment pull as a negotiating tool with the Chinese oil companies. Instead, Fidelity responded with a form letter, worded pretty much the same as its statements to the press.

Texas is one of 20 states considering legislation that follows the "targeted divestment" model created by the Sudan Divestment Task Force (www.sudandivestment.org), which advises governments, universities, and asset managers on how to sever investment ties with companies in Sudan without breaking the bank and jeopardizing pension funds. Based on this model, mutual fund companies such as Fidelity would be spared the divestment axe under the Texas legislation, thereby safeguarding the state's $120-billion-plus pension funds.

The Fidelity divestment campaign Web site includes a petition with a signature goal of 400,000 – the estimated number of civilians killed in Darfur. "It's hard to influence Chinese government and Chinese businesses, but Fidelity is such a large, powerful investor, they could use some of their muscle to influence those companies operating in Sudan," said Cohen, a retired high tech executive. "That would be an earthquake in the financial market."

At the same time, Cohen said optimistically, "Now that Texas is a major business partner with Fidelity, the governor could use this opportunity to talk with Fidelity about being a good social citizen."

Said Perry spokesman Ted Royer: "The governor encourages Fidelity and all other private companies to divest themselves of any holdings they have in companies doing business in Sudan." Royer also said Perry would consider "any needed reforms in how the Enterprise Fund is administered so we can align it with other state investments, specifically in terms of how we divest other state funds of investments in Sudan."

Divestment activists applaud Texas and other states for taking a moral and financial stand against genocide and other atrocities in Darfur. But the Fidelity campaign seeks to appeal to the masses rather than government entities mindful of their fiduciary responsibilities to maintain healthy pension funds. "Even in cases where mutual funds are not part of the legislation, this is a way to build awareness so that individuals can make their own choices," Morgan said.

Authors of the three-bill Texas initiative (Senate Bill 247, House Bill 667, and HB 419) include Rodney Ellis in the Senate and Corbin Van Arsdale and Ruth Jones McClendon in the House. More than two dozen legislators have signed on as co-sponsors, and Railroad Commissioner Michael Williams is an outspoken advocate of the measure.

With this much bipartisan support, what could possibly go wrong? Well, there is the pesky Fidelity angle, for one. Many lawmakers don't even want to talk about Fidelity's dip into the Enterprise Fund because they know that if they mess with Perry's economic development engine, they're messing with their own legislation.

"I'm just learning about the whole issue with Fidelity, and I'm looking into it," said Fort Worth Democratic Rep. Lon Burnam, a co-sponsor credited with galvanizing support for the divestment legislation. Burnam is usually an outspoken critic of the Enterprise Fund, but not this time. "I have visited with Commissioner Williams about this and he has similar concerns, which are we don't want to lose the baby and wade into this whole other arena," he said. "But we also understand that this is classic politics – better to get half a loaf than none."

Rep. Garnet Coleman, D-Houston, said he supports the legislation, but the Fidelity divestment campaign has brought to light new concerns about how the state doles out incentive packages to companies. "If it's wrong for the state through its pension plans to invest in Sudan because of human rights practices, then it's wrong for us to support companies that continue to invest in companies doing business in Sudan," Coleman said. "Otherwise it's a case of, do what I say, not what I do."

Check Your Pension Fund

Top holders in oil companies bankrolling Darfur genocide:

Top institutional holders:

PetroChina (PTR)

Fidelity Corp.

Allianz Global Investors of America LP

Schafer Cullen Capital Mgt. Inc.

Berkshire Hathaway (Warren Buffet)

Merrill Lynch & Co. Inc.

China Petroleum & Chemical Corp (SNP)

Wellington Mgt. Co. LLP

Fidelity Corp.

Thornburg Investment Mgt. Trust

Renaissance Technologies Corp.

Harding Loevner Mgt.

Top mutual fund holders:


Fidelity Contrafund Inc.

Variable Insurance Products

NFJ Dividend Interest & Premium

Fidelity Advisor New Insights Fund

Calamos Strategic Fund


Vanguard Specialized Energy Fund

Fidelity Contrafund Inc.

Harding Loevner Funds

Icon Energy Fund

Variable Insurance Products FD

Source: Yahoo Finance

Taxpayers contribute too

On Feb. 7, Gov. Rick Perry awarded Fidelity an $8.5 million grant from the state-financed Texas Enterprise Fund to expand existing operations at the company's Tarrant Co. campus. Fidelity will invest more than $200 million in the expansion, creating more than 1,500 new jobs, according to the governor's announcement.

