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INVESTMENTS TIED TO GENOCIDE: 

SUDAN DIVESTMENT AND BEYOND 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTERNATIONAL MONETARY 

POLICY AND TRADE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

NOVEMBER 30, 2010 

Printed for the use of the Committee on Financial Services 

Serial No. 111–167 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON INTERNATIONAL MONETARY POLICY AND TRADE

GREGORY W. MEEKS, New York, Chairman 

LUIS V. GUTIERREZ, Illinois 

MAXINE WATERS, California 

MELVIN L. WATT, North Carolina 

GWEN MOORE, Wisconsin 

ANDRE ́ CARSON, Indiana 

STEVE DRIEHAUS, Ohio 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

GARY G. MILLER, California 

EDWARD R. ROYCE, California 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

MICHELE BACHMANN, Minnesota 

ERIK PAULSEN, Minnesota 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

November 30, 2010 ........................................................................................... 1 

Appendix: 

November 30, 2010 ........................................................................................... 29 

WITNESSES 

TUESDAY, NOVEMBER 30, 2010 

Cohen, Eric, Chairperson, Investors Against Genocide ........................................ 7 

Kanzer, Adam M. Esq., Managing Director and General Counsel, Domini 

Social Investments LLC ...................................................................................... 9 

Melito, Thomas, Director, International Affairs and Trade, U.S. Government 

Accountability Office ............................................................................................ 5 

Williamson, Richard S., former Special Envoy to Sudan ..................................... 11 

APPENDIX 

Prepared statements: 

Cohen, Eric ........................................................................................................ 30 

Kanzer, Adam M. Esq. ..................................................................................... 57 

Melito, Thomas ................................................................................................. 69 

Williamson, Richard S. ..................................................................................... 86 

(1) 

INVESTMENTS TIED TO GENOCIDE: 

SUDAN DIVESTMENT AND BEYOND 

Tuesday, November 30, 2010I03 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON INTERNATIONAL

MONETARY POLICY AND TRADE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2 p.m., in room 

2128, Rayburn House Office Building, Hon. Gregory W. Meeks 

[chairman of the subcommittee] presiding. 

Members present: Representatives Meeks, Driehaus, Maffei; Miller of California and Paulsen. 

Also present: Representatives Capuano, McGovern, and Lee of 

California. 

Chairman MEEKS. This hearing of the Subcommittee on International Monetary Policy and Trade will come to order. 

We will have opening statements. And, without objection, all 

members’ opening statements will be made a part of the record. 

We are waiting for the arrival—I want to note that he is going 

to appear shortly—of the ranking member, Mr. Miller, but we will 

begin so that we can hear the testimony of our witnesses and get 

opening statements in prior to us having a vote. 

But before I begin, let me first—I would like to thank the ranking member, Mr. Miller, for working with me to organize this critical hearing on the humanitarian crisis in Darfur and for exploring 

how we can better empower our capital markets to contribute to 

making a positive change in this crisis. 

And I also want to take note of Mr. Capuano, who is here with 

us today. He is one of the most committed Members of Congress 

on this issue especially. And I want to thank you for your dedication and for your commitment in this area. 

Here is Mr. Miller. 

So we are happy to have you with us today. And later on, we will 

be asking for unanimous consent to allow Mr. Capuano to have an 

opening statement. 

I was just saying, Mr. Miller, I wanted to thank you for all of 

your help, for your commitment, and always your partnership in 

organizing and bringing this together, and also for your commitment in this very important issue and area. I thank you. 

And I also want to thank all of the witnesses, even prior to your 

testimony, for being here today and agreeing to testifying before 

Congress. 

2 

The Sudan has been in conflict, as many of you know, for many 

of the past 54 years since it achieved its independence. And civil 

wars have caused millions to die from violence and hunger, displaced millions more, and often destabilize the whole region, with 

neighbors that include Chad, Libya, Egypt, Eritrea, Ethiopia, 

Kenya, Uganda, the Central African Republic, and the Democratic 

Republic of Congo, all of which have been caught up in Sudan’s 

civil wars and famines. 

This is also a priority for reasons of our own national security. 

Whether because it is the largest country in Africa and a major 

producer of oil and other natural resources, a source of conflict with 

millions of weapons in circulation, a government accused of war 

crimes and genocide, or because of its porous borders, Sudan is not 

a country that any American can ignore, and one that the United 

States Government monitors very closely. 

In 2007, Congress passed the Sudan Accountability and Divestment Act, or SADA. SADA helped empower a growing movement 

by authorizing States and investment managers to formally establish a policy to divest from or prohibit investment in companies 

that are seen as supporting the Government of Khartoum. In particular, SADA gave investment managers safe harbor from prosecution if they decided to divest from countries that conflict with such 

a policy. Surveys show that nearly all Americans support such initiatives and do not want their investments supporting genocide in 

any way. 

As Mr. Melito will testify, a recent GAO study found that SADA 

and other such initiatives at the State level have led to an outflow 

of American capital from the targeted companies and Sudan in general. What is more, targeted companies have indeed been prevented 

from government contracting opportunities. 

As we engage in the discussion today, it will matter also to explore what happens when American investors and companies exit 

such regions and whether less scrupulous players enter and merely 

make matters worse. While we want to keep up the pressure on 

American capital to not contribute to supporting governments that 

would allow atrocities such as the situation in Darfur, there is also 

no doubt that American companies generally operate with a higher 

ethical standard and understanding of civic engagement than do 

many other companies from around the world. 

As we discuss and debate the merits of speaking with our wallet 

and empowering investors to direct their savings away investments 

that conflict with their values, we must also be mindful to consider 

what happens in the absence of American capital and companies, 

what we do to mitigate unintended consequences, and how we can 

also empower these same companies and investors to re-engage 

when the situation on the ground improves, looking at it from a 

wholistic point of view. 

And I know that we are going to have some interesting testimony 

and some enlightening questions to come in this matter. So, again, 

let me thank the witnesses for being here to testify. I look forward 

to hearing your testimony and having the opportunity to ask you 

some questions in a very short while. 

And I now will turn it over, I yield to my friend, the ranking 

member, Mr. Miller, for an opening statement. 

3 

Mr. MILLER OF CALIFORNIA. Thank you, Chairman Meeks, for 

holding this hearing today. 

It is interesting to focus on what impact the effectiveness of the 

Sudan Accountability and Divestment Act of 2007 had on the divestment of assets from Sudan and how that affected the country 

and government regime. 

I thank the witnesses for being here today. It is very nice of you 

to all show up. I really look forward to the testimony. We have a 

very brief period of time for you to speak, but I know you have a 

lot to say, and I hope you will make that concise so we can get as 

much as we can on the record. 

Appropriately, this body is concerned with the actions and policies pursued by the Government of Sudan. The people of Sudan 

have long suffered through civil war and economic hardship while 

policies of the government have led to widespread human rights 

abuses and genocide in the Darfur region. 

For this reason, in 2007 this House unanimously passed the 

Sudan Accountability and Divestment Act—and it is nice to say 

‘‘unanimous;’’ when we do something like that on a bipartisan approach, it is very nice to see, because that means what we were 

dealing with was very important and we were trying to have a significant impact—allowing State and local governments to divest 

their assets from companies with business operations in Sudan. 

While the law is only a few years old, I am interested in hearing 

the panelists’ thoughts on the effectiveness of divestment and 

whether the policy has any hope of effecting a sustainable change 

in the region. 

Again, Mr. Chairman, thank you for holding this hearing. We 

have widespread support for this, for what we have done in the 

past, and I am looking forward to hearing the testimony. 

I yield back the balance of my time. 

Chairman MEEKS. I now ask unanimous consent to allow Mr. 

Capuano to have an opening statement. 

Mr. MILLER OF CALIFORNIA. We need to debate who is speaking, 

but I guess we will allow him to go ahead and talk. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

I just want to be very brief myself. I want to thank the chairman 

and ranking member for having this meeting, and to make it clear 

to anybody who might be listening what this is about. 

This is not about Sudan, per se. To me, it is not. It is not about 

civil wars. This is about genocide, clear and simple. There is a difference between a civil war and a genocide. A civil war is when two 

equal parties have disagreements and bad things happen. A genocide is when an innocent, unarmed population is massacred, particularly, in this case, by its own government. So that is what this 

is about, to me. 

And this particular hearing is to determine how well, if at all, 

our law has worked, where the holes might be, what we might be 

able to do to close them up, to see if the action we took is sufficient 

and if it is having any impact. And I think that is the way it 

should be. 

