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PROPOSAL FOR DIVESTMENT FROM SUD

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					PROPOSAL FOR
DIVESTMENT
FROM SUDAN
AN OVERVIEW OF THE GENOCIDE IN
DARFUR, SUDAN AND A DIVESTMENT
STRATEGY FOR THE UNIVERSITY OF
CALIFORNIA

OCTOBER 11, 2005




UNIVERSITY OF CALIFORNIA SUDAN DIVESTMENT TASKFORCE

PLEASE DIRECT CORRESPONDENCE TO:
UCSUDANDT@GMAIL.COM
UNIVERSITY OF CALIFORNIA SUDAN DIVESTMENT TASKFORCE




                        AUTHORS




                      DAVID ATTANASIO
                Philosophy PhD Student, UCLA

                      JASON MILLER
                   MD/PhD Student, UCSF

                       TRISTAN REED
           Economics and Global Studies Major, UCLA

                       DAVID SANDO
                 Student of Law, UC Hastings

                       MICHAEL SMITH
                BS Electrical Engineering, UCLA



                   with contributions from:

                       Stanford STAND




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                           TABLE OF CONTENTS

EXECUTIVE SUMMARY..........................................................................5

I. INTRODUCTION..................................................................................8
II. GENOCIDE IN DARFUR, SUDAN........................................................9
      The Situation and Sudanese Government Culpability......................9
            *History and Scope of the Crisis.............................................9
            *Personal Accounts..............................................................10
            *A Guilty Government..........................................................12
      Classification as Genocide.............................................................14
            *Definition of Genocide and Facts of the Darfur Situation.....14
            *Genocide Declarations........................................................14
III. GENOCIDE IS STILL OCCURING.....................................................17
      Change In Strategy by Khartoum Still Represents Genocide...........17
      Ongoing Violence and Intimidation................................................18
      Assault on Humanitarian Aid........................................................19
      Other Developments......................................................................20
            *The Comprehensive Peace Agreement.................................21
            *The Interim Constitution
              and the International Criminal Court……….…………..........21
      The Need for Action.......................................................................22
IV. THE UC AND SOCIAL RESPONSIBILITY..........................................23
      Fighting Apartheid.........................................................................23
      Tobacco.........................................................................................24
      The Question of Precedent.............................................................24
V. INFLUENCING THE OUTCOME IN DARFUR.....................................26
      Economic Pressure Can Induce Change in Khartoum’s Behavior...26
            *Susceptibility of Khartoum to Economic Pressure...............26
            *Current Status of Sudan’s Economy
              and Reliance on Foreign Direct Investment.........................28
            *Recent Boom in Government Revenue,
              Financed in Part by Foreign Direct
              Investment, is Funding the Genocide…………………............29
            *UC Divestment Would Alter Khartoum’s Behavior...............30
            *How UC Divestment Translates
              into Political and Economic Pressure
              on the Government of Sudan..............................................30
            *Talisman Energy – A Successful Divestment Campaign.......31
      Changing GOS Behavior Without Harming Sudanese Civilians......33
VI. SYMBOLIC VALUE OF DIVESTMENT..............................................35
      UC Divestment Adds Momentum to Nationwide Movement………...35
      Generating Domestic Support for Action........................................36
      Global Impact................................................................................36



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VII. UC’S LEGAL AND FINANCIAL OBLIGATIONS.................................37
       The Prudent Investor Rule...........................................................37
             *Economically Equivalent Alternatives...............................38
             *Avoiding Adverse Portfolio Costs.......................................40
             *Other Issues.....................................................................41
       Other Financial Considerations
       in a Divestment Decision.............................................................43
             *Identifying offending companies......................................44
             *Under-diversification........................................................44
             *Trading costs...................................................................44
             *Peer Risk..........................................................................44
       UC Divestment Compatible
       with Legal and Economic Obligations..........................................45
VIII. PROGRAM OF DIVESTITURE........................................................46
       Definitions of Terms and Acronyms.............................................46
       Distinguishing Sudanese Divestment
       from other Divestment Campaigns..............................................46
       Strategy for Divestment...............................................................47
       Divestment Criteria....................................................................47
IX. CONCLUSION.................................................................................51

APPENDIX A: OVERVIEW OF SUDANESE SANCTIONS.........................52
APPENDIX B: SUDAN CORPORATE MONITOR OVERVIEW...................54




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                   EXECUTIVE SUMMARY

Genocide in Darfur. It is the position of the petitioners, numerous
credible and non-biased human rights organizations, many American
universities, several US state legislatures, the United States government,
and President Bush that a genocide has been, and continues to be,
waged by the Sudanese government against the black African population
of Darfur, Sudan. The carnage includes over 400,000 slaughtered, 2.5
million displaced, and 50% of Darfur’s population now reliant on
humanitarian aid. The international community’s response to what the
UN calls the worst humanitarian crisis in the world today has been
mournfully feeble on the whole, although certain non-governmental
organizations, states, and universities have admirably acted on the issue.

As this proposal went to press, Harvard and Stanford Universities, as
well as the states of Illinois, New Jersey, and Oregon, had divested their
funds from companies doing business in Sudan. These divestments are
the first of a growing national movement calling for institutional investors
to use their power as shareholders to influence the outcomes in Darfur.
Given the historical record of UC divestment from South Africa and its
decision not to invest in tobacco companies, the UC should use its
investments to influence outcomes in Darfur.

Divestment as Economic Pressure. UC divestment can pressure the
Sudanese government to end their genocide in Darfur. In response to
external economic pressure, the Khartoum regime has historically
demonstrated substantial positive changes in behavior. Since Sudan’s
current genocidal military campaign against Darfurians relies heavily on
foreign direct investment (FDI), UC divestment from companies doing
business in Sudan encourages these companies to withdraw FDI, thereby
imparting further economic pressure on the government of Sudan to end
the genocide.

The effectiveness of divestment from Sudan has clear and recent
precedent. Talisman Energy’s 2003 decision to extricate itself from
operations in Sudan following widespread and sustained economic
pressure by Western investors over human rights abuses committed by
the government during the North-South civil war prompted two other
international oil companies to sell their stakes in Sudan. Faced with the
prospect of continuing loss of FDI, Khartoum signed the Naivasha Treaty
with southern rebels shortly thereafter, paving the way for the
Comprehensive Peace Agreement between North and South in January of
2005.


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Finally, divestment will do minimal harm to innocent Sudanese. The
divestment criteria designed by the taskforce, and specifically
enumerated in Section VIII, exclude any company engaged in the
provision of goods and services intended to relieve human suffering or to
promote human welfare. They also exclude sectors of the Sudanese
economy, such as agriculture, which provide employment for large
sectors of the population.

Divestment’s Symbolic Message. Institutional divestment from Sudan
conveys several symbolic messages. For American institutions,
divestment by one institution encourages others to follow suit. For the
US government, institutional divestment signals that Americans consider
genocide an important issue that must be acted on by the Congress and
Executive Branch. For US citizens and individuals abroad, divestment by
major, respected institutions raises the visibility of genocide; it sends a
clear message that no American entity, governmental or private, will
passively condone the crime of genocide. Finally, divestment signals to
the Sudanese government that there are clear and important
consequences to their actions.

Divestment and the “Prudent Investor.” The University of California
owes a fiduciary duty to the donors and beneficiaries of its various
endowment and pension funds. Specifically, as according to California
probate law, the fiduciary must manage endowment assets in a prudent
manner, investing with a view both to safety of the capital and to
securing a reasonable return. Divestment of Sudan-related assets is well
within the mandate of even the strictest interpretation of this so-called
“prudent investor rule.”

There are three main financial concerns with divestment that are easily
addressed in the case of Sudanese investment. These are (1) the
availability of alternative investments, (2) the possibility of adverse
portfolio costs due to divestment, and (3) the increasing risks of
maintaining investments in Sudan during other divestment campaigns.

First, if companies operating in Sudan were to be excluded from the UC
investment portfolio there would be a variety of economically equivalent
alternative investments with equal market capitalization and size. With
no single industry uniquely situated only in Sudan, no single investment
type (in terms of industry sector, market capitalization, or country origin
of parent company) would be systematically excluded from UC
investments. Additionally, since Sudanese investments make up such a
small part of the already small non-US portfolio allocation, their removal
would have minimal overall effect on the performance of the UC portfolio.



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Second, if the divested money is switched to investments with similar
expected returns, the Regents can expect that divestment will not
financially impair their ability to maximize asset returns. This idea is
supported by modern portfolio theory, as specifically described by the
work of Judge Richard A. Posner concerning South Africa divestment and
empirically by a statistical analysis comparing the S&P 500 to a basket of
stocks that screened out certain stocks for social or moral reasons.
Posner’s work and the analysis are cited in section VII.

Third, there is actually an increased risk in maintaining Sudanese
investments in light of other divestment campaigns. As the Regent’s
found while divesting from South Africa, the growing number of divesting
institutions across the country will eventually trigger a depreciation of
Sudanese holdings, actually making divestment a sound financial choice.

Program of Divestiture. The petitioners have developed a
comprehensive program, detailed in section VIII, for UC divestment. It
includes a strategy for identifying companies as well as a detailed criteria
for determining which companies should be removed from the UC’s
portfolio.

Conclusion. It is unacceptable and upsetting to be citizens of the most
powerful country in the world and witness the repeated perpetration of
genocide with deadly consistency. Scarcely a decade went by in the
twentieth century without a major genocide, and the first decade of the
twenty-first century appears to be a grim reminder of this genocidal
regularity.

The University of California has a unique opportunity to act, using its
investments to influence the situation on the ground, and to indirectly
encourage other like-minded institutions to act. The signal UC should
send is clear; genocide is unacceptable and demands action. In a post-
Genocide Convention era, the institution should not tolerate another
century of recurring genocides.




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I. INTRODUCTION
       The University of California (UC) Sudan Divestment Taskforce
       petitions the UC Regents to divest from, and not to invest additional
       funds in, either directly or indirectly, certain companies that do
       business in Sudan or with the Government of Sudan (GOS)1, in
       response to the genocide that Khartoum continues to wage in
       Darfur, Sudan.

       This proposal comes with the backing of individual members and
       organizations within the University who have showed their support
       either online at www.ucdivestsudan.com or by passing resolutions
       within their organizations.

       This document contains a history of the Darfur genocide, details of
       ongoing crimes in the region, and a comprehensive argument for
       why divestiture should be adopted as a policy by UC. We argue that
       a US declaration of genocide in Sudan provides a moral benchmark
       high enough to compel UC divestment, despite the university’s
       understandable position that asset management should be divorced
       from political considerations. We further argue that there is
       reasonable expectation that divestment will pressure the GOS to end
       its genocidal practices. After considering the symbolic significance of
       a UC divestment decision, we provide practical evidence that
       divestment from Sudan is compliant with the prudent investor rule
       and meets the Board of Regent’s financial obligations in overseeing
       the Endowment. Finally, we set out a comprehensive strategy for
       divestment, including a set of criteria for determining which UC
       investments should be divested.




1   In this document, ‘Government of Sudan’, ‘GOS’, ‘Khartoum’, and ‘Sudanese
      Government’ will be used interchangeably.