Lege Notes

• While Gov. Rick Perry hopes to conjure a reported $29 million for his human papillomavirus immunization program, the Texas Cancer Council is fighting for its financial life. Last week, the House Appropriation Subcommittee on general government received a proposed budget for the council that slashes its funding by 7.6%, down to a mere $6.7 million for fiscal year 2008-2009. That's on top of a $2 million cut over the last five years. The council uses this small budget to bring cancer awareness, education, and health projects to outlying areas badly served by other state and federal agencies. It already has a staff vacancy it cannot fill because it can't afford to hire anyone, and now there are fears it will have to cut back its work along the border. "We went down and down and down," TCC Executive Director Sandra Balderrama told representatives, "and now the only thing left is programs." – Richard Whittaker

• Sens. Florence Shapiro, R-Plano, and Kyle Janek, R-Houston, have reintroduced legislation that would put true accountability measures on the state's 191 charter school operators. Those measures would require actual testing of students – instead of dodging the state's accountability system by reconfiguring campuses for nontesting grades – and progress on the state's accountability measures in reading and math. In a news conference at the Capitol on Monday, Shapiro said it was time to get rid of the bad actors and reward those schools that perform well. The best charter school operators – the ones that top the state's accountability rating system for two years – would be given incentive payments for school facilities and broader latitude in creating new charter campuses. – Kimberly Reeves

• Nothing spells a legislative year like a nice Austin-centric fight at the Legislature. This year, it's the Travis Co. commissioners who will be the culprits, as they seek to alter the Capitol view corridor. Nothing is firm yet, but county officials are looking seriously at using the empty tax assessor-collector office for the new civil courthouse building. That means altering the Wooldridge Park Capitol view corridor. That doesn't bother the Parks Board much, but it has the Texas Historical Commission and Heritage Society of Austin up in arms. Both were on hand at Tuesday's Commissioners Court meeting to give stern grandmarmy words of opposition to any change to the view corridors. Commissioners will likely make a decision on seeking the exemption – and finding a bold soul in the local delegation to carry it – by early next month. – K.R.

• Rep. Harold Dutton, D-Houston, has again filed legislation to reduce the criminal penalties associated with the possession of small amounts of marijuana. HB 758 would reduce possession of up to 1 ounce of pot to a class C misdemeanor (punishable by up to a $500 fine only) and would downgrade the possession of up to 2 ounces to a class B misdemeanor (punishable by up to 180 days in county jail). Possession of up to an ounce could net jail time, but only when a defendant has been popped and convicted of minor possession three times within two years. Nationally, marijuana-related arrests have skyrocketed over the last decade, reaching an all-time high of nearly 800,000 in 2005, according to FBI statistics released in September. Of those, nearly 88% were for simple possession; 75% of those arrested were under 30. HB 758 mirrors pot decrim legislation Dutton filed in 2005, and although that bill received a generally favorable hearing in the House Committee on Criminal Jurisprudence, it ultimately languished without enough votes to move forward. For now it's unclear whether Dutton's latest reform effort will face better odds of passage: Lawmakers have made it clear they want to be smarter on criminal-justice issues, and to cut costs associated with a bloated prison system – goals that would be achievable, in part, by reducing the number of inmates locked up for low-level drug and alcohol offenses. Yet, with the departure from the Capitol of veteran Austin lawmaker and Criminal Jurisprudence Committee Chair Terry Keel, the chairmanship has been turned over to Rep. Aaron Peña, D-Edinburg, who hasn't exactly been progressive on pot-related issues. In 2005, Peña proposed laughable legislation to ban the sale of lollipots, candies containing marijuana-derived extracts (such as those from the plant's flowers), saying the candies – which are imported with FBI and U.S. Customs approval and have been sold in the U.S. for nearly a decade – were nothing more than a means to "entice our children into a life of illegal drugs." – Jordan Smith

Families USA, a national health-care watchdog group, has named Austinite Anne Dunkelberg one of the Consumer Health Care Advocates of the Year. Dunkelberg, associate director of the Center for Public Policy Priorities, was honored for her work on behalf of moderate and low-income Texans. She is one of the state's leading health-care experts. Previous Texans who have received the Families USA award include Reps. Elliott Naishtat, D-Austin, and Garnet Coleman, D-Houston. – A.S.

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Fidelity Investments, Darfur, Sudan, Texas Enterprise Fund, Rick Perry, Fidelity Out of Sudan, Massachusetts Coalition to Save Darfur, Lon Burnam, Michael Williams, Corbin Van Arsdale, Rodney Ellis, Ruth Jones McClendon, Garnet Coleman, Eric Cohen, Susan Morgan

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