And I also want to underscore exactly what Mr. Miller said. I 

have not met anybody in this Congress or anywhere who is in favor 

of genocide. Every good human being—not Democrat, not RepubVerDate Nov 24 2008 14:41 Jan 14, 2011 Jkt 063125 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\63125.TXT TERRIE
4 

lican, not even American—every good human being should stand as 

tall as they can against genocide anywhere in the world, whether 

it be people next door to us or people we will probably never meet. 

And that is what this is about. It is about being a human being 

and being responsible to our fellow human beings. 

And, again, I want to thank the chairman and the ranking member. 

I particularly want to thank the chairman for the kindest words 

that have ever been spoken by a Yankees fan to a Red Sox fan. 

And I just want to return the favor. You have done a great job, Mr. 

Meeks, and I appreciate very, very much your leadership on this 

issue and so many other things. 

Thank you. 

Chairman MEEKS. Now I yield to Mr. Paulsen for an opening 

statement. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

I also want to thank the chairman and the ranking member for 

holding the hearing today and for your leadership on this issue, as 

well. 

Some of my constituents, especially a group of students from 

Edina High School who have been part of a group called STAND, 

have been very vocal and concerned about issues surrounding 

Sudan and genocide in particular. And these students have been 

active in informing the community on the crisis in Sudan. And I 

also became a member of, actually, the Sudan Caucus at their urging. 

As we approach the 3-year anniversary now of the Sudan divestment legislation being signed into law, I believe it is important for 

us to examine the impact that the legislation has had on the situation in Sudan. And while the upcoming referendum on southern 

Sudanese independence will be extremely telling, Sudan is far from 

where we would like it to be. And I would hope that this hearing 

can provide some insight on how we can have a more effective policy toward Sudan. 

I am also interested in hearing, in particular, the effects the legislation have had over the last 3 years. I was a strong proponent 

of the Iran divestment legislation that, of course, passed Congress, 

and I am interested to see how the lessons from Sudan can also 

be applied to Iran. 

I want to thank the witnesses for being here today, and I look 

forward to your testimony. 

Thank you, Mr. Chairman. I yield back. 

Chairman MEEKS. I now ask unanimous consent to allow Mr. 

McGovern to speak for purposes of an opening statement. 

Mr. MCGOVERN. I appreciate it. Thank you, Mr. Chairman. 

And I want to thank those who are here to testify. 

This is an important hearing. So many States, like my home 

State of Massachusetts, and public and private institutions are reviewing their investment funds and portfolios and looking for ways 

to ensure that they do not directly or inadvertently invest in companies whose activities and capital help enrich genocidal regimes. 

A little over 2 years ago, in September 2008, the then-Congressional Human Rights Caucus, in coordination with the House 

Sudan Caucus, held a hearing to explore genocide-free investing: 

5 

who was successful at managing such investment portfolios; what 

were the reasons that other investment companies gave for not carrying out this type of scrutiny of their own portfolios; what type of 

guidance for investment managers might be helpful; and whether 

obstacles existed in laws or regulations that inhibited firms from 

making sure that their investment portfolios were genocide-free. 

Today’s hearing more formally builds on that earlier hearing, and 

I look forward to hearing from the witnesses. 

And let me finally say—and I want to associate myself with the 

remarks of my colleague from Massachusetts, Mr. Capuano. We are 

talking about genocide here. And what frustrates me is sometimes 

when you hear people say, that is something for governments to 

deal with. Yes, it is something for governments to deal with, but 

it is something for financial institutions and businesses to deal 

with, as well. Those who knowingly continue to invest in ways that 

help enrich genocidal regimes are, in essence, complicit. There is no 

excuse. And if you want to stop genocide, then you have to stop the 

investments in these genocidal regimes. 

I tried to go to Darfur. The Sudanese Government wouldn’t give 

me a visa to go, wouldn’t allow me in the country. So I went and 

I visited the camps, refugee camps, in Chad, along the Sudanese 

border. It breaks your heart. And the stories that I heard, I can’t 

even describe how horrific they were. 

And I sit here frustrated that the world community has not done 

enough to stop the killing that goes on in places like Sudan, and 

we need to figure out a way to do it. And we are all in this, not 

just governments but the private sector, as well. And so I appreciate your being here and look forward to your testimony. Thank 

you. 

Thank you, Mr. Chairman. 

Chairman MEEKS. Thank you. 

And, with that, I am going to forgo formal introductions, because 

I want to make sure that we have as much time as we possibly can 

with the testimony and questions prior to any votes being called. 

So I will start with Mr. Thomas Melito, who is a Director of 

International Affairs and Trade at the United States Government 

Accountability Office. 

Welcome, Mr. Melito. 

STATEMENT OF THOMAS MELITO, DIRECTOR, INTERNATIONAL AFFAIRS AND TRADE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. MELITO. Thank you, Mr. Chairman. I am pleased to be here 

to discuss our work regarding the Sudan Accountability and Divestment Act. 

My testimony is based on our report which was released in September. I will focus on three topics: first, actions that U.S. States 

and investment companies have taken regarding their Sudan-related assets; second, the factors that these entities considered in 

determining whether to divest; and, third, compliance with the 

Act’s contract prohibition provision. 

Regarding the first topic, we found that State fund managers have divested or frozen about $3.5 billion in assets primarily related to Sudan. Thirty-five U.S. States have enacted legislation or 

6 

adopted policies affecting their Sudan-related investments. State 

fund managers we surveyed cited compliance with these laws and 

policies as their primary reason for divestment. 

U.S.-based investment companies have also sold Sudan-related 

shares. Our analysis shows that the value of U.S. holdings in six 

key foreign companies fell by nearly 60 percent, or about $8.5 billion, from March 2007 to December 2009. We have found that this 

decline in Sudan-related holdings cannot be accounted for solely by 

changes in share price, indicating that these investors, on net, sold 

shares. Investment companies generally stated that they adjusted 

their Sudan-related shares for normal business reasons, such as 

maximizing shareholder value. 

Regarding the second topic, we found that U.S. investors generally considered three issues when determining whether to divest 

from companies tied to Sudan: first, fiduciary responsibility; second, the difficulty in identifying operating companies with ties to 

Sudan; and, third, the possible effects of divestment on operating 

companies and the Sudanese people. 

In terms of fiduciary responsibility, both State fund managers 

and private investment companies told us that any decision to divest needs to take into consideration their duty to act solely and 

prudently in the best interest of the client. However, investment 

companies that consider themselves socially responsible maintain 

that divesting from Sudan is consistent with fiduciary responsibility as long as the alternative equities chosen can compete financially. 

Regarding the identification of operating companies with ties to 

Sudan, the Act requires that, before divesting, responsible entities 

must use credible information to identify which companies have 

prohibited business operations. State fund managers we surveyed 

rely heavily on private-sector lists of operating companies with 

business ties in Sudan. However, our analysis of three available 

lists indicates that they differ significantly from one another, finding that of the over 250 companies identified on one or more of 

these lists, only 15 appeared on all three. 

Representatives from the organizations that created these lists 

told us that obtaining information on operating companies with 

business ties to Sudan is difficult. They also said they would consider an SEC disclosure filing by operating companies to be a particularly reliable source of information. However, Federal securities 

laws do not require companies specifically to disclose operations in 

countries designated as state sponsors of terrorism. 

The SEC has suggested to companies that any operations they 

have in state sponsors of terrorism might be considered material 

and that investors would consider this information important in 

making investment decisions. However, in their correspondence 

with the SEC, companies have raised concerns about these instructions. 

Regarding the possible effects of divestment, some companies 

that have ceased operating in Sudan warned of a negative effect on 

both companies and people. Because of these concerns, some investors and advocacy groups have shifted their focus towards engagement, viewing divestment as a last resort. U.S. States have also endorsed engagement as a viable alternative to divestment, with 19 

7 

of the 25 States whose laws or policies require divestment also encouraging or requiring engagement. 

Regarding the third topic, we found that the U.S. Government 

has complied with the Federal contract prohibition provisions of 

SADA. We did identify one company that received a Federal contract and which also had prohibited business operations in Sudan. 

However, the contract was administered under simplified acquisition procedures that do not require SADA certification. 

In addition, we found that the U.S. Government had awarded 

more than 700 contracts to affiliates and subsidiaries of companies 

identified as having prohibited business ties to Sudan. However, 

SADA does not restrict Federal contracting with these affiliates 

and subsidiaries if they certify that they do not have prohibited 

business operations in Sudan. 

In our report, we recommended that the SEC consider issuing a 

rule requiring companies that trade on U.S. exchanges to disclose 

their business operations related to Sudan as well as possibly other 

U.S.-designated state sponsors of terrorism. 

Mr. Chairman, this concludes my statement. 

[The prepared statement of Director Melito can be found on page 

69 of the appendix.] 