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II. GENOCIDE IN DARFUR, SUDAN
The Situation and Sudanese Government Culpability

        History and Scope of the Crisis. For centuries, nomadic Arab
        horsemen commonly referred to as the Janjaweed have exploited
        black Sudanese in the Darfur region in a slave trade.2 Conflict
        between pro-government Arabs and non-Arab blacks in Darfur has
        also included a long historical struggle for control over arable
        farmland.3 These long-held ethnic antagonisms were exacerbated
        when two black Darfurian rebel groups, the Sudan Liberation Army
        (SLA) and the Justice and Equality Movement (JEM), sought to end
        black Darfur’s chronic economic and political marginalization by
        attacking Sudanese military structures in early 2003.4 At the time, a
        US-brokered peace treaty settling a 20+ year civil war between the
        Muslim North and the largely Christian South was near completion.
        The treaty allocated a significant portion of Sudanese oil revenues
        and government power to the South, but leaders of the neglected
        Darfur region were not included in the peace deal. Wanting to
        prevent further clamor for autonomy and decrements in centralized
        power, the Sudanese government, working with the Janjaweed,
        began sponsoring wholesale ethnic cleansing of black Darfurians,
        almost all of whom had NO affiliation with black Darfurian rebel
        groups.5

        Since February of 2003, 400,000 Darfurian civilians have died.6
        Nearly 2.5 million have been displaced due to violence, and over 3


2   Ruffin, David. “Darfur: Genocide in Plain View.” The Crisis. Jan. 2005.
       <http://www.findarticles.com/p/articles/mi_qa4081/is_200501/ai_n9522087>
3   Ibid.
4   Doyle, Mark. “Darfur Misery has Complex Roots” BBC World Affairs. Published:
       September 26th, 2004. <http://news.bbc.co.uk/1/hi/world/africa/3692346.stm>
5   Power, Samantha. “Dying in Darfur: Can the ethnic cleansing in Sudan be stopped?”
       The New Yorker. Published: August 23rd, 2004.
       <http://www.newyorker.com/fact/content/?040830fa_fact1>
6   Darfur Mortality Study, Table. Coalition of International Justice. Published: April 21,
       2005. <http://www.cji.org/pdf/CIJ_Mortality_table_21_april_2005.pdf>


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     million people are now hungry.7 Particularly gruesome has been the
     Sudanese military and Janjaweeds’ systematic use of rape as a tool
     for humiliation and intimidation.8

     Nicholas Kristof of the New York Times vividly describes the
     atrocities being committed in Darfur:

       “I found a man groaning under a tree. He had been shot in the neck and
       jaw and left for dead in a pile of corpses. Under the next tree I found a
       four-year-old orphan girl caring for her starving one-year old brother.
       And under the tree next to that was a woman whose husband had been
       killed, along with her seven- and four-year old sons, before she was
       gang-raped and mutilated."9

     Darfurians that have not been murdered have fled their homes and
     now inhabit squalid refugee camps. Two-hundred thousand refugees
     have made their way to neighboring Chad and nearly 2 million other
     displaced survivors currently reside in “Internally Displaced Camps”
     within Darfur.10 Because these camps are surrounded by Sudanese
     government troops and Janjaweed, refugees that venture too far
     from camp to collect firewood are raped, tortured, and/or killed.11

     According to the UN, 3.2 million of the approximately 6 million
     people that live in Darfur have been impacted by the genocide.12,13
     In a USAID-sponsored random survey of 1,136 refugees in Chad,
     61% had witnessed the death of a family member and 16% had been
     the victim of or knew a victim of rape.14

     Personal Accounts. Personal accounts of the attacks follow:

       “I noticed a woman who was sitting nearby with a child on each side of
       her... Both children looked extremely weak; their legs were bone thin,
       and pus caked around the eyes of one child. The woman, Rashida Abbas,

7 World Food Program Budget Revision. June 2005.
     <http://www.wfp.org/operations/current_operations/BR/103391_0506.pdf>
8 “Darfur: Rape as a weapon of war: sexual violence and its consequences.” Amnesty

     International Report. Published: July 19th, 2004. AI Index: AFR 54/076/2004.
     <http://web.amnesty.org/library/index/ENGAFR540762004>
9 Kristof, Nicholas D. “Reign of Terror”. New York Times. Published: September 11,

     2004.<http://query.nytimes.com/gst/abstract.html?res=F10F13FC39540C728DDD
     A00894DC404482&incamp=archive:search>
10 Ibid.
11 Ibid.
12 Darfur Humanitarian Profile #16. United Nations Sudan Information Gateway. July

     1st, 2005. <http://www.unsudanig.org/emergencies/darfur/profile/data/2005/
     july/july-dhp-tables.pdf>
13 Documenting the Atrocities in Darfur. U.S. Department of State. State Publication

     11182; Sept. 2004. <http://www.state.gov/g/drl/rls/36028.htm>
14 Ibid.




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         came from Kailek, Darfur; in March, Rashida said, more than a hundred
         men had been summarily executed there, including her husband. She
         had six children before the conflict, but only four had survived. When the
         janjaweed came, Abbas told me, her oldest child, a boy, had run ahead
         of her. She had carried her infant on her back, and she had taken one of
         her girls in each hand. This hadn’t left her with a free hand for either of
         her younger sons, five-year-old Adam Muhammed and seven-year-old
         Hassan Muhammed. They trailed behind as the Arab soldiers threw
         matches onto the roofs of the huts. An Arab militiaman suddenly
         grabbed the boys, and Abbas pleaded that they be released. The gunman
         warned her that if she didn’t shut up, all of her children would be killed.
         She backed away as instructed, but as she did so the man threw five-
         year-old Adam into the fire. “Mama, Mama!” he shouted, as the flames
         consumed him. Hassan, his older brother, briefly escaped his captor’s
         grasp, but as he ran toward his mother he was shot in the back twice
         and died instantly.”

                               - Samantha Power, American reporter in Darfur15

         “I was sleeping when the attack on Disa [a village in Darfur] started. I
         was taken away by the attackers, they were all in uniforms. They took
         dozens of other girls and made us walk for three hours. During the day
         we were beaten and they were telling us: ‘You, the black women, we will
         exterminate you, you have no god.’ At night we were raped several times.
         The Arabs guarded us with arms and we were not given food for three
         days.”
                               – A female refugee from Disa16

         “When we tried to escape they shot more children. They raped women; I
         saw many cases of Janjaweed raping women and girls. They are happy
         when they rape. They sing when they rape, and they tell that we are just
         slaves and that they can do with us how they wish.”

                               – A 37-year-old from Mukjar17

         “I was with another woman, Aziza, aged 18, who had her stomach slit on
         the night we were abducted. She was pregnant and was killed as they
         said, ‘It is the child of an enemy.’ ”

                               – An Irenga woman from Garsila18

         “At 7am in August 2003, our village was surrounded by the Janjaweed; we
         heard machine guns and most of the people ran away, some were killed while
         trying to escape. My sister, M, aged 43, was captured by the military and the


15   Power, Samantha. “Dying in Darfur: Can the ethnic cleansing in Sudan be stopped?”
       The New Yorker. Published: August 23rd, 2004.
       <http://www.newyorker.com/fact/content/?040830fa_fact1>
16   “Darfur: Rape as a weapon of war: sexual violence and its consequences.” Amnesty
       International Report. Published: July 19th, 2004. AI Index: AFR 54/076/2004.
       <http://web.amnesty.org/library/index/ENGAFR540762004>
17   Ibid.
18   Ibid.


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          Janjaweed. They tried to sleep with her. She resisted, I was present and could
          hear her, ‘I will not do something like this even if you kill me’ and they
          immediately killed her.”

                                – A refugee from Miski19



        A Guilty Government. The UN Commission of Inquiry on Darfur
        found that these deaths, displacements, and deplorable conditions
        are a direct result of “indiscriminate attacks, including killing of
        civilians, torture, enforced disappearances, destruction of villages,
        rape and other forms of sexual violence, pillaging and forced
        displacement” committed by Sudanese government forces and
        Janjaweed militias throughout Darfur.20

        The Commission also found and identified reliable and consistent
        elements which indicate the responsibility of some individuals,
        including officials of the Government of Sudan, for serious violations
        of international human rights law and international humanitarian
        law, including crimes against humanity and war crimes, in Darfur.
        The Commission has recommended that these individuals be
        prosecuted by the International Criminal Court.21

        The US government has concurred; during his testimony to the
        Senate Foreign Relations Committee on September 9, 2004, then-
        Secretary of State Collin Powell, said, “We concluded, I concluded…
        that the Government of Sudan and the Janjaweed bear
        responsibility [for the atrocities of Darfur].”22

        Reports released by the U.S. Department of State and Human Rights
        Watch have identified a systematic and reoccurring pattern to the
        attacks that emphasizes the GOS’s role.23 First, Sudanese
        government planes bomb a village from above.24 When civilians
        attempt to escape, Janjaweed militias encircle the villages and
        attack them from the ground with automatic weapons and grenade


19   Ibid.
20   “Report of the International Commission of Inquiry on Darfur to the United Nations
       Secretary-General”. United Nations. Published: January 25th, 2005.
       <http://www.un.org/News/dh/sudan/com_inq_darfur.pdf>
21   Ibid.
22   Powell, Colin. “The Crisis in Darfur.” Testimony before the Senate Foreign Relations
       Committee. Testified: September 9th, 2004.
       <http://www.state.gov/secretary/former/powell/remarks/36042.htm>
23   Ruffin, David. “Darfur: Genocide in Plain View.” The Crisis. Jan. 2005.
       <http://www.findarticles.com/p/articles/mi_qa4081/is_200501/ai_n9522087>
24   Ibid.


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        launchers.25 During these raids, civilians are tortured and killed,
        women are raped, children are forced into slavery, houses are
        burned, livestock and goods are stolen, and drinking water is
        contaminated to eliminate the possibility that the surviving
        displaced return to rebuild.26

        The Sudanese government has also relentlessly restricted delivery of
        international humanitarian aid and access of aid workers to the
        people of Darfur. While the Sudanese government has cited security
        concerns as the rationale for barring access, several state
        government officials, in contradiction to the national government’s
        position, declared large areas of Darfur accessible and secure for
        humanitarian access as early as December of 2003.27 Despite such
        local government declarations, Khartoum refused to immediately lift
        humanitarian aid restrictions.

        Under increasing international pressure to improve humanitarian
        access, the government declared in mid-February of 2004 that nine
        locations would be open to relief workers.28 While the chokehold on
        humanitarian aid was somewhat loosened, the Sudan government
        continued to erect immense bureaucratic and security hurdles for
        relief workers. Such policies forced the International Red Cross to
        withdraw from the country in March of 2004. In an unusually
        pointed public statement to the government of Sudan, the president
        of the International Committee for the Red Cross (ICRC) said, “The
        ICRC, under present constraints, is not in a position to carry out a
        meaningful humanitarian operation [in Darfur].”29 More recently,
        Human Rights Watch documented the continued arbitrary arrests of
        aid workers in April of 200530 and a “growing bureaucratic war on
        the vast humanitarian relief effort” in May of 2005.31

        Thus, rather than being a byproduct of chaos caused by conflict on
        the ground, obstruction of humanitarian aid is an intentional
        instrument of genocide used by the GOS. With approximately 3
        million Darfurians in need of food aid each of the past several
25   Ibid.
26   Epstein, Norman. “World ignores genocide in Sudan.” Canadian Jewish News. Vol. 35
       No. 11 p. 9. Published: Mar. 10, 2005.
       <http://www.cjnews.com/viewarticle.asp?id=5750>
27   Confidential communication to Human Rights Watch.
28   “Sudan ‘opens up aid routes.’ ” British Broadcasting Corporation. February 13, 2003.
29   “ICRC president ends visit.” International Committee of the Red Cross, Geneva.
       Published: March 6, 2004.
30   “Darfur: Aid workers under threat.” Human Rights Watch. Published: April 5, 2005.
      <http://hrw.org/english/docs/2005/04/05/darfur10417.htm>
31   “Darfur: Help African Union boost troops now.” Human Rights Watch. Published:
       June 25, 2005. <http://hrw.org/english/docs/2005/05/25/darfur11013.htm>


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        months32, the blockade of humanitarian aid may be the most
        effective tool of ethnic cleansing Khartoum has employed to date.

Classification as Genocide

        While it is undeniable that appalling acts of violence have been
        committed against the people of Darfur, there is some debate over
        whether or not the Sudanese government is actively pursuing a
        policy of genocide. It is the position of the petitioners that the
        government of Sudan is in fact engaged in such a policy. We have
        reached this conclusion based on the facts of the situation and,
        more importantly, based on the position of the United States
        government, several state legislatures, numerous, well-respected
        and unbiased humanitarian organizations, and the positions of two
        prominent American universities that have decided to divest from
        Sudan.

