Tobacco holdings at issue

August 02, 1994|By Joel Obermayer and William F. Zorzi Jr. | Joel Obermayer and William F. Zorzi Jr.,Sun Staff Writers

Pressure is likely to increase on local public pension funds to sell their holdings in tobacco companies, city and state officials said yesterday.

Baltimore City Councilman Martin O'Malley, a 3rd District

Democrat, said the council could move to divest the $23 million that the city pension fund has in tobacco company stocks as soon as council members return from their recess in September.

"I would be surprised if someone doesn't put in an ordinance as soon as we get back," he said, noting that the council has banned tobacco billboards virtually everywhere in Baltimore. "I think it looks hypocritical to take the billboards down and let pension funds turn a sweet buck on the same business."

Media attention on divestment also will put the issue before the General Assembly when it convenes in January, predicted Del. Richard N. Dixon, a Carroll County Democrat who is House chairman of the Joint Committee on Pensions. The state pension fund has $112 million invested in stocks and bonds of tobacco companies.

Meanwhile, the American Cancer Society's Maryland Division called on the city and state pension funds to divest their tobacco holdings. Such investments conflict with the governments' "efforts to curb the death and suffering those products cause," the group said in a statement yesterday.

Yesterday The Sun outlined the city and state pension funds' $135 million in tobacco holdings, which represent less than 1 percent of the money handled by the funds. During the past five months, the State Pension and Retirement Systems bought $27 million in bonds from tobacco companies -- even as those companies were preparing to sue Maryland over its workplace smoking ban.

When informed by Sun reporters about the investments, several public officials, including Maryland's attorney general, said the holdings were troubling.

But Mr. Dixon and others expressed reservations about divestment.

"These kinds of issues come before the committee, and we look at placing restrictions on the pension system very, very cautiously," said Mr. Dixon, a broker and assistant vice president at Merrill Lynch & Co. "We could take some legislative action, but we have been quite reluctant to take any such action."

Maryland Treasurer Lucille Maurer, who sits as the pension board's vice chairwoman and treasurer, said that she believed the divestment issue would come up Thursday at a regularly scheduled meeting of the pension board's executive committee.

"I have no aversion to taking it up as a policy matter and discussing it," she said, adding that the board's investment staff might be asked to prepare a preliminary report on the issue.

But she also expressed concerns about so-called "socially targeted investments," particularly regarding conglomerates where a subsidiary is the target.

"I'm particularly concerned about where we draw the line," she said. "Do we want to not invest in advertising companies that take on tobacco ads? . . . Do you do every beer company or companies that sell to beer companies?"

"It's just a political football in an election year," said Bruce C. Bereano, the state's leading tobacco company lobbyist.

He pointed out that pension trustees by law are supposed to look for the best investments possible with little regard to social issues. "I think that any [pension fund] administrator that injects political and subjective consideration into their investments is breaching their fiduciary duty."

Mr. Bereano warned that pension officials who vote to divest could be sued, just as the state has been sued by tobacco companies over the state's tough new workplace smoking regulations.

Maryland Attorney General J. Joseph Curran Jr. said he was not worried about more suits and maintained that the state pension fund's tobacco investments undermine public policy.

His office has considered suing tobacco companies to reimburse the state for the hundreds of millions of dollars it gives out in Medicare and Medicaid payments for smoking-related illnesses.

"State trustees have invested 99.3 percent in something other than tobacco stock. We're not talking about a lot of money," he said. "The question is why aren't we consistent with our position."

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