Chairman MEEKS. Thank you very much. 

Now, I will go to Mr. Eric Cohen, who is the chairperson of Investors Against Genocide. 

Mr. Cohen, thank you for your work. 

STATEMENT OF ERIC COHEN, CHAIRPERSON, INVESTORS 

AGAINST GENOCIDE 

Mr. COHEN. Thank you, Chairman Meeks, Ranking Member Miller, and members of the subcommittee. Thank you for the opportunity to discuss the need to empower individual investors to 

choose investments aligned with their desire to avoid connections 

to genocide. 

For the last 4 years, Investors Against Genocide has been asking 

financial institutions to better serve shareholders by making an effort to avoid investments in companies that are known to substantially contribute to genocide or crimes against humanity. We term 

this approach to investment ‘‘genocide-free investing.’’ 

Our experience highlights two problems. First, although U.S. 

sanctions against Sudan prevent U.S. companies from operating in 

Sudan’s oil industry, American financial institutions have been 

major investors in foreign oil companies that help the Government 

of Sudan fund its campaign of genocide and crimes against humanity in Darfur. For example, in the last few years, well-known financial institutions such as Fidelity, Franklin Templeton, and JP Morgan have each had investments in PetroChina alone worth over $1 

billion. 

Second, research shows that the vast majority of Americans are 

opposed to having their hard-earned savings tied to genocide. 

Nonetheless, because most individuals entrust their savings to mutual funds, millions of Americans are investing unknowingly, inadvertently, and against their will in companies funding genocide. 

Addressing this problem will have enduring value not only for 

the continuing crisis in Sudan but also for humanitarian crises in 

8 

the future. Our recommendations are focused on financial institutions becoming more transparent and providing customers with the 

material information needed to make informed choices. 

Our recommendations are based on the following observations. 

First, according to market research, 88 percent of Americans 

don’t want to be connected through their savings to egregious 

human rights abuses. Copies of these studies are included in my 

written testimony. This preference for genocide-free investing has 

been further demonstrated in the marketplace by strong support 

for shareholder proposals addressing genocide-free investing and by 

the action of States, colleges, and Congress to support divestment 

from Sudan. 

Second, current reporting requirements for funds provide no insight into the funds’ human rights policy, depriving investors of 

material facts needed to identify funds with connections to the 

worst human rights abuses and preventing investors from making 

informed choices among investment options. Funds’ investment 

policies on human rights, if they exist, are rarely disclosed or only 

vaguely referenced. Few investors take on the onerous task of researching fund holdings and determining which companies have 

ties to genocide so that they can avoid these companies. Instead, 

most investors simply trust their investment company to make 

sound choices on their behalf. 

Third, financial institutions, in general, resist shareholder requests to restrict their investments, even in the case of genocide— 

the ultimate crime against humanity. 

Fourth, through these investments in foreign companies, financial firms conflict with and weaken the effect of U.S. sanctions that 

block U.S. companies from doing business while U.S. mutual funds 

make investments that support their unrestricted foreign competitors. For example, ExxonMobil is precluded from supporting the 

Government of Sudan by helping in its oil industry, but U.S. mutual funds invest billions of dollars in PetroChina, ExxonMobil’s 

foreign competitor. 

Investors Against Genocide has developed specific legislative recommendations, detailed in the written testimony, that would provide useful guidance for financial institutions regarding human 

rights abuses without limiting their ability to make the investments they choose. Most importantly, the recommendations would 

make it easier for individual investors to be able to choose to avoid 

connections to the worst human rights abuses. 

Regulations should establish a standard framework for genocidefree investing and require funds to use simple language to disclose 

whether they have implemented or chosen not to implement the 

framework. 

Regulations should establish transparency and disclosure rules 

so that small investors and the investment marketplace can more 

readily understand the policies of funds and investment companies 

with regard to investments in companies tied to serious human 

rights abuses. 

Regulations should ensure that there is no conflict between fiduciary responsibility and avoiding investments in companies tied to 

genocide or crimes against humanity. SADA provided a model for 

the case of Sudan that should be generalized to apply to future huVerDate Nov 24 2008 14:41 Jan 14, 2011 Jkt 063125 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\63125.TXT TERRIE
9 

manitarian crises without requiring an act of Congress for each crisis. 

It has been over 12 years since the U.S.-imposed sanctions on 

Sudan and noted serious human rights abuses, and 6 years since 

Congress declared Darfur a genocide, and yet most financial institutions are still investing in the worst companies funding the genocide. And through the fund offerings of these investment firms, millions of Americans are caught in the web of these problem investments. 

Long-term inaction by financial institutions highlights the need 

for Congress to help empower Americans to make investment 

choices that are in line with their personal values. If it is important enough for the U.S. Government to impose sanctions related 

to human rights that prevent American companies from doing business in a country, then the funds in which America saves should 

have an extra level of due diligence and disclosure regarding their 

related investments. 

Small improvements in disclosure and transparency rules related 

to human rights abuses can have a big effect. By acting, Congress 

will help investors be able to choose to avoid connections now and 

in the future to the worst human rights abuses: genocide and 

crimes against humanity. 

Thank you. 

[The prepared statement of Mr. Cohen can be found on page 30 

of the appendix.] 

Chairman MEEKS. Thank you for your testimony. 

We will move on to Mr. Adam Kanzer, who is the managing director and general counsel of Domini Social Investment, LLC. 

STATEMENT OF ADAM M. KANZER, ESQ., MANAGING DIRECTOR AND GENERAL COUNSEL, DOMINI SOCIAL INVESTMENTS LLC 

Mr. KANZER. Thank you very much. It is an honor to address this 

committee and to share Domini’s perspective on investor and regulatory responses to the genocide in Darfur. 

Domini Social Investments is an investment advisor based in 

New York. We manage funds for individual and institutional mutual fund investors who incorporate social and environmental 

standards into their investment decisions. 

We believe investors have an affirmative obligation to respect 

human rights and to seek to do no harm. Domini seeks to meet this 

obligation by implementing a comprehensive set of social and environmental standards to guide our investment decisions. 

Addressing genocide is first and foremost a moral imperative, but 

it is also an appropriate concern for fiduciaries who see their role 

as exclusively focused on financial concerns. Companies that operate in conflict zones such as Sudan take on a variety of operational, 

reputational, and legal risks, including risk to their license to operate. There are also systemic socioeconomic risks presented. 

Investment policies to address genocide are both warranted and 

achievable and can influence corporate behavior. Investors have 

other tools as well, and direct engagement with portfolio holdings 

is a critically important and effective strategy for addressing corporate human rights performance. 

10 

In discussions about the Sudan Accountability and Divestment 

Act, emphasis has been placed on the word ‘‘divestment.’’ I would 

encourage you, however, to focus on the word ‘‘accountability.’’ Investors cannot hold companies accountable without data. I would 

therefore like to focus today on the need for mandatory corporate 

human rights disclosure. 

We strongly endorse the GAO’s recommendation that the SEC require companies to disclose their business operations related to 

Sudan, and encourage Congress to take the recommendation a few 

steps further. 

Domini utilizes a targeted model of divestment and engagement. 

A company’s connection to Sudan is merely the first step in our 

analysis and is insufficient to gauge how a company is meeting its 

human rights obligations. We need information to distinguish between companies that are helping to finance human rights abuses 

and those that are contributing to solutions. Appropriate disclosure 

should also highlight key areas for corporate executives to manage 

and measure. 

To foster business respect for human rights, Professor John 

Ruggie, the U.N. Secretary-General’s Special Representative for 

Business and Human Rights, states that governments should encourage and, where appropriate, require business enterprises to 

provide adequate communication on their human rights performance. This is an element of the state’s duty to protect against 

human rights abuses, one of the three pillars of the ‘‘protect, respect, and remedy’’ framework adopted by the U.N. Human Rights 

Council in 2008. 

In the United States, however, corporations are not required to 

disclose their human rights policies, procedures, or performance 

unless corporate counsel determines that such issues present material risk to the company. 

The materiality standard has failed to provide investors with 

necessary information about corporate human rights performance 

in any area of the world, including Sudan, for several reasons. 

First, although materiality is an objective standard, in practice materiality is in the eye of the beholder: the corporation. 

Second, the materiality standard is generally interpreted as financial risks to the issuer, not to stakeholders affected by corporate activity. So-called externalities, including human rights 

abuses, are generally not reported. 

And, third, materiality is a broad, ambiguous concept. Companies 

are often uncertain whether an emerging risk should be disclosed 

and, if it is material, how it should be disclosed. In Domini’s experience, it is rare to find any human rights data in securities filings. 