        Definition of Genocide and Facts of the Darfur Situation. The
        operative definition of genocide is given in the U.N Convention on
        the Prevention and Punishment of Genocide as “any act committed
        with the idea of destroying in whole or in part a national, ethnic,
        racial or religious group. This includes such acts as: killing
        members of the group, causing serious bodily or mental harm to
        members of the group, deliberately inflicting conditions calculated to
        physically destroy the group (the whole group or even part of the
        group), and forcefully transferring children of the group to another
        group.” 33

        Consistent with this official definition of genocide, Amnesty
        International reports that Khartoum’s attacks against black
        Darfurians have been systematic, targeted, particularly horrific, and
        carry a clear racial intent.34

        Genocide Declarations. On July 23, 2004, the U.S. Senate and
        House of Representatives unanimously adopted a joint resolution
        declaring the atrocities in Darfur to be genocide. 35,36 The decision to
        declare the massacre a genocide while the conflict was ongoing

32   World Food Program Budget Revision June 2005
      <http://www.wfp.org/operations/current_operations/BR/103391_0506.pdf>
33   Genocide. United Nations Cyberschoolbus. 2002.
      <http://www.un.org/cyberschoolbus/treaties/genocide.asp>
34   Rape as a Weapon of War by Amnesty International as cited in “Testimonies of rape
      in Sudan.” BBC News World Edition. Published: July 19th, 2004.
      <http://news.bbc.co.uk/2/hi/africa/3900777.stm>
35   United States. Cong. House. 108th Congress, 2nd.session. H. Con. Res. 467
36   United States. Cong. Senate. 108th Congress, 2nd.session. S. Con. Res. 124


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        represented an historic first; since the adoption of the UN
        Convention on the Perpetration and Punishment of Genocide, no
        previous genocide (including Cambodia, Bosnia, and Rwanda) had
        been declared such until after the carnage abated and intervening
        action was impossible. In September of 2004, based on interviews
        with approximately 1,300 Darfurian refugees in Chad, the U.S.
        Department of State concluded that genocide had occurred in
        Darfur.37 On September 9, 2004, both President Bush and then-
        Secretary of State Colin Powell explicitly stated that the atrocities in
        Darfur amounted to genocide.38 Shortly after the official federal
        government declaration of genocide, state lawmakers in New Jersey,
        Illinois, and Oregon, in ratifying divestment legislation in their
        respective states, concurred that the butchery in Darfur amounted
        to genocide.

        On July 23, 2004, Physicians for Human Rights (PHR), an
        international humanitarian organization, released a report that uses
        the UN definition to classify the situation in Darfur as a genocide:

          “In the case of Darfur, PHR has concluded that there is ample indication
          that an organized campaign on the part of the Government of Sudan
          (GoS) is underway, targeting several million non-Arab Darfurian
          inhabitants for removal from this region of the country, either by death
          (most commonly through immediate violence or slow starvation) or forced
          migration. GoS forces, allied with the Janjaweed militia, have caused
          intense disruption and destruction of non-Arab Darfurian land holdings,
          communities, families, and all means of livelihood and necessities. By
          destroying, stealing, or preventing access to food, water, and medicine,
          the GoS and Janjaweed are creating conditions destined to destroy the
          non-Arab Darfurians.”39

        In contrast to the declarations made by the US government, several
        state governments, and a multitude of humanitarian organizations,
        the United Nations Commission of Inquiry on Darfur found that,
        rather than perpetrating genocide, the Sudanese government has
        committed crimes against humanity and war crimes while waging an
        anti-insurgency war against Darfurian rebels. The Commission
        contends however, that “international offences such as the crimes
        against humanity and war crimes that have been committed in


37   Documenting the Atrocities in Darfur. U.S. Department of State. State Publication
       11182; Sept. 2004. <http://www.state.gov/g/drl/rls/36028.htm>
38   Powell, Colin. “The Crisis in Darfur.” Testimony before the Senate Foreign Relations
       Committee. Testified: September 9th, 2004.
       <http://www.state.gov/secretary/former/powell/remarks/36042.htm>
39   “PHR Calls for Intervention to Save Lives in Sudan: Field Team Compiles Indicators of
       Genocide.” Physicians for Human Rights. Published: June 23, 2004.
       <http://www.phrusa.org/research/sudan/pdf/sudan_genocide_report.pdf>


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        Darfur may be no less serious and heinous than genocide.”40

        The petitioners disagree with the UN Commission on its
        classification of the situation, especially given the GOS’s role in
        targeting a specific racial group, regardless of their relationship to
        Darfurian rebel armies, through an all-encompassing and
        systematic campaign of murder, rape, destruction of
        food/water/shelter, and denial of humanitarian assistance.
        Regardless, however, of the UN’s final definition of the atrocities, the
        Commission clearly states that the Sudanese government has an
        active role in crimes against the people of Darfur and should be held
        directly responsible for its actions. Those actions have contributed to
        making Darfur the worst humanitarian crisis occurring in the world
        today, as the UN has elsewhere noted.41

        Finally, the petitioners’ assertion that the GOS is perpetrating
        genocide in Darfur is supported by the declaration of genocide
        agreed upon by two leading American universities, Harvard and
        Stanford. Both universities cited ongoing genocide as motivation for
        divesting university assets from certain companies operating in
        Sudan.




40   Report of the International Commission of Inquiry on Darfur to the United Nations
      Secretary-General. Published: January 25, 2005.
      <http://www.ohchr.org/english/docs/darfurreport.doc>
41   “Q&A: Sudan’s Darfur Conflict.” British Broadcasting Corporation (BBC) Online.
      Published: May 26, 2005.<http://news.bbc.co.uk/1/hi/world/africa/3496731.stm>


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III. GENOCIDE IS STILL OCCURING
Change in Strategy by Khartoum Still Represents Genocide

        Despite the reduction in Darfur press coverage in recent months, the
        genocide has not stopped; while the media finds itself with less
        headline grabbing violence and death to report, Khartoum has
        merely changed its methods as more and more black Darfurians are
        displaced or killed.

        Indeed, the UN Secretary General’s July 18th, 2005 report found that
        “so many villages have been destroyed since … [2003] that there are
        now fewer locations for militias to strike.”42       Having razed the
        majority of Darfur’s villages, Khartoum is laying the groundwork to
        kill by attrition and starvation, specifically targeting the displaced.
        “Violence by both the Janjaweed and Khartoum’s regular military
        forces has not been halted; and Janjaweed predations and threats of
        violence continue to terrify internally displaced persons and make
        impossible the resumption of agricultural production throughout
        most of Darfur.”43 The destruction of villages and ongoing violence
        against the displaced leaves over 3 million hungry Darfurians (over
        50% of the Darfur population) reliant on international aid to avoid
        starvation.44,45,46 Concurrently, however, the GOS has led a
        relentless campaign to limit humanitarian aid to internally displaced
        persons, principally by physical and bureaucratic impediment of aid

42   Annan, Kofi. Monthly report of the Secretary-General on Darfur. Presented: July 18,
      2005. <http://www.reliefweb.int/library/documents/2005/unsc-sdn-18jul.pdf>
43   Reeves, Eric. “Sudan's ‘Government of National Unity.’ ” Published: July 14, 2005.
      <http://www.sudanreeves.org/modules.php?op=modload&name=News&file=article
      &sid=60&mode=thread&order=0&thold=0>
44   Johnson, Pat. “Shoah lesson from Sudan.” The Jewish Independent. Published:
      February 4, 2005.
      <http://www.jewishbulletin.ca/archives/Feb05/archives05Feb04-01.html>
45   Darfur Humanitarian Profile #16. United Nations Sudan Information Gateway.
      Published: July 1st, 2005.
      <http://www.unsudanig.org/emergencies/darfur/profile/data/2005/july/july-dhp
      tables.pdf>
46   World Food Program Budget Revision June 2005
      <http://www.wfp.org/operations/current_operations/BR/103391_0506.pdf>


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     workers (up to and including violence against humanitarian staff).47
     Tragically, denial of humanitarian aid may end up being Khartoum’s
     most effective genocidal tool, resulting in more deaths than direct
     attacks on Darfurians.

     Ongoing Violence and Intimidation. The government of Sudan
     has made repeated promises to end violence in Darfur to UN
     Secretary General Kofi Annan, former US Secretary of State Colin
     Powell, and US Deputy Secretary of State Robert Zoellick, among
     others. Yet, as observed by Senegalese Foreign Minister Cheikh
     Tidiane Gadio, whose country’s military is part of the current African
     Union peacekeeping force in Darfur, "the militias are still very active,
     killing people, burning villages, raping women."48 Instead of reigning
     in the Janjaweed militias that attack, rape, and kill civilians,
     Khartoum continues paying salaries to their leaders and supporting
     their activities.49 50

     Just three days before the publication of this proposal, the
     Washington Post published an account of the continuing state-
     sponsored violence:

       "... [A] recent series of attacks has shown how quickly violence can flare up
       again. In the last days of September, a Janjaweed death squad crossed into
       neighboring Chad and killed 36 civilians, and another squad supported by
       government helicopters attacked a camp for displaced civilians in Darfur, killing
       34. These and other attacks drove thousands from their homes and brought
       relief efforts to a standstill. The United Nations' disaster chief, Jan Egeland,
       warned that, unless security improved, the Western humanitarian effort "could
       all end tomorrow." Yesterday, the first killings of African Union peacekeepers in
       Darfur underscored his point."51




47 Reeves, Eric. “Khartoum's Continuing Assault on Humanitarian Aid Workers.”
     Published: June 1, 2005.
     <http://www.sudanreeves.org/modules.php?op=modload&name=News&file=
     article&sid=54&mode=thread&order=0&thold=0>
48 Brinkley, Joel. “Sudan Still Paying Militias Harassing Darfur, U.S. Says.” New York

     Times. Published: July 21, 2005
     <http://www.nytimes.com/2005/07/21/international/africa/21sudan.html?pagew
     anted=print>
49 Ibid.
50 Prendergast, John and Thomas-Jensen, Colin. “Off Camera, Darfur Deteriorates.”

     Boston Globe. Published: August 30, 3005.
     <http://www.boston.com/news/globe/editorial_opinion/oped/articles/2005/08/30
     /off_camera_darfur_deteriorates/>
51 "Negotiating With Genocide." Washington Post. Published: October 9, 2005.

<http://www.washingtonpost.com/wp-
dyn/content/article/2005/10/08/AR2005100801029.html?referrer=emailarticle>



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     Such actions put Khartoum in direct violation of UN Security
     Council Resolution 1556 (July 30, 2004) which requires Khartoum
     to disarm the Janjaweed and bring their leaders to justice.

     Assault on Humanitarian Aid. As Human Rights Watch and New
     York Times columnist Nicholas Kristof have both noted, the
     Sudanese government continues to erect enormous bureaucratic
     barriers between humanitarian aid agencies and affected
     Darfurians. For example, the Sudanese government has blocked
     Darfurians arriving at humanitarian camps from getting registered,
     thereby preventing these refugees from obtaining food and basic
     shelter.52 On the other side of the bureaucratic barrier, the
     Sudanese government has erected a mountain of required
     paperwork for international aid groups and international reporters,
     often delaying or denying the granting of visas.53,54

     Outside of bureaucratic barriers, the GOS also continues to attack
     and kill refugees within displacement camps55,56 and harass aid
     workers, members of human rights organizations, and even UN
     officials through arbitrary arrests. In late May, 2005, the top two
     officials working in Darfur for the Nobel Peace Prize-winning
     humanitarian organization Doctors Without Borders/Medecins San
     Frontieres (MSF) were arrested, purportedly for producing a “false”
     report57 regarding rapes in the region.58 Dozens more aid workers,
     including the translator for UN Secretary-General Kofi Annan, have
     been arbitrarily arrested, detained, or threatened with arrest.59

52 Kristof, Nicolas. “Day 141 of Bush’s Silence.” The New York Times. Published: May
     31, 2005. p. A25.
53 “Darfur: Help African Union boost troops now.” Human Rights Watch. Published:

    June 25, 2005. <http://hrw.org/english/docs/2005/05/25/darfur11013.htm>
54 Prendergast, John and Thomas-Jensen, Colin. “Off Camera, Darfur Deteriorates.”

    Boston Globe. Published: August 30, 3005.
    <http://www.boston.com/news/globe/editorial_opinion/oped/articles/2005/08/30
    /off_camera_darfur_deteriorates/>
55 “Attack on Darfur camp leaves 29 dead.” ABC News. Published: September 29, 2005.

