By Kenneth R. Timmerman
FrontPageMagazine.com | April 27, 2007
"Economic sanctions,” former Sen. Jesse Helms was fond of remarking, “are the only policy option between appeasement and war.”
In his paraphrase of Thomas Jefferson, Sen. Helms was addressing the
concerns expressed by the business lobby to U.S. sanctions on the
regime of Saddam Hussein. The sanctions Sen. Helms was advocating came
in response to the gassing of thousands of Iraqi Kurds by Saddam’s
troops in Halabja, nearly twenty years ago.
So too, today, the business lobby is fighting vigorously to prevent
state legislatures around the country from passing new laws to divest
state pension funds from companies doing business with the terrorist
regime in Iran.
But not only do such laws make good sense. They will act as “force
multipliers” for other measures now being taken by the federal
government to increase the pressure on the Tehran regime, such as
banning Iranian state-owned banks from the international financial
I travel the country speaking about Iran. People are always asking: what can we do?
Divest Iran bills answer that question. Here is something clear-cut,
effective, and just plain right that individual Americans and state
legislatures can do to help increase the pressure on the Iranian
What kind of policies will be effective in compelling a regime such as
the one in power in Tehran to change its behavior? Certainly not
continuing to invest and do business with them as usual.
But by telling foreign companies that their support for the Tehran
regime will affect the investment decisions Americans make will
complicate Iran’s quest for the investment capital and technology it
needs to keep its oil industry afloat.
This is Iran’s key vulnerability. Just last week, Iran’s oil minister
told a conference in Tehran that Iran needed $20 billion annually in
fresh foreign investment funds to keep the oil flowing. We can help to
staunch that flow by shunning companies that do business in Iran.
But in a letter sent to Ohio state representative Chris Widener,
chairman of a key economic panel hearing a divest terror bill on
Wednesday, the president of the National Foreign Trade Council, Bill
Reinsch, dragged out every shop-worn argument the business lobbyists
have used for decades to oppose any limits on trade with terrorists.
Divestment would “broadly and indiscriminately harm U.S. and foreign
companies,” he claimed, and was “extremely unlikely to affect the
behavior of the Iranian government or help the Iranian people.”
On the contrary: divestment is one thing the Iranian regime truly
fears, because it knows that businesses will follow the money. And
without the support of Western business, Iran’s oil industry – and
possibly its radical Islamist regime – will collapse.
Reinsch also claimed that divesting in companies that are propping up
the Iranian regime would hurt individual pensioners – apparently under
the assumption that Wall Street fund managers are too dumb to tailor
specialized “Iran-free” funds that would perform at or above the
market. (We’ve got sector funds, index funds, emerging market funds,
“green” funds – why not Iran-free or terror-free funds?)
But what was most astonishing about Reinsch’s argument was what he
didn’t say. Why are he and his organization lobbying so vigorously
against this bill? What interests or behavior are they seeking to
protect? Why do responsible business executives want to invest in Iran
in the first place, given the unwillingness of the Tehran regime to
protect foreign investment and its imposition of onerous buy-back
arrangements that rational executives in the oil industry shun?
My friend and colleague Frank Gaffney calls Reinsch “terror’s lobbyist,”
because of his systematic willingness to go to bat for the right of
business to prop up the world’s worst regimes. Gaffney notes that
Reinsch told a reporter, “You don’t win this particular battle in the
hearings; you win the battle in the backroom, where you can explain the
consequences of the legislation.”
Appropriately, Reinsch shunned yesterday’s hearing in the storied
statehouse of Columbus, Ohio, preferring to send a letter filled with
specious legal gobbledygook instead. His goal was to intimidate
legislators into believing that their actions would be struck down by
the courts as a violation of the foreign commerce clause of the
That argument was taken apart by Arizona state university law professor
Orde F. Kittrie, who actually pulled the full legal opinion Reinsch had
selectively cited and showed that the court did NOT address the right
of state governments to pass divestment laws, but a separate and
That’s why Reinsch works in the backrooms. As Frank Gaffney noted, “his
clients’ case cannot stand the light of day. Their only chance lies in
spooking legislators in settings where their constituents [and in this
case, law professors] cannot monitor the misinformation and
But even more astonishing was Reinsch’s assertion that government should not set guidelines for business.
Government regulates business for two primary reasons: to prevent
rapacious acts that harm consumers, workers, and/or investors, but also
to protect business from non-stop lawsuits.
Reinsch’s insistence that state governments should step back from
passing divest terror legislation could open his member companies to
massive lawsuits from victims of the products he insists they should be
allowed to sell to Iran.
A case in point. After the 1991 Gulf war, thousands of U.S. military
veterans came down with a broad array of debilitating diseases that
became known as Gulf War syndrome.