Management’s incentives, particularly during a global divestment 

campaign, are to disclose as little as possible. As noted by the 

GAO, companies have generally resisted the SEC’s instructions to 

disclose and, at times, have refused to disclose information about 

their ties to Sudan. There appears to be no meaningful sanction for 

these companies. 

The status quo falls short of Professor Ruggie’s recommendation 

that the state encourage or require corporate reporting and provide 

clarity about these obligations. A mandatory set of tailored indicators—including human rights policies, due diligence procedures, 

11 

risks identified, and performance reports—would provide investors 

with reliable, consistent, comparable, and relevant information to 

make prudent investment decisions and monitor corporate human 

rights performance and would further our government’s policy 

goals in Sudan and its duty to protect against human rights 

abuses. 

In addition, if investors are to help avert the next Darfur, we 

need disclosure requirements that apply to corporations wherever 

they operate around the world. 

Thank you again for this opportunity. You will find additional 

recommendations and details in my written testimony. I look forward to your questions. 

[The prepared statement of Mr. Kanzer can be found on page 57 

of the appendix.] 

Chairman MEEKS. Thank you very, very much. 

And last, but far from least, we have Mr. Richard S. Williamson, 

who is the former special envoy to Sudan. 

STATEMENT OF RICHARD S. WILLIAMSON, FORMER SPECIAL 

ENVOY TO SUDAN 

Mr. WILLIAMSON. Thank you, Chairman Meeks, Congressman 

Miller, and other members of the subcommittee. 

During 30 years in various diplomatic posts, I have been a skeptic of economic sanctions and divestiture campaigns. They are blunt 

instruments, difficult to quantify. They have collateral damage to 

innocents. And regimes most often hunker down and endure, giving 

people a sense of having taken action but not getting the desired 

results. 

Having said that, I strongly support the continued application 

and strengthening of the Sudan Accountability and Divestment 

Act. I am not an expert on the intricacies or application of SADA, 

but I would like to make a few comments about the situation in 

Sudan which frames this debate. 

We are approaching the north-south referendum on January 9th. 

This follows the longest civil war in Africa, in which over 2 million 

died and 4 million people were displaced. The CPA, the Comprehensive Peace Agreement, largely negotiated by the United 

States 6 years ago, put an end to the worst fighting. And there is 

hopes that the referendum, which will give the south a chance to 

determine whether to have independence or remain part of Sudan, 

will be successful. 

Having said that, there are many significant areas that have not 

been adequately addressed, particularly the contested border areas, 

Abyei, oil revenue, citizenship, freedom of movement, and treaties. 

Neighbors and China have begun to tilt their behavior, hedge their 

bets, with the possibility of independence. There are no observers 

who disagree that the will of the people will be independent. 

However, the post-referendum commission, which is dealing with 

these difficult issues, reflects a pattern used by the Government of 

Sudan over the last decades of developing an elaborate machinery, 

followed by extensive discussions, deliberations, delay, eventually 

for denial. The point is, more will need to be done after the referendum during the 6-month period to independence. And this is 

12 

not the time to look at just incentives, but coercive pressure is necessary, tied to concrete steps. 

With respect to Darfur, as you well know, and the target of this 

particular law, we have had one of the worst genocides in the last 

30 years. While it is less vigorous today, it continues with low-intensity conflict. And the degree to which there is less violence is 

not because of a change of heart but because there are fewer targets of opportunity, with over 300,000 people dead and more than 

2 million displaced—displaced and nowhere to go, no hope, their 

lives ruined, their families killed. 

Meanwhile, aerial bombings by the Government of Sudan continue. The Qatar negotiations have not been productive. The International Criminal Court has issued arrest warrants for President 

al-Bashir regarding his actions on Darfur for war crimes, crimes 

against humanity, and genocide. 

Finally, if the north-south does proceed, you should be aware 

that it may make more difficult progress in Darfur, the Nuba 

Mountains, and the Blue Nile, as Khartoum is worried that it may 

lead to further dismemberment. 

Bottom line, I think that SADA provides a useful purpose, that 

coercive steps are required to get action. And having negotiated 

with all the prominent personalities in Khartoum, in Juba, in 

Darfur, I believe the only way to make progress is to go beyond 

what the current envoy has referred to as ‘‘gold stars and cookies,’’ 

i.e., incentives for the north, and to use pressure and tie it to concrete, verifiable steps for progress. That is the only way this genocide in slow motion will end. 

Thank you. 

[The prepared statement of Mr. Williamson can be found on page 

86 of the appendix.] 

Chairman MEEKS. Thank you very much for your testimony. 

And I do see, for the first time in a long time, and as indicated 

by just about anybody here, we all are united in that we want the 

genocide to stop. We have to make sure that we are doing everything that we can to have that done. And one method is the divestment. 

What I want to make sure, and I think the reason for you being 

here is, what else do we need to do? 

For example, Mr. Melito, in your testimony you talked about how 

exchanges between the SEC and companies and even investors at 

times as to whether or not their activities in the Sudan can be considered material—yet, a lot of those issues just remain unresolved. 

And the SEC has not given, I think, the real guidance or made the 

guidance clear here. 

I was wondering, are there other comparable examples to using 

a starting point where the SEC did decide to give a clear guidance 

as to what might constitute material information or something else 

that we can then try to push to the SEC so that we don’t have 

these unresolved issues? 

Mr. MELITO. Mr. Chairman, I don’t believe there is an example. 

Part of our discussions with SEC is that they have generally left 

the materiality decision to the operating company to decide, within 

the broad parameters which were partly established by the SuVerDate Nov 24 2008 14:41 Jan 14, 2011 Jkt 063125 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\63125.TXT TERRIE
13 

preme Court, which is, if the information is important to investors, 

it should be disclosed. 

That said, in our dialogues with them and in response to our report, they seem quite open to our recommendation. The way it 

would work, though, is the SEC staff would present it to the Commissioners. Then it is up to the Commissioners to either approve 

it or not. If it does get approved by the Commission, then it would 

become a rule, which would have to go through the regulatory process. 

Sudan has been designated by the U.S. State Department to be 

a state sponsor of terrorism. The SEC can then say, in that case 

and potentially for the other three state sponsors, you, as an operating company, should disclose your activities. 

It doesn’t mean that everyone would divest, because, as other 

witnesses have mentioned, it is possible that you are involved purely in humanitarian activities or you are conducting activities that 

SADA approves of. But putting the information out to the public 

would then greatly increase the credibility of available information. 

Chairman MEEKS. Let me ask another question then, because I 

am trying to—I would like to make sure that we accomplish our 

goals. And in your opening statement, you indicated that your data 

showed that the United States did, in fact, withdraw capital from 

the Sudan. 

I am concerned about other folks coming in or, you know—so we 

withdraw, but other folks are still coming in, and we are not stopping this genocide because there is no real effect that we are having here, and there may be—we have to do something. 

I am wondering whether or not you have any additional data 

that will show who is stepping in when we are leaving. And maybe 

there should be—because I am going to look at it from the point 

that some pressure point may be put on some other individuals 

also. Because I like more pressure on multilateral sanctions also, 

as opposed to just the sanctions that we may have from the United 

States. 

Mr. MELITO. Our analysis of both the private sector and the 

States were on holdings in publicly traded companies. So they sold 

their shares, and it is unclear who bought them, but it is obvious 

that the holdings of State governments and private sector investment companies have gone down. 

The issue of operating companies is very tricky, though. There 

are a number of operating companies; some are Western, some are 

Asian. There are no U.S. companies operating in the 4 sectors because that would be against our sanctions law. 

Some of the companies we spoke with try to engage the Government of Sudan to change its behavior; they try to provide humanitarian or social programs. At least one of the companies we spoke 

with said, as they left Sudan that the company that bought them 

said they would not continue those activities. So there are some 

real concerns. 

Though divestment is a blunt instrument, but it is having an effect in terms of changing investor behavior. So there are a number 

of tradeoffs that need to be considered. 

Chairman MEEKS. Mr. Cohen, I would like for you to respond to 

this. It is similar. We need to stop it. And I don’t know if we have 

14 

sufficient data about who is moving in. You indicated in your testimony how some American companies are investing and others who 

are still doing business. Do you have any or have you done any research or anything in that regard? Any suggestions? 

Mr. COHEN. I agree with Mr. Melito that it would be helpful to 

have a really good, deep list of who is operating in Sudan. 

But one thing we know is who the worst players are, because 

universally everyone recognizes that the worst players are the oil 

companies helping the regime. So in our work at Investors Against 

Genocide, we focused on those oil companies, because they most 

substantially contribute to the problem. So if you just think about 

leverage, who is the worst problem, and then it doesn’t take you 

long to focus on the CNPC group, of which PetroChina is a part, 

because it is the largest partner with the Government of Sudan. 