    <http://abcnews.go.com/International/wireStory?id=1170399>
56 “Chad closes Consulate in Darfur over Sudanese militia attack.” AngolaPress.

    Published: October 4, 2005. < http://www.angolapress-angop.ao/noticia-
    e.asp?ID=380197>
57 The Crushing Burden of Rape: Sexual violence in Darfur. Doctors Without Borders

    Report. Published: March 8, 2005.
    <http://www.doctorswithoutborders.org/publications/reports/2005/sudan03.pdf>
58 Reeves, Eric. “Khartoum's Continuing Assault on Humanitarian Aid Workers.”

    Published: June 1, 2005.
    <http://www.sudanreeves.org/modules.php?op=modload&name=News&file=
    article&sid=54&mode=thread&order=0&thold=0>
59 “Darfur: Arrest War Criminals, Not Aid Workers.” Human Rights Watch. Published:

    May 31, 2005.


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        A spate of recent violence against aid workers, including brazen
        beatings and humiliating strip-downs, threatens the physical
        security of those persons Darfurians most need for survival.
        Admittedly, the most recent violence against aid workers can not be
        directly traced to government action, but if the attacks were not
        government sponsored, the GOS has done little to prevent the
        attacks or ensure secure conditions for humanitarian relief
        workers.60,61,62 Edward Rackley, consultant to several aid groups
        currently in Darfur, summed up the current status of humanitarian
        organizations in Darfur:

          “Without a doubt, [Darfur] is the most difficult working environment
          among the world’s large-scale relief operations… [For example], unlike
          Rwanda, Congo, or northern Uganda, no [official] cumulative mortality
          figure exists for Darfur - again due to government obstruction. The UN
          agency charged with conducting mortality surveys has had members of
          its staff detained, physically intimidated, and expelled from the country
          by Khartoum officials.”63

        Continued state sponsored violence and insecurity in the Darfur
        region combined with the systematic nature of Khartoum’s
        interference with relief efforts demonstrate a shift in strategy rather
        than intention. The GOS is laying the groundwork to kill by attrition
        rather than ending the genocide.

Other Developments

        Over the past few months, some positive developments have
        emerged from Sudan including the signing of the North-South
        Comprehensive Peace Agreement, the drafting of an Interim
        Constitution, and the creation of a National Unity government.
        Such developments are a boon to the people of southern Sudan who
        have suffered through a long civil war with the Khartoum
        government, but they provide little direct benefit to desperate and
        displaced Darfurians.

      <http://hrw.org/english/docs/2005/05/31/sudan11043.htm>
60   Khan, Amil. “Armed men in Darfur attack aid convey, beat staff.” Reuters AlertNet.
      Published: September 3, 2005.
      <http://www.alertnet.org/thenews/newsdesk/L03376598.htm>
61   Lovell, Jeremy. “UNICEF: Bandits hit vital aid convoys in Darfur.” Sudan Tribune.
      Published: August 31, 2005.
      <http://www.sudantribune.com/article.php3?id_article=11403>
62   “US condemns violence in Sudan’s Darfur region.” China View. Published: October 6,
      2005. <http://news.xinhuanet.com/english/2005-10/05/content_3583383.htm>
63   Rackley, Edward. “Darfur- A big test for the whole world.” Sudan Tribune. Published:
      August 26, 2005. <http://www.sudantribune.com/article.php3?id_article=11286>


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        The small, positive developments in Sudan must not be used as an
        excuse for inaction. These developments, especially in southern
        Sudan, show that international pressure and scrutiny can effect
        positive change in Khartoum’s behavior. Unfortunately, international
        pressure has been insufficient to significantly alter GOS genocidal
        activity in Darfur, where the situation remains dire.

        The Comprehensive Peace Agreement. The signing of the
        Comprehensive Peace Agreement (CPA) in January of 2005 between
        North and South Sudan and the subsequent creation of a National
        Unity government does little to resolve the crisis in Darfur. The
        National Islamic Front, which has governed from Khartoum
        throughout the genocide in Darfur, maintains control of 52% of the
        national assembly and ministerial posts, the presidency, and
        Sudan’s security forces, giving southern Sudanese officials little
        political power to change the GOS’s policies in Darfur.64 Further,
        southern Sudanese officials serving in the National Unity
        government will likely focus their political resources and influence
        on reconstructing war-torn southern Sudan and preparing for an
        influx of an additional 1 million returnees over the next 12
        months.65

        The Interim Constitution and the International Criminal Court.
        The new Interim Constitution ratified on July 6th, 2005, represents a
        small victory for human rights in Sudan, providing additional rights
        for women and children.66 Unfortunately, the constitution does little
        to prevent continued abuses in the Darfur region. According to
        Amnesty International, the Interim Constitution “provides sweeping
        immunity for the highest levels of the Sudanese government and
        demonstrates that the government is not serious about combating
        impunity.”67 Under Articles 60 and 92 of the Interim Constitution,
        the President, First Vice President, and members of the National
        Legislature would be immune from prosecution for continuing a
        policy in Darfur of using militias and national military forces to
        destroy villages and to displace or murder former residents. Such


64   Reeves, Eric. “Khartoum's Continuing Assault on Humanitarian Aid Workers.”
       Published: June 1, 2005.
       <http://www.sudanreeves.org/modules.php?op=modload&name=News&file=
       article&sid=54&mode=thread&order=0&thold=0>
65   Ibid.
66   “Sudan: New constitution provides sweeping immunity for high level officials.”
       Amnesty International. Published: July 6, 2005.
       <http://web.amnesty.org/library/Index/ENGAFR540662005>
67   Ibid.


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        immunity removes a critical disincentive for perpetrating genocide
        and leaves the Darfur region at unremitting risk.

        The government of Sudan is also attempting to shield those
        responsible for war crimes in Darfur from international
        persecution.68 According to Sudanese Justice Minister Ali
        Mohammed Yassin, a special court established in Sudan will be
        used as an alternative to the International Criminal Court, which
        officially began its investigations of 51 war crimes suspects in June
        of 2005.69 Human rights organizations such as Amnesty
        International say these Sudanese courts “lack credibility” to try
        individuals for crimes the government has condoned for the past 2
        years and which the government has failed to outlaw in the new
        interim constitution.70

The Need for Action

        Despite recent developments, it is clear the Sudanese government
        remains actively involved in perpetuating genocide against black
        Darfurians. International humanitarian and diplomatic efforts have
        thus far been unable to end the genocide and protect Darfurian
        civilians, who continue to suffer. Where the international community
        has been inadequate, the University of California is in a position to
        oppose genocide through divestment.




68   “UN Envoy warns of more Darfur violence.” The Guardian. Published: September 27,
       2005. <http://www.guardian.co.uk/worldlatest/story/0,1280,-5304904,00.html>
69   “Sudan Sets Up War Crimes Tribunal: Sudan has set up a special court to try those
       accused of war crimes in the Darfur region.” BBC News. Published: June 14, 2005.
       <http://news.bbc.co.uk/2/hi/africa/4091146.stm>
70   Ibid.


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IV. THE UC AND SOCIAL RESPONSIBILITY
     It has been established that the Sudanese government is responsible
     for the ongoing genocide in Darfur. The UC’s history of socially
     responsible investing makes clear that the University should be
     willing to use its investments to respond. Specifically, the UC
     decided to divest from South Africa in 1986 and, in 2001, decided
     not to invest in Tobacco companies. It made these decisions, in part,
     because the issues in question – brutal racial discrimination and the
     public health detriment of tobacco – were in direct conflict with the
     values of the university and mandated action. Surely the same can
     be said about Sudan.

     The UC has made other commitments to socially responsible
     investing as well. The Treasurer explicitly reserves the right to
     consider social issues in proxy voting. Specifically, in its power and
     capacity as a shareholder, the UC may engage in case-by-case
     analysis of social issues related to securities it owns.71 The UC Office
     of the Treasurer cites tobacco, animal testing, and military contracts
     as examples of social issues worthy of consideration. 72

     This section will outline the South Africa and Tobacco decisions and
     show why they set a precedent for divestment from Sudan.

Fighting Apartheid.

     The resolution to divest from South Africa specifically cited moral
     and political concerns as key motives for divestment:




71 Office of the Treasurer, “University of California General Endowment Policy
Investment Policy Statement,” p. 26, Appendix 5: Office of the Treasurer Guidelines for
Proxy Voting, February 8, 2005.
<http:www/ucop.edu/treasurer/invpol/GEP%20policy.pdf.> ; Office of the Treasure,
“University of California Retirement Plan Investment Policy Statement,” p.27, November
3, 2004. <http://www.ucop.edu/treasurer/invpol/UCRP%20policy.pdf.>
72 Ibid.




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         “WHEREAS the policy and practice of apartheid is repugnant to the moral and
         political values of the people of California and of the democratic and free
         societies everywhere.”73

        This citation sets a clear precedent for taking moral and political
        concerns into account in financial decisions. Surely the policy and
        practice of genocide by the Sudanese government is equally
        repugnant and mandates similar action.

        The Regents also exhibited a belief that divestment would affect
        apartheid policies.74 The resolution cited, as a reason to divest, that
        the Regent’s more minor divestment from South Africa in 1985 had
        not affected apartheid, implying that the Regents hoped full
        divestiture would indeed alter the situation on the ground. As we
        will argue in the next section, divestment from Sudan also has
        strong potential to change the policies of the Sudanese government.

Tobacco

        The Regents continued a pattern of accepting compelling political
        and moral concerns as grounds for investment decisions when they
        voted in 2001 to exclude all tobacco securities from University of
        California investments. In their decision, the Regents cited concerns
        about public health along with financial considerations.75

        While the decision to avoid investing in tobacco companies might
        have appeared to be a primarily financial decision (due to impending
        litigation and decreased tobacco consumption), the dynamics of the
        investment situation would have made it difficult to justify the
        decision solely on financial grounds. All proposed tobacco
        investments under consideration in 2001 were indirect, via index
        funds. Given that index funds are administered by outside fund
        managers to maximize University returns, had tobacco holdings
        been poor investments, they would have merely been dropped when
        appropriate without a specific resolution. Thus, the Regents again
        showed a willingness to look beyond financial considerations in their
        investment decisions.

The Question of Precedent

        Clearly, historical precedent has demonstrated UC’s willingness to
        consider socially-conscious investing under certain circumstances.

73   Board of Regents Meeting, Minutes (June 18, 1986), 46.
74   Ibid.
75   Board of Regents Meeting, Minutes (January 18, 2001) 11-12.


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   However, the UC currently faces a multitude of calls for divestment
   from a variety of offending targets, and we fully recognize that
   heeding every call is impractical, imprudent, and often downright
   controversial. We argue that the overwhelmingly and
   uncontroversially heinous nature of our concern, combined with
   validation of our concern by official, non-biased, and highly
   trustworthy sources, makes our call for divestment truly singular
   among divestment campaigns recently presented to the Board of
   Regents.




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V. INFLUENCING THE OUTCOME IN DARFUR
        In this section, we argue that divestment from Sudan is likely to
        create significant economic pressure on the GOS and that, based on
        historical precedent, such economic pressure is likely to induce a
        change in Khartoum’s policies. We further argue that carefully
        tailored divestment would have a maximal impact on the Sudanese
        regime while imposing minimal hardship on innocent Sudanese
        civilians.

Economic Pressure Can Induce Change in Khartoum’s Behavior

        Susceptibility of Khartoum to Economic Pressure. T h e
        government of Sudan is an authoritarian regime formed by an
        alliance between the military and the National Congress Party
        (NCP).76 As an integral part of Sudan’s governing alliance, the
        Sudanese military has resorted to strong-armed tactics, including
        force and intimidation, to help maintain control over a diverse
        population.77 At the same time (as will be shown below), the military
        is heavily dependent on direct foreign investment for its financial
        well-being. Thus, withdrawal of foreign direct investment threatens
        the stability of the Sudanese military which, in turn, threatens the
        government’s principal mechanism of power and control over its
        citizens.

