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Judge to hear arguments in Sudan-divestment suit next week
A federal judge will hear arguments next week in a dispute between the National Foreign Trade Council and the state of Illinois over the constitutionality of the state’s Act to End Atrocities and Terrorism in the Sudan.
The key hearing, set for Wednesday, Jan. 3, could decide whether public pension funds will have to get rid of investments linked to genocide in Darfur next month.
Eight public pension funds, nine individual pension-fund beneficiaries, and taxpayers are also listed as plaintiffs in the suit, which was filed in U.S. District Court for the Northern District of Illinois. The defendants are Attorney General Lisa Madigan, Department of Financial and Professional Regulation secretary Dean Martinez, and outgoing state Treasurer Judy Baar Topinka.
On Oct. 26, U.S. District Judge Matthew Kennelly denied the state’s motion to dismiss the case. For now, Julie Bauer of Winston & Strawn LLP, the Chicago firm handling the suit on behalf of the trade council, says her firm is going forward with its motion for preliminary injunction, which, she says, Kennelly has consolidated with a trial on the merits.
Illinois passed the nation’s first and toughest law concerning divestiture from Sudan. The outcome of the court battle here will determine whether the NFTC also takes legal action against 15 other states that have passed similar laws, NFTC officials say.
In the state’s response, Madigan argues that the purpose of the Sudan Act is “to disassociate Illinois from the grave human rights abuses currently taking place in the Republic of Sudan” — and not set policy.
The act also seeks to protect Illinois pension assets from the political, economic, and security risks associated with operating there, the state says, noting that the NFTC’s own investment consultant acknowledges that stock prices may be affected by a nation’s “political circumstances.”
Gov. Rod Blagojevich signed the act on June 25, 2005. It prohibits the treasurer from investing state money in Sudanese government bonds, “related investment vehicles,” and certain “forbidden entities.”
These include Sudan’s government and companies controlled or managed by the Sudanese government, companies incorporated and principally operating in Sudan, any company identified by the federal government as sponsoring terrorist activities or any company sanctioned by the government for violating existing rules pertaining to Sudan, and any company that fails to certify that it is not doing business in Sudan.
Humanitarian agencies, however, are excluded from complying with the act, which also prohibits fiduciaries of Illinois pension and retirement funds from investing in these entities.
These provisions are unconstitutional, according to the NFTC suit, which argues that the Sudan Act encroaches on the federal government’s exclusive authority over foreign affairs, violates the clause of the U.S. Constitution that gives Congress the power to legislate foreign commerce, and is preempted by trade sanctions already in place against Sudan and the National Bank Act, which regulates deposits at banks established by federal law.
Since 2003, in the region of western Sudan known as Darfur, Arab militia groups, reportedly funded by the Sudanese government, have slaughtered upwards of 400,000 people and displaced 2.5 million. Congress passed a resolution in 2004 urging the Bush administration to label the Darfur situation a genocide, and it did so in September of that year.
Kennelly has indicated that he intends to issue a ruling before the Jan. 27 divestment deadline, Bauer says.
Contact R.L. Nave at firstname.lastname@example.org.