So if you just look at PetroChina and its holdings, what we see 

is, as recently as October 11th of this year, Franklin Templeton 

owned over a billion shares of PetroChina. This is worth about $1.3 

billion, in that one company alone. So there could be really big 

voices that could be used if the Franklin Templetons of the world 

didn’t think that it was okay to invest their shareholders’ money 

in the very worst companies. 

I use them as an example, but I don’t want to use them alone 

because it is not like they are the only one. It is many financial 

institutions who are the biggest holders. It was never the colleges 

and universities, and it was never the States. The biggest holders 

of the worst companies were financial institutions. 

Chairman MEEKS. What about divestment also from other OECD 

countries? 

Mr. COHEN. If you look at U.S. sanctions and included just the 

biggest, most prominent ones—let’s take Burma, Sudan, and Iran, 

all of which are sanctioned against U.S. companies doing business 

in the oil industry—there is a heavy correlation of the companies 

in Sudan being in the other countries, as well. 

So pressure on the CNPC group, on Sinopec, on PETRONAS, on 

ONGC would be helpful not just in Sudan but helpful across the 

board in the places where the worst human rights abuses are happening and where the United States has already identified sanctions are worth having because of those terrible human rights 

abuses. 

Chairman MEEKS. Thank you. 

I am going to turn it over to Mr. Miller. Just saying this from 

my point of view, because that is tremendously important. I believe 

Mr. Williamson talked about South Africa. South Africa because 

successful when everybody—we happened to be one of the last joining in, but when we joined in and everybody else joined in, then 

we were able to make a difference. And to the degree that we can 

put the pressure on everybody so that we can stop this creep, if you 

will, that I think goes on—as we leave out, somebody else comes 

in, and it keeps this regime in Khartoum up and continues the 

genocide. We have to focus how we can put the same kind of multilateral pressure on the financial institutions and the other countries so that we can join in, because this is an atrocity to all of us. 

Mr. Miller? 

15 

Mr. MILLER OF CALIFORNIA. Yes. If you look at the way GSEs 

bundle their mortgage-backed securities, if they have a nonperforming loan within the bundle, they can remove that and replace 

it with a performing loan. So the investors are held harmless. 

But if you look at the way the private sector did it, which got 

us in many of the problems we face today, they weren’t bundled 

that way. And the problem you have is the servicer, if they try to 

replace one of the nonperforming loans, they can be sued by the investors for all the losses associated with the mortgage-backed security. 

Do you believe that the investment advisor who would divest in 

Sudan-related holdings is open to a charge of violating fiduciary responsibility if the reinvestment doesn’t yield a rate that competes? 

Or do you believe that SADA’s safe-harbor provision really adds 

needed protections to that? 

Anybody who wants to address that. 

Mr. KANZER. One answer, I think, is: It depends. As a mutual 

fund manager, our fiduciary duty is to comply with our prospectus. 

Our prospectus says that we apply human rights standards and environmental standards to our holdings. Our investors come to us 

for that; they expect us to do that. If we fail to do that, we could 

be subject to a lawsuit for violation of fiduciary duty because we 

would have a duty to uphold our prospectus. 

Mr. MILLER OF CALIFORNIA. But the question was— 

Mr. KANZER. Yes? 

Mr. MILLER OF CALIFORNIA. I understand, but if you have an investor who invests, and their perspective might be something they 

are looking for other than human rights but they are looking for 

an investment they thought was reasonable, and you divested of 

that when they put their money with you, and the investment you 

put it into did not compete as it applies to yield, does SADA’s safe 

harbor—I am wondering if we need to address it or if it is not adequate. That is my concern. 

Mr. KANZER. Possibly, yes. Possibly. And I think it is a real problem. 

Mr. MILLER OF CALIFORNIA. Because that was discussed during 

the presentations, and that raised a big flag to me of who is going 

to be liable if we placed a situation in the private sector where investment advisors are open to litigation because of what we have 

asked them to do and the consequence of good faith on their part 

has put them in court. 

Mr. KANZER. Generally, a trustee is accorded pretty wide discretion in making those kinds of decisions, the business judgment 

rule. So it would be, I think, difficult to bring a successful lawsuit 

because you made a couple of decisions that were wrong and impaired the performance of the fund. Look how many funds underperform their benchmarks and don’t get sued. I don’t think it is a 

high risk. 

But there is a theoretical risk, and I think— 

Mr. MILLER OF CALIFORNIA. Mr. Melito’s comments are why I 

brought it up. I think in your statement you said that. And when 

you said that, that was a concern for me. 

Mr. MELITO. It is a theoretical risk, as Mr. Kanzer is saying. 

16 

We interviewed a number of investment companies, and all of 

them said that their decisions were based on market reasons. And 

they held to that very, very closely. 

That said, at the time we issued our report, two companies had 

applied for safe harbor. Now three companies have in fact applied 

for safe harbor. So I think there is ambiguity here. But I do think 

it would be difficult to discern why an investment company sold its 

shares if it didn’t say it was to divest. 

Mr. MILLER OF CALIFORNIA. But Mr. Kanzer would have stated 

that publicly was the reason for the sell. And that is the concern 

I am having. I am just wondering if we have a loophole out there 

that needs to be dealt with or addressed or not. And I am not trying to debate you. I am trying to see if we can open this can up 

and there is something there that we don’t want to have in it. 

Yes, sir? 

Mr. COHEN. Yes, on this point, when we have dealt with financial 

institutions about this problem, some, like TIAA–CREF, publicly 

spoke out against the genocide, said they would do more, and divested, and they took advantage of the safe-harbor provision of 

SADA. 

Mr. MILLER OF CALIFORNIA. So it was adequate for them. 

Mr. COHEN. Yes. So they used it because it helped them. 

When American funds decided to sell 100 percent of their PetroChina, $200 million worth, they did what you heard Mr. 

Melito describe, which is, ‘‘We don’t discuss why we do things.’’ 

Mr. MILLER OF CALIFORNIA. Okay. 

Mr. COHEN. The less said, the better, because they don’t want to 

increase the risks Mr. Kanzer is talking about, about getting sued 

for whatever reasons. 

When we talked to Fidelity, Fidelity at shareholder meetings 

would say, ‘‘We are just following our prospectus,’’ and they want 

to say as little as possible. 

The thing they can do, though, is, if Congress acts and provides 

an ongoing safe-harbor provision, then that can provide protection 

for fiduciaries who choose to use it such as TIAA–CREF did. 

Mr. MILLER OF CALIFORNIA. Okay. 

Mr. COHEN. The second thing that any financial institution could 

do with a prospectus is to disclose that they cared enough that they 

would try to avoid investments in companies. And the Fidelity general counsel agreed with us that that was all they would have to 

do to eliminate any of these theoretical risks. 

The problem the lawyers in these financial institutions have is 

they want to minimize risk so they will do the most conservative 

thing so they will talk the least about it, they will do the least they 

can in this direction, even if they— 

Mr. MILLER OF CALIFORNIA. So they are being proactive in their 

approach. They are not being extremely candid on what they are 

really doing— 

Mr. COHEN. Yes. So if we give them reasons and give them tools, 

then we will have a chance that they will use them. 

Mr. MILLER OF CALIFORNIA. Okay. Looking at the continuing unrest in the Sudan, does it contribute to destabilizing nearby African 

countries, or is there the opposite occurring in some cases? 

Mr. WILLIAMSON. I am sorry. Could you repeat that? 

17 

Mr. MILLER OF CALIFORNIA. The destabilization that has occurred in Sudan, has that had a negative or positive impact on surrounding countries? 

Mr. WILLIAMSON. Oh, no question, it has had a significant bleeding effect, especially in Chad, which has to deal with a rebel group 

which is given safe harbor in Darfur by the Government of Sudan 

to make attacks on N’Djamena, the capital of Chad, because they 

fear that Chad gives safe harbor to the Justice and Equality Movement. So there is a destabilization there. 

There is also a bleed of refugees into Egypt. There is some bleed 

into Ethiopia. There is unquestionably a link between the LRA in 

southern Sudan, again enhanced by the Government of Khartoum, 

to cause destabilization down there. 

So, of the nine neighbors, all of whom have an interest in Sudan, 

all of whom play a role, not always constructive, and the potential 

from Somalia all the way to the Congo of a bleed of destability is 

real. And the consequences would be catastrophic, both on the war 

on terror and for the people who live there. 

Mr. MILLER OF CALIFORNIA. Has anybody seen any changing of 

behavior in the Khartoum regime based on what we have done so 

far? 