        Because of this close relationship between foreign direct investment,
        military stability, and political control over its populace, the
        government of Sudan has demonstrated a willingness to change its
        policies in response to external economic pressure. Following the
        1989 military coup that brought current president, Omar Hassan al-
        Bashir, to power, Sudan became a haven for terrorists, harboring
        Iranian Revolutionary Guards and Islamist guerrillas, members of
        the Palestinian Liberation Organization splinter faction Abu Nidal,

76   “Sudan” CIA World Factbook. CIA. Updated August 30, 2005
      <http://www.cia.gov/cia/publications/factbook/geos/su.html>
77   Freedom House. “Country Reports: Sudan” Freedom in the World 2005.
       <http://www.freedomhouse.org/research/freeworld/2005/sudan05.pdf> For
      example, the Freedom in the World 2005 report notes that in Sudan “arbitrary
      arrest, detention, and torture are widespread, and security forces act with
      impunity.” Such undemocratic methods allow the Khartoum regime to suppress
      opposition and maintain control by force.


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        Carlos the Jackal, Osama bin-Ladin, and other members of the Al
        Qaeda terrorist network.78

        In response, the Clinton administration listed Sudan as a state
        sponsor of terrorism in 1993, citing the country's “disturbing
        relationship with a wide range of Islamic extremists,” which included
        providing “paramilitary training, indoctrination, money, travel
        documentation, safe passage, and refuge.”79 The Clinton
        Administration imposed additional economic sanctions against
        Khartoum in 1997, after “finding that the policies and actions of the
        Government of Sudan, including continued support for international
        terrorism … constituted an unusual and extraordinary threat to the
        national security and foreign policy of the United States.”80

        Since the late 1990’s, the Government of Sudan has dramatically
        altered its policy of harboring and supporting terrorists in response
        to US economic sanctions and political pressure. Sudan has
        detained Al Qaeda suspects, turned over evidence recovered in raids
        on suspected terrorists’ homes, expelled extremists, and interdicted
        foreign militants moving through Sudan.81

        According to the Los Angeles Times, “Khartoum wants to be removed
        from the list of state sponsors of terrorism. It is also pressing
        Washington to lift long-standing economic sanctions barring most
        trade between the two countries.”82 Khartoum’s policy changes on
        terrorism demonstrate an attempt to achieve these aims. John
        Prendergast, who served at the National Security Council during
        Clinton’s second term, doubts the sincerity of Sudan’s commitment
        to combating terrorism but agrees that “their promises of
        cooperation were … designed to get sanctions removed.” 83


78   Silverstein, Ken. “Official Pariah Sudan Valuable to America's War on Terrorism.” Los
       Angeles Times. Published: April 29, 2005. p. A1.
79   Ibid.
80   What You Need To Know About U.S. Sanctions. An overview of the Sudanese Sanctions
       Regulations – Title 31 Part 538 of the U.S. Code of Federal Regulations. US
       Department of the Treasury: Office of Foreign Asset Control, Washington, D.C.
       Published: July 26, 2001.
       <www.treas.gov/offices/enforcement/ofac/sanctions/t11sudan.pdf>
       Additional grounds for this executive order included Sudan’s ongoing efforts to
       destabilize neighboring governments and the prevalence of human rights violations,
       including slavery and the denial of religious freedom. This document is attached in
       Appendix A.
81   Silverstein, Ken. “Official Pariah Sudan Valuable to America's War on Terrorism.” Los
       Angeles Times. Published: April 29, 2005. p. A1.
82   Ibid.
83   Ibid.


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        While the al-Bashir regime has demonstrated a history of
        transformed behavior in the face of decreased US investment, the
        lack of international political or economic pressure over the genocide
        in Darfur has removed an important “stick” of influence. The
        International Crisis Group, an NGO dedicated to preventing and
        resolving deadly conflict, argues, “The government clearly believes it
        can avoid penalties [from its involvement in Darfur], making for an
        easy choice between inaction and the admittedly difficult process of
        now neutralizing the militia groups [Janjaweed] it created.”84
        Divestment creates such a penalty for committing genocide. With
        US sanctions, aimed at reducing Sudanese-sponsored terrorism,
        already in full effect before the Darfur genocide started, further US-
        based economic pressure to stop the Darfur genocide can only come
        from wide-scale divestment by governmental and non-governmental
        investors.

        Current Status of Sudan’s Economy and Reliance on Foreign
        Direct Investment. Ironically, instead of experiencing detrimental
        financial consequences related to its genocidal activities, the
        Sudanese government has improved revenue stream from $1.79
        billion in 2002 to $4.39 billion in 2004, created a budget surplus,
        and averaged GDP growth of over 6.4% since 2001.85 The
        International Monetary Fund (IMF) states that GDP growth,
        predicted to rise to 8.3% in 2005, is “relatively broad based, but…
        has been more prominent in the oil, construction, utilities, and
        agriculture sectors.”86

        This growth has been led by foreign direct investment, particularly
        in the oil sector, by foreign firms unhampered by US sanctions. The
        IMF notes that “foreign direct investment (FDI) and private transfers
        rose to US$25 billion [in 2004] – more than one-third higher than in
        2003 – owing to a stable macroeconomic environment, improving
        trade integration, and the expansion of the oil sector... [Among other
        factors, FDI] allowed for a buildup of foreign exchange reserves from
        1.5 months of imports at end-2003 to 2.9 months at end-2004.”87 A
84   Darfur: The Failure to Protect. International Crisis Group. Published: March 8, 2005.
       8.<http://www.crisisgroup.org/library/documents/africa/horn_of_africa/089_darfu
       r_the_failure_to_protect.pdf>
85   IMF Country Report No. 05/180. International Monetary Fund. June 2005. p. 28.
       <http://www.imf.org/external/pubs/ft/scr/2005/cr05180.pdf> Revenue and GDP
       growth are calculated from Table 3 on page 28. Revenue was found by multiplying
       revenue (as % of GDP) times Nominal GDP (in Sudanese Dinars) and then
       converting to USD at the exchange rate listed for each year. Average GDP growth
       since 2001 calculated by averaging values listed in Table 3 for GDP growth for the
       years 2001-2004.
86   Ibid. p. 10
87   Ibid. p. 7.


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        further gauge of Sudan’s reliance on FDI comes from examining how
        FDI inflows into Sudan compare with inflows for other countries; for
        2000-2003, Sudan ranked approximately 20th out of 162 economies
        in actual FDI inflows (as a percentage of GDP)88 but near the bottom
        of world economies in its potential for FDI inflows; this indicates that
        Sudan is highly successful in attracting FDI, surpassing
        expectations based on its economic landscape and infrastructure.89

        Recent Boom in Government Revenue, Financed in Part by
        Foreign Direct Investment, is Funding the Genocide. T o
        understand how current GOS behavior is affected by a rapidly
        growing economy driven, at least in part, by foreign direct
        investment, it is instructive to look at how GOS behavior has
        historically evolved in the face of increased revenue. Since the first
        barrel of oil was pumped in 1999, oil revenue has made “the all-
        important difference in projected military spending.”90 A Human
        Rights Watch Report notes:

         “The president of Sudan announced in 2000 that Sudan was using…
         [newly garnered] oil revenue to build a domestic arms industry. The
         military spending of 90.2 billion dinars (U.S. $ 349 million) for 2001 was
         to soak up more than 60 percent of the 2001 oil revenue of 149.7 billion
         dinars (U.S. $ 580.2 million). Cash military expenditures, which did not
         include domestic security expenditures, officially rose 45 percent from
         1999 to 2001. This was reflected in the increasing government use of
         helicopter gunships and aerial bombardment in [the North-South civil
         war].”91

        At the same time that 60% or more of Sudan’s oil revenues were
        pouring into military expenditures, the GOS’s military budget
        doubled.92 This striking correlation is strengthened by a report from
        the UK-based Christian Aid Organization:

         “Since oil revenue started coming in, the government has hiked the pay
         and improved the benefits of the forces fighting for it- regular troops and
         militias alike.


88   Interactive World Map. Globalis Consortium; Accessed: September 8, 2005.
      <http://globalis.gvu.unu.edu/indicator.cfm?IndicatorID=155&country=SD#rowSD>
89   United Nations Conference on Trade and Development (UNCTAD); Accessed:
       September 8, 2005.
       <http://www.unctad.org/Templates/Page.asp?intItemID=2468&lang=1>
90   Sudan, Oil, and Human Rights. Human Rights Watch. 2003; p. 59.
       <http://www.hrw.org/reports/2003/sudan1103/sudanprint.pdf>
91   Ibid.
92   Goodman, Peter. “China and Sudan: Partners in Oil – and Warfare?” From the
       Washington Post in the Seattle Times. Published: December 27th, 2004.
       <http://seattletimes.nwsource.com/html/nationworld/2002131515_chinaoil27.ht
       ml>


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         ‘In the financial year 2000/2001, salaries of civil servants were raised by
         15% because of oil- but army salaries by 80%,’ [Taban] Deng, [a former
         Sudanese Minister of State for Roads turned defector] told Christian
         Aid…

         He added: ‘Two or three years ago, young men were reluctant to go [into]
         the army. But now people are going back to the army because of good
         services and salaries…’

         ‘In 1999, before the army had all this oil money, the army enrolled less
         than a battalion. Hardly anyone wants to fight for a jihad- holy war-
         which cannot be measured in terms of household benefit.’ ”93

        Given the convincing historical evidence that FDI-supported GOS
        revenues are disproportionately diverted to military expenditures,
        the petitioners argue that it is reasonable to assume an ongoing link
        between FDI and military spending. Since it is well documented that
        the Sudanese military has fully participated in and funded the
        genocide in Darfur, there is a direct link connecting FDI and
        genocide:

                          FDI → Sudanese military → genocide

        UC Divestment Would Alter Khartoum’s Behavior. Considering
        the GOS’s history of altering its behavior in the face of US economic
        sanctions and its current strong reliance on FDI, the petitioners
        argue that divestment is highly likely to alter GOS conduct in
        Darfur. With the massive number of Darfurians currently displaced,
        hungry, susceptible to disease, and heavily reliant on humanitarian
        aid organizations, altering GOS behavior (including a cessation of
        military action against civilians, a reigning in of the Janjaweed, and
        allowing full protection and access of humanitarian aid groups to
        refugees) is especially important at present time. Therefore, the
        University of California, as a large institutional investor, is in a
        position to utilize divestment as a leveraging tool to pressure the
        GOS to justly resolve the crisis in Darfur.

        How UC Divestment Translates into Political and Economic
        Pressure on the Government of Sudan. When the UC divests from
        index funds containing companies that do business with Sudan,
        demand for offending companies’ stock falls and the price of shares
        decline. Share price is further reduced by the possibility that UC
        divestment would inspire additional divestment campaigns, many of
        which are already in progress. To protect the value of shareholder
        investments, offending company executives would convey to the

93   The scorched earth: oil and war in Sudan. Christian Aid Society (UK). Published:
     March 2001. <http://www.christian-aid.org.uk/indepth/0103suda/sudanoi2.htm>


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        Sudanese government that perpetuation of genocide in Darfur is
        making the country an undesirable place to do business. As a
        result, either government behavior would change (to preserve FDI) or
        offending companies would leave Sudan, thereby withdrawing FDI.
        Withdrawal of FDI would simultaneously create an economic penalty
        for genocide and reduce Khartoum’s ability to fund the campaign.

        Talisman Energy – A Successful Divestment Campaign. The
        entire divestment process is exemplified by the 2003 decision of
        Canadian-based oil giant Talisman Energy to withdraw from
        operations in Sudan after years of criticism by divestment
        campaigns concerned with ongoing human rights abuses by
        Khartoum during the 20+ year North-South civil war.94 Prior to its
        departure from Sudan, Talisman had generated annual revenues of
        approximately US$350-500 million from its Sudanese ventures,
        approximately 8-12% of total company revenue.95,96 But in the
        leadup to Talisman’s withdrawal, company CEO Jim Buckee noted:

          “Talisman's shares have continued to be discounted based on perceived
          political risk in-country and in North America [emphasis by petitioners] to
          a degree that was unacceptable for 12% of our production. Shareholders
          have told me they were tired of continually having to monitor and analyze
          events relating to Sudan... Selling our interest in the project resolves
          uncertainty about the future of [our Sudanese] asset.”97

        Thus, a stock discount sparked by ongoing divestment as well as
        uncertainty about further condemnation and future divestment by
        North American investors was sufficient to convince Talisman to
        leave Sudan.

