Lawmaker pulls bill to set human-rights limits on public pension fund investments

Opposed by the state's two public pension funds and Gov. Arnold Schwarzenegger, an assemblyman withdrew a bill Wednesday that would have prevented the funds from investing in private-equity firms partly owned by foreign governments with poor human-rights records.

Assemblyman Alberto Torrico, D-Newark, announced he is withdrawing Assembly Bill 1967 for the time being.

"This delay will give us time to properly address some of the concerns that have been raised," he said in a press release.

Officials at the California Public Employees' Retirement System and the California State Teachers' Retirement System had said the bill would have cost them billions of dollars in lost investment opportunities. On Wednesday, the governor announced his opposition in an opinion piece in the Los Angeles Times.

The bill was sponsored by the powerful Service Employees International Union, and critics said AB 1967 wasn't really about human rights. Rather, they said it was meant to help the SEIU in its struggle to organize employees of a nursing home chain owned by the private-equity firm Carlyle Group.

CalPERS and CalSTRS are Carlyle investors. So is Abu Dhabi, a member of the United Arab Emirates, which was specifically mentioned in the text of AB 1967. The emirates' human-rights record has been labeled poor by the U.S. State Department.

The bill "was a cynical effort to play fast and loose with the pensions of 2 million public employees to advance a single-minded organizing campaign," said the Private Equity Council, a Washington lobbying group.

Jack Ehnes, the chief executive of CalSTRS, called the bill "a direct attack on the highest-performing investments we have."

CalSTRS and CalPERS could have kept their existing investments but would have been prohibited from plowing new money into private-equity firms whose investors include foreign governments that don't adhere to major human-rights treaties.

CalSTRS estimated that AB 1967 would have cost it $1.5 billion to $5.3 billion over five years. The fund controls $165 billion in assets.

"Times are tough, and markets are choppy as they are," Ehnes said Wednesday. "This bill would have made it tougher."

Brad Pacheco, a spokesman for CalPERS, said the fund sympathized with Torrico's "intentions around human rights," but it was pleased that the bill had been pulled. CalPERS, which has $242.7 billion in assets, said AB 1967 would have cost it $1.2 billion a year over 10 years.

In his piece in the Times, Schwarzenegger noted that the Legislature has banned CalPERS and CalSTRS from investing in Sudan and Iran.

But he called AB 1967 different, saying it "would do little to address human rights and would impose a costly burden on California."

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