Mr. WILLIAMSON. Congressman, if I could just comment. And it 

certainly came out in my discussions and negotiations with the senior level of the Government of Khartoum, or the Government of 

Sudan, but also in discussions with other regimes. 

I think it is safe to say that those who have done the least to 

earn legitimacy, either because of their action or lack of expression 

of the will of the people, hold a claim of legitimacy most dearly. 

And among other consequences, beyond what Chairman Meeks had 

raised earlier, the financial one, it goes to the issue of legitimacy. 

That is a heavy burden. 

And the divestment act contributes to that questioning and reinforces that the behavior in which they are engaged is unacceptable 

to the international community and to the United States of America. 

Mr. MILLER OF CALIFORNIA. Thank you very much for your candid response and for your testimony. I appreciate it. 

Chairman MEEKS. Mr. Maffei? 

Mr. MAFFEI. Thank you, Mr. Chairman. 

Mr. Williamson, I want to follow up by bringing the upcoming 

referendum into the discussion. The Sudanese people, or the southern Sudanese people, are going to be able to vote, at least allegedly 

are going to be able to vote, on whether they want to stay part of 

the Khartoum Government or break away. And that vote is supposed to be, I believe, in late January? 

Mr. WILLIAMSON. January 9th. 

Mr. MAFFEI. January 9th, earlier in January. 

First, can you give me some sort of sense of your estimate about 

whether that will actually occur on time, whether it will be a fair 

process? I have constituents who are Sudanese refugees who are 

going to be able to vote in that election. They have to come down 

to Washington to vote, but are going to be able to vote in that referendum. 

Can you give us some context about that? 

18 

Mr. WILLIAMSON. Sure. 

Congressman, as you know, the referendum was part of the Comprehensive Peace Agreement. It gave 6 years for the Government 

of Sudan to make unity attractive. Those 6 years were not utilized 

to make unity attractive. The marginalization continued—economically, politically, and otherwise. There is no observer who does not 

believe that the will of the people will be for independence on the 

plebiscite. 

The mechanics of the plebiscite are difficult; it goes on for 7 days. 

Many of the mechanics have not been put in place because of dragging by the north. And in a country the size of Texas, with over 

50 inches of rain a year, they only have about 40 miles of asphalt 

road—mostly dirt. So the logistical is consequential, the logistical 

handicaps. USAID and others are intervening to try to help as best 

they can. 

Second, there is a cluster of important issues, such as citizenship, freedom of movement, treaties, etc., that need to be dealt 

with. And a very able diplomat, Ambassador Princeton Lyman, is 

there now, heading those negotiations. Some progress is being 

made. 

There are more difficult, divisive, and consequential issues dealing with contested border areas, the area of Abyei, oil revenue 

sharing. There, the progress has been nonexistent. There have been 

two different mechanisms for the contested border area. Both sides 

agreed to having it arbitrated initially by a border commission, second by the International Board of Arbitration. Both times, the 

north reneged on its word. 

There is going to be a 6-month period after the vote to try to resolve those issues. The south says it should be a firm date; the 

north has said it should be a soft date. And the senior presidential 

advisor for security, former head of intelligence for the Government 

of Sudan, Salah Gosh, just last week said that this issue could be 

resolved by war. 

Mr. MAFFEI. So you do think, though, that the referendum or the 

plebiscite will occur? 

Mr. WILLIAMSON. It will occur. There will be some violence. 

Whether or not it is credible will be a tough call. If it is in the least 

bit credible, it will be a vote for independence. And then it is trying 

to make that a reality. 

Mr. MAFFEI. And trying to avoid a civil war, hopefully, the Khartoum Government. 

Then my question is, for Mr. Cohen and Mr. Kanzer or anyone 

else who wants to chime in: After that process, won’t it be a lot 

easier to bring attention to the injustices in Sudan and, therefore, 

make this situation far more comparable to South Africa, when 

there was a massive movement to divest in South Africa? 

Mr. WILLIAMSON. If I could just make one comment? 

Mr. MAFFEI. Yes, of course. Of course. Sorry. 

Mr. WILLIAMSON. I do think the risk is going to be even more intense on Darfur, Nuba Mountains, Blue Nile, other areas. And I 

think if the reaction is an increase in violence, which it could well 

be, there will be repercussions in the neighborhood and in the 

international community, which hopefully will further galvanize 

people on this issue. 

19 

Mr. MAFFEI. Yes, even for their own self-interest, people may 

want to divest. 

Anyway, sorry, I am almost out of time, but I think I have a little time for Mr. Cohen and Mr. Kanzer to respond. 

Mr. COHEN. Just to add to that, one of the things we know about 

the Government of Sudan is that it is constantly testing the limit 

of what it can get away with. And if sanctions are weak, if financial pressures are weak, they will sense it. They are looking to find 

what the limits are. 

So the point that Mr. Williamson made about now is the time to 

make the pressures be as great as possible so that they believe the 

pressures will build, build, build, build, build, will have perhaps a 

chance of success; where, even if the south secedes peacefully, the 

challenges in the south don’t end and the challenges for Darfur 

may be just beginning. 

So the stronger our measures, the better. The sooner we can 

make them credible and clear, the more powerful. 

Mr. MAFFEI. So your answer is, yes, it would help, but we can’t 

wait for that because our best chance of avoiding civil war is to act 

effectively. 

Mr. Kanzer, I believe other Members took a little bit longer, so, 

please, go ahead. 

Mr. KANZER. Sure. If I could just add a couple of quick comments 

on that. 

I think, first, you would have thought that calling this a genocide 

would have been sufficient to raise awareness. A civil war, a new 

civil war may be a new opportunity for us to raise— 

Mr. MAFFEI. In one where a clear plebiscite, a clear referendum 

is ignored. 

Mr. KANZER. Right. True, but we have that in Burma, as well. 

And although we are part of a movement to divest from Burma, it 

hasn’t changed the government yet. 

So, one, I think that we have a problem here where there are a 

lot of traditional, mainstream investors that still simply view these 

issues, regardless of how egregious they are, as off the table for 

them as investors, which I do consider to be a breach of fiduciary 

duty, because these things do raise financial issues, they do raise 

long-term issues, and they do raise systemic risks. And we all know 

how well our financial system deals with financial risks. 

So we need to revisit those issues, and we need to put more pressure on fiduciaries to think more broadly about their obligations to 

their beneficiaries and what it really, truly means to provide benefits to their beneficiaries. 

The other quick thing I just want to note is that we haven’t been 

sitting on the sidelines here. And the Conflict Risk Network, which 

is a network of investors and other stakeholders—a subscriber base 

of trillions of dollars—has been—and we have been part of this— 

has been engaging with telecommunication companies and oil and 

gas companies on the referenda, to say there has been evidence in 

the past—the Sudatel apparently shut down cell phone communication in timing with attacks in the south to ensure that people 

couldn’t warn each other that the attacks were coming. 

So we have reached out to the telecommunication companies that 

are operating in Sudan to ensure that they put appropriate measVerDate Nov 24 2008 14:41 Jan 14, 2011 Jkt 063125 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\63125.TXT TERRIE
20 

ures in place to make sure that communication is maintained 

throughout the referendum and that they ensure it is a fair process. 

Mr. MAFFEI. Excellent. Thank you very much. 

I also just want to quickly note, Mr. Chairman, that Mr. 

Williamson mentioned Princeton Lyman. I am familiar with his 

work and we couldn’t have a better person there to help observe 

this very challenging situation. But I want to thank all of the panelists. 

Chairman MEEKS. Thank you. Now, we couldn’t have a better 

person here than Mr. Michael Capuano. 

Mr. CAPUANO. Thank you, Mr. Chairman. First of all, I want to 

thank the witnesses for coming today and helping us out. 

Mr. Williamson, I presume you know the most about Sudan. Is 

there anything, any natural resources in Sudan that are unique to 

Sudan that can’t be found anyplace else? I know that oil is the 

major item, but is there gold that can’t be found, some kind of special diamonds or bauxite or anything that can’t be found anyplace 

else? 

Mr. WILLIAMSON. Unlike the Eastern Congo that, as you know, 

with cobalt and other things, has unique mineral assets, the discovered assets in Sudan don’t reflect that. However, let me emphasize, 

when the NCP came to power through a coup in 1989 there were 

less than $500 million of exports. Today, there is $9.5 billion, principally from oil. Second, that there are great agriculture resources 

in the south and that is the opportunity for development. 

Mr. CAPUANO. I understand. But there is nothing unique that 

can’t be replicated someplace else? 

Mr. WILLIAMSON. Not that I am aware of. 

Mr. CAPUANO. Are there any manufacturing techniques that can’t 

be replicated anyplace else? 