        Just weeks after Talisman announced that it was leaving Sudan, the
        Swedish company Lundin Petroleum sold off a significant portion of
        its Sudanese interests and, shortly thereafter, suspended all
        business operations in Sudan.98,99 On abandoning its oil interests in


94   “Talisman pulls out of Sudan.” BBC News. Published: March 10, 2003.
       <http://news.bbc.co.uk/1/hi/business/2835713.stm>
95   “Sudan, Oil, and Human Rights: The United States: Diplomacy Revived.” Human
       Rights Watch. November 2003.
       <http://www.hrw.org/reports/2003/sudan1103/28.htm>
96   Annual Report, 2000. Talisman Energy.
       <http://www.talisman-energy.com/pdfs/tlm2000ar.pdf>
97   “Talisman to Sell Sudan Assets For C1.2 billion." Talisman press release. Published:
       October 30, 2002. <http://www2.ccnmatthews.com/scripts/ccn-
       release.pl?/2002/10/30/1030131n.html?cp=tlm>
98   “Lundin Petroleum Sells Interest in Block 5A, Sudan to Petronas for USD 142.5
       million”. Lundin Petroleum Press Release. Released: April 28th, 2003.
       <http://www.lundin-petroleum.com/Documents/pr_sudan_28-04-03_e.html>


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     Sudan (valued at several hundred million dollars), Lundin President
     Ian Lundin said, “[We] will reactivate our operations only when a
     cease-fire or a peace agreement in our area has been
     implemented.”100

     By the end of 2003, a third petroleum company had left Sudan.101
     Just four months after describing its investments in Sudan as
     “attractive assets,” OMV Oil, Austria’s largest industrial group,
     announced the sale of its stake of over one hundred million dollars
     in the country.102

     The string of sales and departures by these petroleum companies
     was the result of intense lobbying and economic pressure by
     institutions and organizations across the world. Calls for divestment
     ranged the gamut from Canadian institutions such as the University
     of Toronto103, York University104, and Ontario Teachers Federation to
     international figures and governments including the United States
     Department of State and former Secretary of State Madeline
     Albright.105,106 Though not done in concert, the decisions of each
     offending company to withdraw from Sudan were not unrelated;
     rather, they were in response to an economic reality unfavorable to
     investment in Sudan.

     The results of US diplomacy supported by divestment, economic
     pressure,107 and the accompanying industrial departures from
     Sudan are striking. By the end of 2004, just over a year after the
     three aforementioned petroleum companies had ceased business
     operations in Sudan, the Khartoum government and the Southern
     rebels had agreed to the Naivasha Treaty, providing a significant,

99 Muindi, Matthias. “Oil firm’s exit: The first crack?” News from Africa. February
     2002. <http://www.newsfromafrica.org/newsfromafrica/articles/art_7900.html>
100 Ibid.
101 “Oil Firm Flees Sudan”. BBC News, UK Edition. Published: September 2, 2003.

     <http://news.bbc.co.uk/1/hi/business/3201231.stm>
102 Ibid.
103 Led by students and faculty
104 Led by students and faculty
105 “Sudan, Oil, and Human Rights: The United States: Diplomacy Revived.” Human

     Rights Watch. November 2003.
     <http://www.hrw.org/reports/2003/sudan1103/28.htm>
106 “Sudan: The Role of the International Community.” World Report, 2001; Human

     Rights Watch. 2001. <http://www.hrw.org/wr2k1/africa/sudan3.html>
107 Domestically, prohibitions on American companies operating in Sudan have been in

     place since the Clinton administration (November 4th, 1997) on the grounds that
     Sudan commits gross human rights violations and sponsors acts of terrorism. This
     prohibition was renewed by the Bush administration (October 29th, 2002) (Human
     Rights Watch <http://www.hrw.org/reports/2003/sudan1103/28.htm>; BBC News
     <http://news.bbc.co.uk/1/hi/business/2868047.stm>)


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      and potentially permanent, repose from the decades-long civil war.
      The treaty was signed in January of 2005.108 Wide-spread
      divestment in response to ongoing genocide in Darfur, including
      UC’s significant indirect holdings, has the potential for similar
      results, thereby halting the genocidal slaughter.

Changing GOS Behavior Without Harming Sudanese Civilians.

      Since the ultimate intent of Sudanese divestment is humanitarian, it
      is important to tailor divestment to have maximal impact on GOS
      behavior and minimal harm to innocent Sudanese. To this end, the
      divestment criteria specifically enumerated in Section VIII excludes
      any company engaged solely in the provision of goods and services
      intended to relieve human suffering or to promote welfare, health,
      religious and spiritual activities, and education for humanitarian
      purposes or otherwise. These goods and services specifically include
      agricultural commodities, medicine, and medical devices. Since
      agriculture remains Sudan’s most important economic sector,
      employing 80% of the workforce, exclusion of agricultural
      commodities from divestment is especially critical to minimizing
      harm to ordinary citizens.109

      Even without carefully targeted criteria that exclude companies
      engaged in welfare promotion, divestment is still likely to
      disproportionately affect the GOS since Khartoum is already stingy
      on allocating government revenue towards social needs. In contrast
      to the concordance of increased FDI into Sudan, improved oil
      revenue, and a growing military budget since 1999, there has been a
      gaping disparity between increased oil returns and spending on
      development projects:

       “…increase of [GOS] funding for the [North-South civil war, partially
       financed by rising, FDI-sponsored oil revenue from 1999-2001, was] not
       matched by an increase in funding for southern development. In August
       2000, Khartoum announced that it had allocated approximately US$3
       million for development in the south. This is the equivalent of one per
       cent of military spending. When [Taban] Deng, [the former Sudanese
       Minister of State for Roads turned defector], resigned, he accused the
       government of investing its oil wealth in the army rather than in
       development projects for southern areas affected by oil: 'When I was
       governor I never received a single penny from the oil so I could build a
       school,' he said.”110


108 Ibid.
109 CIA World Factbook: Sudan. Updated September 20th, 2005.
      <http://www.cia.gov/cia/publications/factbook/geos/su.html#Econ>
110 The scorched earth: oil and war in Sudan. Christian Aid Society (UK). Published:

   March 2001. <http://www.christian-aid.org.uk/indepth/0103suda/sudanoi2.htm>


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        While Khartoum’s revenue disproportionately funds its military,
        development programs in Sudan are largely financed by
        international assistance. For example, a donor conference hosted by
        Norway in April of 2005 generated pledges of US$1.9 billion for
        development assistance over the next three years.111 Annually, this
        pledge alone is 44% larger than Khartoum’s 2004 social spending.112
        Divestment will not limit the flow of this crucial development aid to
        the Sudanese people.

        Even with a targeted divestment campaign and despite evidence that
        GOS revenue rarely gets funneled into important social/development
        projects, there is a small chance that divestment will have some
        impact on Sudanese citizens. However, the petitioners argue that
        any negative impact from divestment would be more than offset by
        the benefits of a change in regime behavior in response to economic
        pressure.




111   IMF Country Report No. 05/180. International Monetary Fund. June 2005. p. 11.
       <http://www.imf.org/external/pubs/ft/scr/2005/cr05180.pdf>
112   Ibid. p. 26. Calculated by converting Sudanese Dinars to USD using the official
       exchange rate (end of period, SD/US$) for 2004.


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VI. SYMBOLIC VALUE OF DIVESTMENT
        A growing number of institutions across the country have divested
        or are contemplating divestment from select companies operating in
        Sudan. Harvard University was the first, ordering the Harvard
        Management Corporation to divest itself from nearly $4 million of
        stock held in PetroChina Company Limited.113 Stanford University
        recently decided to divest all direct holdings in four companies:
        PetroChina, ABB Ltd., Sinopec, and Tatneft. On the state level, the
        legislatures of Illinois, New Jersey, and Oregon have all passed
        legislation mandating the divestment of state funds.114 To give an
        idea of scale, Illinois will divest from nearly $1 billion of stock in 32
        offending companies.115 Other bills and resolutions calling for
        divestment are under consideration among numerous state
        legislatures, and divestment campaigns exist on many university
        campuses across the nation.116

UC Divestment Adds Momentum to Nationwide Movement

        By joining institutions that have already divested, UC divestment
        would encourage other states and institutions to follow suit, adding
        crucial support to a growing nationwide consensus that action must
        be taken to end the genocide in Darfur. Furthermore, a divestment
        resolution by UC would demonstrate that declaration of genocide by
        credible sources meets the moral benchmark for triggering socially
        conscious investment by the University and that the UC is willing to
        take actions, within its ability, to end the genocide.

113   Bhatnagar, Manav K. Collins, Benjamin B. “Human Rights: An Investment.” The
       Harvard Crimson. Feb. 24, 2005.
       <http://www.thecrimson.com/article.aspx?ref=505952>
114   Sudan Divestment Campaigns Nationwide. <http://www.sudandivestment.com/>
115   "Collins and Jones Initiative Suspending State Investment In Sudan Goes To
       Governor.” Illinois State Senator: Jaquline Y. Collins. Represenative: Lou Jones.
       Press Release. May 18, 2005.
       <http://www.joemadison.com/divestsudancampaign/divestpr.htm>
116   There is pending divestment legislation related to Sudan in Louisiana, Maryland,
       Massachusetts, New York, North Carolina, Ohio, Indiana, Texas, and Vermont.
       Legislation has being drafted but not yet introduced in the states of Virginia and
       Kentucky. Additionally, there are Sudan divestment campaigns in progress with all
       of the following institutions, although this is by no means a comprehensive list:
       Boston College, Boston University, Columbia, Tufts University, Swarthmore College,
       George Washington University, Smith College. University of Maryland, University of
       Alabama, MIT, University of Pennsylvania, Amherst College, University of
       Washington, Dartmouth College.


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Generating Domestic Support for Action

        When the UC divested from South Africa, Governor Deukmejian
        noted that “while the State does not make foreign policy, it was his
        hope that this resolution [to divest] would influence the foreign
        policy of the Congress and the Executive Branch.”117 The petitioners
        hold this same hope that UC divestment from Sudan would palpably
        influence federal government action. Divestment shows the US
        government that American citizens are deeply concerned about the
        situation in Darfur. Several important pieces of legislation, including
        the Darfur Peace and Accountability Act as well as funding support
        for African Union troops stationed in Darfur, are pending in
        Congress. At the same time, with the January, 2005 signing of the
        North-South peace agreement, the US is also considering removal of
        sanctions against Khartoum.118 Such governmental decisions, likely
        to be critical in influencing the course of genocide in Darfur, are not
        made in a vacuum; the voice of Americans and American
        institutions can and do influence US federal policy. After the
        Rwandan genocide, the late Senator Paul Simon said, “If every
        member of [the U.S.] House and Senate had received 100 letters
        from people back home saying we have to do something about
        Rwanda when the crisis was first developing, then I think the
        response would have been different.”119

        Divestment by major institutional investors is also likely to raise
        awareness about the situation in Darfur among citizens of the US
        and foreign countries alike.

Global Impact

        Divestment makes a strong statement to the international
        community; not only will US companies not do business with the
        government of Sudan, but American investors will not even invest in
        companies that have such business relations. To the GOS
        specifically, divestment sends a message that genocidal policies
        carry consequences. Khartoum will pay a price in government
        revenue, market attractiveness, and ability to engage in business
        with the rest of the world while continuing such policies.


117   UC Board of Regents Meeting. Minutes (July 18, 1986) 46
118   McDoom, Opheera. “Darfur Action Key to Ending U.S. Sanctions, Zoellick Says.”
       Reuters. Published: July 9th, 2005 <http://english.epochtimes.com/news/5-7-
       9/30171.html>
119   Power, Samantha. A Problem From Hell: America and the Age of Genocide. Perennial
       Books. New York. 2003. p. 377.