A few years after the war, U.S. Army and outside medical studies began
to find that a high percentage of the soldiers affected by Gulf War
syndrome also had been exposed to Saddam Hussein’s chemical weapons.
This prompted a class-action lawsuit against the companies that had
provided the dual-use technology and expertise to Saddam enabling him
to build those weapons.
Many of the companies argued at the time that they could not be held
responsible for what Saddam did with their products because the
government had never warned them away from the trade.
(This was only partly true, of course. Starting in 1984, the Reagan
administration began imposing a series of increasingly severe foreign
trade restrictions on the sale of precursor chemicals and chemical
weapons manufacturing goods to Saddam’s regime, because of his
documented use of CW on the battlefield against Iran. They later
expanded these to include missile, nuclear, and biological
Mr. Reinsch’s arguments could expose his members, or the foreign
parents or subsidiaries of his members, to a flurry of future lawsuits
from victims of the Iranian regime who will claim they were harmed by
his clients’ actions.
Members of the Financial Institutions committee of the Ohio House of
Representatives heard from a recently retired state teacher, Mary Lou
Bennett, who told them that she was outraged to think that her
retirement money was going to prop up the Tehran regime.
They heard from a Cleveland area fireman, Marine Gunnery Sergeant Mark
DePhillips, who told them that while serving in Iraq his men had been
targeted by Iranian-supplied weapons.
Indeed, U.S. military spokesmen in Iraq have said recently that over
the past 18 months, more than 170 American soldiers have been murdered
in Iraq by insurgents equipped with Iranian-made “Explosively-Formed
Penetrators” used in roadside bombs.
Sgt. DePhillips expects to be redeployed to Iraq at some point over the
next year. Asked by a committee member if he would accept, say, a 10%
lower yield if the firemen’s pension fund were required to divest from
companies doing business in Iran, he didn’t miss a beat.
Divestment was “just the right thing to do,” he said. “They want to destroy us.”
Sgt. DePhillips is right. What is more fundamental than the right of
individual Americans and groups of Americans to decide where they will
invest their money? It’s like choosing who you invite for dinner.
After all, investment is a voluntary decision, not a compulsion. Nobody can force you to invest in Daimler-Chrysler, LG Group, Siemens, Shell, Sinopec, Petronas, Gazprom, Statoil, Mazda, Bayer or Total, just as nobody can force any of those companies to invest in Iran.
But Bill Reinsch and the National Foreign Trade Council would like to
compel you to invest in companies doing business in Iran, or at the
very least, to make sure you never know when you are investing in them.
And they want to accomplish this through back-room arm-twisting and
In my own testimony to the committee, I recalled an anecdote told about George Shultz.
When Shultz was Secretary of State, he traveled to Hong Kong and
delivered a speech that included a sharp rebuke of the Communist
Chinese regime. The President of the U.S. Chamber of Commerce in Hong
Kong was livid. You’re going to ruin our trade with China, he said.
Shultz reportedly turned to the man and said icily, “Security trumps trade.”
And so it does here.
America’s national security, the security of our troops in Iraq who are
being killed by Iranian intelligence officers, and the security of our
friends in the region trumps profits.
Terror-free investing is an idea whose time has come. Already last summer, the Securities and Exchange Commission wrote officially to Ford Motor Company, warning them that they had failed to mention business operations in Iran, Sudan and Syria by their subsidiary, Mazda.
The SEC letter asked Ford to address “qualitative factors that a
reasonable investor would deem important in making an investment
decision, and the potential impact of corporate activities [in Iran and
other terrorist states] upon a corporation’s reputation and share
The SEC pointed out that “Arizona and Louisiana have adopted
legislation requiring their state retirement systems to prepare
reports regarding state pension fund assets invested in,…companies that
conduct business with countries identified as state sponsors of
terrorism.” Pennsylvania had followed suit, while Illinois,
Maine, New Jersey, and Oregon had all adopted similar measures
In Ohio, state legislators Rep. Josh Mandel, a 29-year old Marine
sergeant who served in Iraq with DePhillips, and his co-sponsor Rep.
Shannon Jones, deserve special praise for introducing this legislation
and braving the irresponsibility lobby.
Shareholders expect corporate leaders to make them as much money as
possible. But it is up to legislators to frame the guidelines, to write
the rules of the game.
If American states had taken this kind of initiative in 1938, and made
Henry Ford, and IBM, and others pay a price for investing in Hitler’s
Germany, the horrific war that my father and his generation had to
fight might never have occurred.
If America had acted then in a timely fashion, we might have prevented the Holocaust.
So let us learn from history, not merely repeat it out of ignorance –
or through mistaken arguments that put today’s profit before tomorrow’s
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