Mr. WILLIAMSON. Not that I am aware of. 

Mr. CAPUANO. So that basically any investor who is looking at an 

investment opportunity—not necessarily helping out Sudan and 

building Sudan—as an investment opportunity, there is no particular reason to invest in Sudan and not someplace else. 

Mr. WILLIAMSON. I am not aware of unique attributes that would 

compel an investment, no. 

Mr. CAPUANO. Fair enough. I was wondering if anybody on the 

panel—are there any other countries, at the moment, that we know 

of that have been designated officially by the United States Congress as engaged in committing genocide? 

Mr. WILLIAMSON. No. 

Mr. CAPUANO. So that we have a country that has no specifically 

unique attribute to attract investors, that maybe we could say, 

geez, you can’t get it anyplace else. We have the only country in 

the whole world that the United States Congress has said, ‘‘You are 

committing genocide.’’ Are there any studies anywhere? And 

maybe, Mr. Kanzer, you might be the best, or maybe Mr. Cohen. 

Are there any studies anywhere that indicate that investment in 

Sudan provides a particularly unique or large return on that investment? 

Mr. KANZER. Not that I am aware of. I think the problem is that 

most of the companies that we are speaking about are not SudaVerDate Nov 24 2008 14:41 Jan 14, 2011 Jkt 063125 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\63125.TXT TERRIE
21 

nese companies. They are global companies that have operations in 

Sudan. So the problem for a fiduciary that manages a large mutual 

fund, for example, that wants to track, let’s say, a PAC Asia benchmark that has PetroChina as one of its largest holdings and is 

going to be held to performance against that benchmark, it might 

be difficult for them to say, I can’t hold PetroChina. It is not because of PetroChina’s investment involvement in Sudan, it is because it is PetroChina and it is because it is one of the largest components of their benchmark. 

Mr. CAPUANO. I understand. But I am trying to make sure that— 

it has been argued to me that anytime you add social agenda to 

investment opportunities, it is a slippery slope. Today, it is genocide. Tomorrow, it might be because I don’t like left-handed people. 

And I understand that argument. 

And my argument in return has always been, unless you can— 

I understand the slippery slope argument. I get that, that you can’t 

just have an unlimited list of things we don’t like. But I think in 

this particular case we have a unique situation: a country that is 

committing genocide, that doesn’t offer anything in particular, to 

my knowledge, doesn’t offer a specifically astronomically high return on investment. So there is no real reason for anybody to look 

me in the eye and say, I really have to invest in Sudan and only 

in Sudan in order to fulfill my fiduciary responsibility of providing 

the highest return to my investors. Is that a fair statement to 

make? 

Mr. KANZER. I agree that is a fair statement, yes. 

Mr. CAPUANO. And I understand the difficulties in tracking all 

this. Which brings me to the last point, and this is a point to Mr. 

Melito in particular. I want to be clear. The SEC, as you understand the law now, currently has the authority, if they choose to 

exercise it, to require disclosure from various companies about the 

investments they make in Sudan. 

Mr. MELITO. As the law is written, they have the authority to enforce materiality, which is a rather imprecise designation or definition. We were privy to correspondence between the SEC and a few 

companies where the SEC said, given the divestment campaign 

and given your large holdings, you may want to include this information on Sudan. But in those cases the company said, we don’t 

think so, because even though the holdings may have been large 

as a portion of Sudan, they said it was a small portion of their 

global holdings. That is why our recommendation is to clarify the 

materiality standard to say: In the cases where it is state-sponsored terrorism, where Sudan is one of them, it is material. 

Mr. CAPUANO. And in your judgment, the SEC has the authority 

currently to make that clarification pursuant to regulation? 

Mr. MELITO. The SEC has that authority, but they would have 

to go through the regulatory process, which includes going through 

the Commission. 

Mr. CAPUANO. So everything is in place. This law, we know, has 

some loopholes. I understand there are some problems in definition. I understand there are problems defining exactly which company. But according to you, Mr. Melito, there are at least 15 companies that everybody agrees is on this list, and another several 

22 

dozen companies that most people will agree. And then you will get 

the debates. That I understand. 

But at least, if nothing else—I don’t even know what the 15 companies are, but these 15 companies that everybody agrees fits this 

materiality, the SEC could require them to disclose their investments. 

Mr. MELITO. Yes. 

Mr. KANZER. Can I add to that? 

Mr. CAPUANO. Sure. 

Mr. KANZER. Actually, I believe the SEC actually does have the 

authority to add a specific item of disclosure that could relate to 

Sudan or many other items, and they do this all the time. There 

are many items of disclosure, for example, in a corporate proxy 

statement related to executive compensation, board composition, 

etc., etc., that are not material. The SEC simply decided this is material that must be disclosed. If a company has environmental liabilities that exceed $100,000, you are required to disclose it. They 

decided that was material. Now companies ignore the rule, but it 

is a rule. 

The SEC just decided that you must disclose whether you have 

a policy on board diversity. If you do, how is it implemented; not 

because it is material, because they thought it was important. So 

the SEC can do this, but they need to step outside of the materiality framework. Once you are within the materiality framework 

we will never, in my view, resolve this problem. 

Mr. CAPUANO. I would certainly think that—I would love to see 

that disclosure statement from any company saying, ‘‘We invest in 

a genocidal country that is also officially sanctioned as a state 

sponsor of terrorism.’’ And then I would love to see anyone invest 

in that company. 

Mr. MELITO. In our dialogues with the SEC, they see this as possibly consistent with the materiality clause, given SADA, given 

State laws, given interests of certain investment companies. So 

part of the materiality clause is what is interesting to an investor. 

So it can work within or without the materiality clause. 

Mr. CAPUANO. Fair enough. And for me, basically what I take out 

of this hearing, and some of the information that has been given 

by the GAO is, number one, the law that we have is okay, could 

use some improvements, but is okay. 

Number two is we have some further work to do both on Sudan, 

and maybe particularly on some other regimes that might attract 

our attention. 

But number three, in particular, the quickest thing that can be 

done, in my estimation based on this hearing today, is to get the 

SEC to actually take the next step and to demand disclosure from 

companies. And again, I am not ready to argue every single company. But there are 15 companies that everybody agrees should be 

on this list. Then at least start with them to simply allow disclosure, so that if the American public or the people that they invest 

through want to invest in companies that admittedly invest in a 

genocidal state sponsor of terrorism, let them explain that to their 

neighbors. 

Mr. COHEN. That certainly would be very powerful and very 

helpful. I would just add one thing. It is now 7 years and more 

23 

since the genocide started. We are lucky this is a slow-motion genocide or we would have lost count of the number of people killed. 

Something is wrong with our system if we are here, 7 years after 

the beginning, arguing, trying to discuss, trying to find ways to 

incent the people who are ignoring the problem. 

So one of the things I hope we can accomplish, beginning today, 

is the kind of rules that you were just describing could be put in 

place not only for Sudan, but looking forward, so that we never 

have to sit 7 years after the event and say, now what can we do 

so that we can have less investment in the very worst places? 

Mr. CAPUANO. I agree. Thank you, gentlemen. I thank the Chair 

for your indulgence. 

Chairman MEEKS. Thank you. And the Jets will beat New England. All right. 

Now I will call on my friend and colleague, Barbara Lee. With 

unanimous consent, there is no objection. 

Ms. LEE OF CALIFORNIA. Thank you very much, Mr. Chairman. 

I apologize for being late, so if I ask a couple of questions that are 

redundant, please forgive me. But as the author of the original legislation that passed the House, and working with Senator Dodd— 

this was back in 2007—I just want to say thank you for getting us 

this far. And I want to thank Mr. Melito and the GAO for your report that came out. 

I guess we didn’t really know exactly how the law would work, 

but we knew it would be significant not just for the real impact on 

the regime in Khartoum and its supporters, but also for engaging 

the American public in a sustained commitment and campaign to 

invest with a conscience and to encourage others to do the same. 

Of course, I come from California and have been very involved 

in many divestment movements, and it was really a challenge here 

to get this bill passed for many reasons. And one of the issues I 

remember when we tried to get the—when we were writing the bill 

was that the SEC had no information. There was no database, no 

knowledge of what companies were actually doing business in the 

Sudan. 

And so I wanted to just ask about, and following up with Mr. 

Capuano, how, and with the GAO’s recommendation in terms of a 

rule, why can’t we, why can’t the SEC develop a rule that is meaningful so that we have that information, we have the knowledge of 

who is doing this? I think it could really provide meaningful information to investors. And I don’t see why this can’t be done. 