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VII. UC’S LEGAL AND FINANCIAL OBLIGATIONS
      The University of California owes a fiduciary duty to the donors and
      beneficiaries of its various endowment and pension funds.120 More
      specifically, California probate law mandates the standard of care in
      which these funds are to be managed. The fiduciary must manage
      endowment assets in a prudent manner, exercising “reasonable
      care, skill, and caution.121 “This requirement of caution requires the
      trustee to invest with a view both to safety of the capital and to
      securing a reasonable return.”122 Divestment of Sudan-related
      assets is well within the mandate of even the strictest interpretation
      of this so-called “prudent investor rule.” Indeed, divestment of
      Sudan-related assets arguably poses a more durable fulfillment of
      the rule than either the 1986 South Africa or 2001 tobacco
      divestments.

The Prudent Investor Rule

      The prudent investor rule requires the fiduciary to act in the interest
      of its beneficiaries.123 As long as decisions are consistent with
      beneficiary interest, incidental benefits flowing to third parties are

120 “Principles of Endowment Administration.” University California Office of the
     President. Viewed on: September 10, 2005.
     <http://ucop.edu/uer/instadv/fundraising/principles.pdf> The term “funds”
     collectively refers to the General Endowment Pool, the Equity Fund, and the
     University of California Retirement Plan.
121 CAL. PROB. CODE §§ 16047(a)-(b) (Deering 2005) reads as follows:

(a) A trustee shall invest and manage trust assets as a prudent investor would, by
considering the purposes, terms, distribution requirements, and other circumstances of
the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill,
and caution.
(b) A trustee’s investment and management decisions respecting individual assets and
courses of action must be evaluated not in isolation, but in the context of the trust
portfolio as a whole and as a part of an overall investment strategy having risk and
return objectives reasonably suited to the trust.”
122 CAL. PROB. CODE § 16047 cmt. of Law Revision Commission (1995) (adopting

RESTATEMENT (THIRD) OF TRUSTS § 227 (1992)).
123 RESTATEMENT (THIRD) OF TRUSTS § 227 cmt. c. General requirements of loyalty and

impartiality. (1992).


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        permissible.124 More simply stated, “[I]f economically equivalent
        alternatives exist, … the duty of loyalty does not require the trustee
        to be indifferent to social concerns [and the fiduciary’s] duty of
        prudence is satisfied.”125 Donald Reidhaar, General Counsel for the
        University of California, has acknowledged a role for socially
        responsible investing in asset management, “[C]onsideration of
        corporate social responsibility is to supplement rather than supplant
        the basic standards of maximizing return and preserving
        principal.”126

        Fulfilling the Prudent Investor Rule: Economically Equivalent
        Alternatives. From the above discussion, the principal concerns in
        a divestment decision are whether there are economically equivalent
        alternatives to the divested securities and whether there are adverse
        costs to divesting. Various governmental pressures (e.g. US
        sanctions) and market pressures (e.g. Talisman withdrawal) have
        prevented/dissuaded many businesses from investing in Sudan and
        driven many of those already invested out of the country. The small
        pool of companies remaining in Sudan are similar in nature and size
        to companies outside of Sudan. With no single industry uniquely
        situated only in Sudan, divestment would replace a limited number
        of individual securities from a variety of industry sectors in Sudan
        with financial, non-Sudanese equivalents. For example, while there
        are several oil and gas companies in Sudan, the global oil and gas
        sector is rich with alternate investing options in terms of risk
        exposure and market capitalization. Exclusion of Sudanese-
        operating PetroChina from the U.C. portfolio, for instance, would not
        preclude investment exposure to large-capitalization, global oil and
        gas operations. The Sudanese-operating French telecommunications
        company, Alcatel, could be replaced by a similarly situated, large-
        capitalization global telecommunications corporation based in
        Europe.

        Not only does Sudanese divestment avoid exclusion of an entire
        industry sector from the portfolio (unlike the 2001 tobacco
        divestment decision), but it also avoids cutting into US-based
        security holdings that constitute the core of UC’s Endowment. This
        is because US-based companies are prohibited from operating in
        Sudan due to US trade sanctions and are therefore ineligible for
        divestment. Whereas U.S. equities (excluding tobacco companies)
124   Thomas A. Troyer et al., Divestment of South Africa Investments: The Legal
       Implications for Foundations, Other Charitiable Institutions, and Pension Funds, 74
       GEO. L.J. 127, 157 (1985).
125   Id. at 149.
126   Donald L. Reidhaar, Memorandum, The Legal Implications of University Investments
       in Companies Doing Business in South Africa, 7 J.C. & U.L. 164, 171 (1980-81).


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        account for 55% of the UC General Endowment Pool’s portfolio
        allocation,127 non-US equities constitute a mere 10% of total
        allocation.128 Similarly, the University of California Retirement Plan
        maintains a target allocation of only 7% in non-U.S. equities.129

        When UC decided to divest from South Africa in 1985/1986, the
        securities at issue were those of leading U.S. corporations. In 1984,
        152 of the 500 companies comprising the S&P 500 either had
        employees in or business ties to South Africa.130 Among them were
        General Electric (with a market capitalization of $33 billion at the
        time of its withdrawal from South Africa), IBM ($73 billion), Exxon
        ($51 billion), Mobil ($26 billion), and General Motors ($21 billion).131
        Therefore, the decision to divest securities with business ties to
        South Africa entailed abandoning some of the largest constituents of
        the UC portfolio’s largest asset class (U.S. equities). Elimination of
        such large, blue-chip companies from UC’s portfolio necessarily
        increased security risk and decreased portfolio diversification since
        each excluded company had to be replaced by either smaller,
        industry-similar companies or by equally large, industry-dissimilar
        firms.132 Portfolio risk also increased since excluded firms
        represented a significant weight in US equity benchmarks.

        By contrast, UC divestment from Sudan would have minimal impact
        on UC’s portfolio diversity or risk. As described above, investment
        alternatives to Sudanese companies clearly exist; no single
        investment type (in terms of industry sector, market capitalization,
        or country origin of parent company) would be systematically
        excluded. Additionally, since the US government already forbids US
        businesses from operating in Sudan,133 divestment would not affect
        the UC portfolio’s exposure to US securities. Thus, Sudanese

127   Id. at12.
128    “University of California General Endowment Pool Investment Policy Statement.”
       Office of the Treasurer. p. 12, February 8, 2005.
       <http://www.ucop.edu/treasurer/invpol/GEP%20policy.pdf> The endowment is not
       to differ significantly from the performance benchmark (maintaining a Beta statistic
       at or near 1.0). Id. at38.
129   Office of the Treasurer, University of California Retirement Plan: Investment Policy
       Statement, p. 12, November 3, 2004.
       <http://www.ucop.edu/treasurer/invpol/UCRP%20policy.pdf.>
130   Richard A. Posner, Law and the Theory of Finance: Some Intersections, 54 GEO.
       WASH. L. REV. 159, 172 (1986).
131   Richard T. Wilk, The Boston South Africa Free (Safe) Index, in THE SOCIAL INVESTMENT
       ALMANAC 328 (Peter Kinder et al. eds. 1992).
132   See Richard A. Posner, Law and the Theory of Finance: Some Intersections, 54 GEO.
       WASH. L. REV. at 172-73.
133   Lisa Krieger, Stanford ending investments with firms in Sudan, SAN JOSE MERCURY
       NEWS, June 10, 2005 (“Under U.S. sanctions, American businesses cannot operate
       in the country.”).


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        divestment would clearly present less financial risk than either of
        UC’s two previous divestment decisions (Apartheid and tobacco).

        Fulfilling the Prudent Investor Rule: Avoiding Adverse Portfolio
        Costs. Besides the requirement that divestment decisions stipulate
        equivalent financial alternatives, the prudent investor rule also
        requires that divestment does not entail adverse costs to the
        portfolio. Rudimentary economic theory might suggest that an
        investor suffers an opportunity cost (lower future returns) by
        divesting. That theory would suggest that concentrated selling drives
        down the price of the disfavored securities. Buyers scooping up the
        highly liquid, undervalued securities based on particularized
        financial metrics would gain at an opportunity cost to the divesting
        investor. However, this theory does not necessarily bear out.

        According to modern portfolio theory, return is a function of risk.
        The theory of efficient markets, a key tenet of modern portfolio
        theory, reasons that security pricing reflects all information
        regarding risk and expected return at any given time. Judge Richard
        A. Posner134, in a financial primer, recognized that efficient markets
        respond immediately to the market pressures introduced by
        divestment. Notably, he rightly concluded divestment neither
        diminishes nor bolsters a portfolio’s expected return. This is because
        with each transaction the market will bid up or down the price
        according to its expected return as compared to the market.135 In
        the context of South Africa, Posner stated, “[T]his analysis teaches
        that it makes no difference whether companies that do business in
        South Africa have better than average prospects or worse than
        average prospects.”136 Buyers and sellers will trade stocks to the
        point where the disfavored securities “yield the same expected
        returns as the other stocks of their risk class.”137 This is a critical
        point. Endowment management is not speculation. It is risk
        management.

        Since the UC Treasurer’s Office subscribes to and employs modern
        portfolio theory in the management of the University’s assets,138 the
        Office can expect that divestment will not financially impair ability to

134   Judge Posner serves on the United States Court of Appeals for the Seventh Circuit as
       well as Senior Lecturer at the University of Chicago Law School.
       http://www.law.uchicago.edu/faculty/posner-r/ [as viewed on September 13,
       2005].
135   Richard A. Posner, Law and the Theory of Finance: Some Intersections, 54 GEO.
       WASH. L. REV. at 172. (1986).
136   Id.
137   Id.
138   Id.


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        maximize asset returns if the divested money is switched to
        investments with similar expected returns. Indeed, Posner notes
        that “the expected return of a [screened] portfolio . . . should be the
        same as that of a portfolio with nothing but the [screened]
        stocks.”139 Regardless of whether the sale of divested securities
        caused a change in stock price after adjustment, remaining
        securities within the portfolio will have expected returns that mirror
        that of the market. And thus, there will have been little effect from
        divestment.

        Empirical economic analysis bears this out. In a statistical analysis
        comparing the S&P 500 and a basket of stocks that screened out
        certain stocks for social or moral reasons, researcher Melissa Arms
        found no opportunity cost in opting out of certain securities.140 She
        concluded, based upon the analysis of nine years of returns, that
        “socially responsible investors can pursue their moral goals without
        forsaking their financial goals.”141

        Fulfilling the Prudent Investor Rule: Other Issues. Besides
        finding equivalent financial alternatives and minimizing portfolio
        costs, a prudent investor contemplating divestment must consider
        practical and non-financial risk factors as well. As famed economist
        and noted investor John Maynard Keynes warned, portfolio
        management “cannot depend on strict mathematical
        expectations.”142 Keynes eschewed blind devotion to long-term
        financial metrics because they often ignored human or social
        elements that might generate manias, such as tulip bulbs or
        Internet stocks.143 Recognizing that principle, “no prudent investor
        could fail to see the economic implications of investing in a country




139   Richard A. Posner, Law and the Theory of Finance: Some Intersections, 54 GEO.
       WASH. L. REV. at 172. (In Posner’s example he referred to a portfolio with South
       African stocks and one without South African stocks.).
140   Melissa Arms, The Opportunity Cost of Monetary Conviction: A Comparision of the DSI
       and the S&P 500, 7 PARK PLACE ECONOMIST 21 (1999).
       http://www.titan.iwu.edu/~econ/ppe/1999/melissa.pdf.
141   Id. Significant screening does however decrease the overall diversification of a
       portfolio, which may lead to greater volatility over the long-term. As discussed
       below however, the limited universe of 130 publicly traded securities dispersed
       across the entire non-U.S. universe does not pose a meaningful threat to under-
       diversification.
142   JOHN MAYNARD KEYNES, THE GENERAL THEORY OF EMPLOYMENT, INTEREST, AND MONEY
       (Harcourt Brace 1936) (quoted by Patrick McVeigh, Stocks in THE SOCIAL INVESTMENT
       ALMANAC 355 (Peter Kinder et al. eds. 1992)).
143   See BURTON MALKIEL, A RANDOM WALK DOWN WALL STREET 30-32 (W.W. Norton Co.
       1973) (2003).