I know I read just a minute ago the letter that Mr. Cross from 

the SEC wrote, talking about the overall mix of information about 

a company and how this could possibly overwhelm investors and 

possibly obscure other material information. And so I don’t see how 

that is possible. These companies know what they are doing, and 

they should be able to easily disclose this if the SEC had a rule 

that would require them to do that. 

Mr. MELITO. Congresswoman, the SEC, even though it is so 

strangely written, is agreeing with the recommendation. But they 

are agreeing with the great caveat that they don’t want the rule 

to be broad. They want the rule to be narrow. So state sponsors of 

terrorism, potentially just Sudan, they agree with. 

24 

And in the dialogue with SEC staff yesterday, my staff said that 

they are preparing the package to present to the Commission. So 

it will go to the Commission. The next step then will be whether 

or not the Commission agrees with the recommendation. 

Ms. LEE OF CALIFORNIA. Okay. Can you define what ‘‘broad’’ 

versus ‘‘narrow’’ would mean? 

Mr. MELITO. In our opinion, the designation of a state sponsor 

of terrorism is an objective finding by our State Department. State 

has determined that four countries are state sponsors of terrorism, 

one of which is Sudan. So we believe that designation then should 

fall within the materiality clause. We limit our recommendation to 

Sudan since our report is about Sudan. 

But we say you could possibly go beyond and to the other three— 

Syria, Cuba and Iran—as well and be consistent. So that is how 

we—there is a process that the State Department goes through. 

They make a designation, then, that should then be consistent with 

materiality. 

Mr. KANZER. Can I just add a couple of comments to that? First, 

in terms of the investors being inundated with information, if you 

look through current securities filings, there is plenty of information in there that investors are not finding particularly useful, and 

it does take a lot of time to get through it. I would agree with that. 

We spend most of our time looking elsewhere. Most investors want 

as much quality information as they can get, and I don’t think that 

there is a risk here, as long as the requirement is carefully drafted. 

The other thing that I want to just stress here is that companies 

face human rights risks all over the world. They are profiting from 

slavery. They are profiting from child labor. They are profiting 

from forced labor. They are profiting from horrendous abuses all 

around the world. We really need to get information about how 

companies are managing these risks everywhere. 

And we can engage with our holdings on sweat-shop issues, on 

slavery in Brazil, on child labor around the world. Obviously, genocide rises to a different level. But if we are going to avoid the next 

genocide, if we are going to avoid the next conflict zone, the next 

set of problems, we need to make sure that the companies we are 

investing in have the appropriate policies in place, that they understand and respect human rights, that they know what to do when 

they are confronted with these situations, because sometimes when 

you engage with a company that is doing business in Sudan, they 

don’t know what you are talking about. And I think the people you 

talk to are being honest when they say that. They honestly don’t 

know what you are talking about. 

And that happens with virtually every human rights issue we 

raise, the first time we raise it. But after we continue to raise it, 

they get smarter about it. And I think it can be done. I think the 

SEC could require companies to disclose, do you have a human 

rights policy? Where can we find it? How do you implement it? 

Who is in charge? 

And then with respect to specific countries where we know there 

are egregious human rights risks or where the U.S. Government 

has designated a state sponsor of terrorism, are you operating 

there, and what are you doing to mitigate those risks? I think that 

25 

is useful information. I don’t think it is going to bury investors in 

useless information. 

Ms. LEE OF CALIFORNIA. Mr. Cohen? 

Mr. COHEN. Just one caveat to add about SEC disclosure. A lot 

of the time, when I read discussions about what the SEC is going 

to do, there is a discussion about what happens on U.S. stock exchanges. However, what we have seen in investigating financial institutions who are investing in the worst companies, helping the regime in Khartoum, is most of their holdings are in Hong Kong. 

So, for instance, I know that Franklin Templeton is a 5 percent 

shareholder in PetroChina not because of any SEC filing, but because of one in Hong Kong. They own zero shares, zero shares of 

PetroChina in New York. So if a rule is written that sounds really 

good, but only dealt with New York holdings, it might accomplish 

nothing; not the intended consequence, because they just wouldn’t 

report on PetroChina. After all, they don’t own it in New York. 

So for anything that goes forward, it would be really valuable to 

be keeping in mind the need to be addressing that the financial institutions that we use in America are investing globally, global 

markets, not just in domestic markets. 

Ms. LEE OF CALIFORNIA. Let me mention one thing. I couldn’t let 

this go. In terms of a standard being used, state sponsors of terrorism, how do we—if we use that standard, how do we address 

countries that are on that list for political reasons, such as Cuba? 

Mr. MELITO. Our recommendation is about Sudan, so we say perhaps consider the other state sponsors. We know that there is a 

process to designate a country as a state sponsor of terrorism. So 

whether for political reasons, economic reasons or such, there is a 

process, and we considered that to be an important objective element in this particular materiality clause. If a country is on this 

list, if a company is working in one of these countries, it could potentially be consistent with U.S. interests. They could be conducting activities in a humanitarian way. So their disclosure 

wouldn’t necessarily be brief. It could disclose the activities, and 

then it would be for the investors to decide whether or not these 

are activities that they want to support. 

Ms. LEE OF CALIFORNIA. Mr. Cohen? 

Mr. COHEN. I would register a concern about using the state 

sponsor of terror list. Just recently, we heard the news that the 

United States Government might trade listing Sudan as a state 

sponsor of terror for having free and fair and relatively safe recognized elections in south Sudan, not a determination that they 

weren’t anymore, but a political judgment as a chip to trade away. 

So that list is very, very political, and I would worry about that. 

In contrast, the sanctions list has a hand, not just from the Administration with Executive Orders, but also from Congress, so 

that there is some balance there. So that politics may still come 

into play, but there are more hands getting to have a say in what 

are the really terrible things that are happening in the world. So 

I would encourage a close look in that tie-in to sanctions. 

Ms. LEE OF CALIFORNIA. Mr. Chairman, just one more question. 

When we were writing the legislation, we had some concerns about 

the impact on the south. Of course we were naturally targeting the 

Khartoum regime as it relates to Darfur. How has this impacted 

26 

the south, if it has, or not impacted the south? We were very careful to try to carve out that type of exemption. 

Mr. WILLIAMSON. Unfortunately, the south still remains enormously underdeveloped. As I mentioned earlier, in an area the size 

of Texas, it has about 40 kilometers of asphalt roads, has a rainy 

season that gives it over 50 inches of rain a year. But to the best 

of my knowledge, the Divestment Act hasn’t had a negative impact. 

And with respect to sanctions, there have been waivers given. 

I would suggest the issue with respect to the lack of development 

in the south has to go with both the donor community and trying 

to hold together an area which was divided into various competing 

militias that have fragmented since the CPA was signed. 

But bottom line, Madam Congresswoman, I do not think, at least 

in my experience, that the Divestment Act has been a significant 

burden for the development that is necessary, and hopefully the 

United States will redistribute its substantial development assistance in the south from just humanitarian to actual economic development, good governance, etc. 

Ms. LEE OF CALIFORNIA. Thank you very much. Thank you, Mr. 

Chairman. And thank you all very much, because not only is this 

important, and I think all of us have been to Darfur and witnessed 

the tremendous tragedy that has and continues to take place there. 

But it is an effort to try to stop the genocide, but also trying to figure out ways to prevent future genocides. And so your role in that 

and this oversight hearing has been very important. And so I just 

want to thank you for following up and responding. 

Chairman MEEKS. Thank you. And I also want to thank you. 

This has been a good hearing, and one of which I think that all of 

you who have testified, I could just look back and see the facial expressions and the acknowledgements of one another and listening 

to the points that each other was making, which leads to the focus 

of trying to make sure we stop the genocide. And going further 

than that, we make sure that we don’t have an opportunity where 

so much time goes by, where so many people die, and we are still 

trying to figure out what needs to be done; that we need to stop 

this and put something in place so that should this ever arise 

again, we know how to stop it before thousands and thousands of 

lives are lost. 

I heard that sentiment from all four of you and I thank you for 

that, because that is really what this is really about. It is about 

preserving human life and making sure that this never happens 

again. But if it does, it shouldn’t take, 7, 8, 9, 10 years to figure 

out how do we stop it and put the pressures on the government to 

stop this from happening. Because those are lives that are gone. 

Those are people, those are generations of young kids who will 

never have a chance to enjoy this place that we call Earth. 

So your testimony and your work and your commitment is something that is much, much appreciated. And again, I thank you very 

much for being here today. 

27 

Let me note that some members may have additional questions 

for the witnesses which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for 

members to submit written questions to these witnesses and to 

place their responses in the record. 

With that, this hearing is now adjourned. 

[Whereupon, at 3:26 p.m., the hearing was adjourned.] 

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A P P E N D I X 

November 30, 2010 

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