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        undergoing a profound political and social upheaval.”144 The United
        States government shares this view; the Securities and Exchange
        Commission has determined that decisions to avoid investing in
        countries under US sanctions (like Sudan)145 likely fall within the
        boundaries of the prudent investor law.146

        Among the “manias” not explicitly mentioned by Keynes, social
        movements such as divestment can dramatically influence security
        pricing, especially as a movement gains momentum. Initial
        Sudanese divestment campaigns in the US argued that divestment
        addressed a moral concern while carrying minimal financial risk.
        However, the growing number of divesting entities across the
        country will eventually trigger a depreciation of Sudanese holdings,
        actually making divestment a sound financial choice. Indeed, as
        more universities and governments divest, the pool of prospective
        buyers diminishes for those shareholders who seek to sell later.
        Obviously, as each new entity divests its assets, the concentrated
        sale of assets of each security places a sudden downward pressure
        on the price. An efficient market will adjust the price of the
        securities to align with market risk/return expectations. With
        actively traded securities and many willing buyers, a liquid market
        can shoulder a rush to sell. However, many of the companies linked
        to Sudan neither enjoy a large pool of willing buyers nor a liquid
        market for their securities. For less liquid securities, fewer buyers
        are available, widening the bid-ask spread and driving stock price
        down further.147

        Unlike the large, heavily-traded US corporations that conducted
        business in South Africa, the companies operating in increasingly
        isolated Sudan do not trade in great volume. For example,
        PetroChina, an oil and gas corporation with a market capitalization
        of $141.1 billion, had an average volume of traded shares of 683,249
        per day over a three-month range.148 Over that same period,
        Chevron Corp, another oil and gas concern with a similar market

144   Laurence Tribe, Memorandum on the Nonpreemptive Effect of the Comprehensive Anti-
       Apartheid Act of 1986 upon State and Local Measures, 132 CONG. REC. 23,292
       (1986).
145   Sudan Sanctions Regulation, 31 C.F.R. § 538 (2005). See Appendix A.
146   “The fact that a foreign company is doing material business with a country,
       government, or entity on [the U.S. Treasury Department’s Office of Foreign Assets
       Control] sanctions list is, in the SEC staff’s view, substantially likely to be
       significant to a reasonable investor’s decision about whether to invest in that
       company.” See Appendix B.
147   A bid-ask spread is the trading gap between the price buyers seek and what sellers
       are willing to pay.
148   <www.finance.yahoo.com> [as of the close of these shares on the New York Stock
       Exchange on September 15, 2005].


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        capitalization of $130.1 billion, traded an average of 8,517,300
        shares a day.149 Total S.A., a Sudanese-operating French energy
        company with a market capitalization of $157.6 billion, traded
        40,000 fewer shares a day than USEC, a small American energy
        company with a market capitalization of only $903.2 million.150,151
        Thus, many Sudanese-related securities are susceptible to severe
        declines in value because they lack a robust market for their shares
        commensurate with their market capitalization.152

        In addition to selling pressures and illiquidity, issuers of securities
        that still operate in Sudan run the risk of losing goodwill. This
        intangible business characteristic is difficult to gauge and adds to
        the volatility of corporations that engage in business practices
        shunned by millions. When and if external pressure forces a
        company to withdraw from Sudan (as was the case for Talisman,
        Lundin, and OMV), stock price for that company suddenly drops
        because resulting loss of revenue alters expected return.153
        Divestment before a company withdraws removes UC from this risk.

        New York City Comptroller William C. Thompson, Jr. recognized just
        this potential for depreciation; as the custodian and investment
        advisor to New York City’s pension funds, he announced in
        September of 2005 that he was urging 24 companies to review their
        business ties in Sudan. As shareholders, he said, a company's
        business dealings with Sudan “could expose the Company to
        negative publicity, public protests, and a loss of investor confidence,
        all of which could have a negative effect on shareholder value.”154

Other Financial Considerations in a Divestment Decision

        Although there is no opportunity cost in terms of expected return,
        divestment may involve other risks. Judge Posner argued that
        screening out investments according to social issues creates three
        potential costs: the cost of identifying those companies to be



149   Id.
150   Id.
151   Id.
152   See Standard’s & Poors, “The S&P/Citigroup Global Equity Indices” 34-35, October
       2005.<http://www.globalindices.standardandpoors.com/data/citi/factsheet/snp_ci
       ti_rulebook.pdf.> Describing the role of “free float” in determining the liquidity of
       equity index components. [As viewed on Oct. 5, 2005.].
153   See discussion of Talisman and Lundin in Section V.
154   Press Release: 05-09-103. NYC Comptroller Wiliam C. Thompson Jr. Sept. 7, 2005 <
       http://www.comptroller.nyc.gov/press/2005_releases/PR05-09-103.shtm>


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        screened out, under-diversification, and increased trading costs.155
        The issue of “peer risk” also must be considered.

        Identifying offending companies. Multiple on-line services and
        human rights organizations provide information for screening
        companies doing business in Sudan. Any de minimis c o s t s
        associated with these services would be no more significant than the
        costs of ordinary due diligence for any investment.

        Under-diversification. As addressed above, under-diversification
        does not present a problem for successful divestment from Sudan.
        The excluded securities do not comprise a discrete industry sector
        (e.g., tobacco) or specific market. Rather, they are strewn across
        various industry groups, company sizes, and parent company
        countries of origin, making for readily available financial
        equivalents. This lack of concentration places Sudanese divestment
        easily within the acceptable levels of under-diversification caused by
        divestment from South Africa or from tobacco.

        Trading costs. UC funds would incur the one-time trading costs of
        divesting offending assets. However, this cost is necessary in order
        to serve the twin obligations of the funds to maximize returns and
        protect their capital. These transaction costs are no different than
        what is incurred when the endowment makes the routine decision to
        buy or sell any security. This is a necessary cost of any prudent
        money management.

        Peer risk. It is the responsibility of the Regents’ Investment
        Committee to consider “peer risk” in the general management of its
        fund. In the context of the GEP, the Office of the Treasurer defined
        this term as “the difference in GEP performance relative to peer
        institutions.”156 The Investment Committee is responsible for the
        same risk characteristic with the UCRP.157 As similar institutions
        follow Harvard and Stanford’s lead and consider divesting their
        Sudan-related assets, this question of “peer risk” becomes a concern
        of ongoing investment.



155   Richard A. Posner, Law and the Theory of Finance: Some Intersections, 54 GEO.
       WASH. L. REV. 159, 172 (1986).
156   “University of California General Endowment Policy Investment Policy Statement”
       Office of the Treasurer. 5. February 8, 2005.
       <http:www/ucop.edu/treasurer/invpol/GEP%20policy.pdf.>
157   “University of California Retirement Plan Investment Policy Statement.” Office of the
       Treasurer. 5. November 3, 2004.
       <http://www.ucop.edu/treasurer/invpol/UCRP%20policy.pdf.>


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UC Divestment Compatible with Legal and Economic Obligations

   The sheer magnitude of moral outrage that genocide engenders
   would seem to be enough to trigger divestment from investments
   that profit and assist the Khartoum regime. However, as a fiduciary,
   the University’s investors must adhere to the mandate of serving the
   financial interests of its beneficiaries. We believe even under the
   most restrictive view of the prudent investor standard that the
   beneficiaries of UC’s investments will be served by divestment.
   Economically equivalent alternative investments that maintain
   portfolio diversity are available without the taint of Sudan. We have
   argued that the growing nationwide divestment movement, the
   limited trade volume and illiquidity of Sudanese company stock, and
   the UC Treasurer’s definition of “peer risk” suggest that UC
   divestment may be financially prudent. Moreover, the Board’s 1986
   and 2001 divestment decisions have demonstrated the Regents’
   willingness to consider non-financial issues in making investment
   decisions. Therefore, the petitioners submit that the unnecessary
   financial risk of Sudanese investments do not warrant the grisly
   human cost of continued investment.




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VIII. PROGRAM OF DIVESTITURE
Definitions of Terms and Acronyms.

  o “Company” is any entity capable of affecting commerce, including
    but not limited to (1) a government, government agency, natural
    person, legal person, sole proprietorship, partnership, firm,
    corporation, subsidiary, affiliate, franchisor, franchisee, joint
    venture, trade association, financial institution, utility, public
    franchise, provider of financial services, trust, or enterprise; and
    (2) any association thereof.
  o “Sudan” is the Republic of the Sudan.
  o “UC” is the University of California.
  o “GEP” is the University of California General Endowment Pool.
  o “UCRP” is the University of California Retirement Plan.
  o “Divestiture,” “Divestment,” “Divest” refer to the sale of direct and
    indirect holdings in specified assets and the commitment not to
    reinvest either directly or indirectly in such assets.

Distinguishing Sudanese Divestment from Other Divestment
Campaigns

   The petitioners understand that divestment is not the appropriate
   response to most injustices or social causes. While we have argued
   for UC divestment from Sudan, we feel a positive decision on
   divestment by the Regents would not set a precedent for broad use
   of this tool because the situation in Sudan is truly unique. For the
   first time since ratification of the UN Convention on Genocide, the
   US Congress and State Department have declared that ongoing
   atrocities constitute a genocide. The petitioners argue that the
   magnitude of the offending atrocity, namely genocide, combined with
   credible declaration by official sources that it is indeed occurring
   and ongoing, more than meets any implied moral benchmark set by
   the two previous UC divestment decisions. Additionally, our
   proposal for divestment from Sudan will allow the UC to maintain a
   diversified and effective investment portfolio without opportunity



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          costs, thereby allowing UC to fulfill its legal and financial obligations
          to beneficiaries of the GEP and UCRP.

Strategy for Divestment

          To fulfill the goals of divestment outlined above in this proposal, a
          divestiture program must include several components.

      o The University of California should determine which companies
        meet the divestment criteria outlined below. To this end, the UC
        should purchase the Sudan Corporate Monitor, or a similar report,
        which provides comprehensive analysis of companies operating in
        Sudan.158 The report can be found here:

           http://www.conflictsecurities.com/products/index.cfm?fuseaction
           =sudan.

           The UC should also work with the California Public Employees’
           Retirement Systems (CalPERS) Investment Office which is
           currently “engaging 46 external investment managers and 1,869
           portfolio companies in an effort to identify companies that may be
           operating in Sudan.”159 Additionally, the UC should contact the
           treasurers of the states of Illinois, New Jersey, and Oregon, each of
           which is currently instituting divestment legislation.
      o    Preceding divestment, the Treasurer and President of the UC
           should immediately send a letter to the CEOs of companies which
           meet the divestment criteria explaining why the UC plans to divest.
           The President of the UC should also send a letter to the Sudanese
           Embassy detailing why the UC plans to divest from Sudan.
      o    The UC should divest from all holdings that meet the criteria
           outlined below under Criteria for Divestment.
      o    The Treasurer should amend the investment guidelines for all
           investment accounts to prohibit further investments that meet the
           criteria for divestment.
      o    This program should be accomplished within six months of the
           passage of a divestment resolution by the Board of Regents.

Divestment Criteria

          Divestiture includes four categories: companies that maintain an
          equity tie with Sudan, companies that maintain a non-equity tie
          with the Sudan, bonds or similar financial obligations issued by the


158   Overview of the Sudan Corporate Monitor is in Appendix B.
159   CalPERS Investments Committee Agenda (September 19th, 2005). Item 8a.


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        government of Sudan, and banks that extend loans to the
        government of Sudan.

        Equity Ties:

            The University of California should divest from companies that,
            either directly or through a subsidiary, engage in the following:

          o Own or control any property or asset located in, or that have
            employees or facilities located in, Sudan. Exceptions include: (1)
            Companies that engage solely in the provision of goods and
            services intended to relieve human suffering or to promote
            welfare, health, religious and spiritual activities, and education
            for humanitarian purposes or otherwise. These goods and
            services specifically include agricultural commodities, medicine,
            and medical devices. (2) Companies that engage solely in
            journalistic activities.
          o Are domiciled in Sudan. The same exceptions as in the previous
            point apply.

        Non-Equity Ties:

            The criteria for divestment from companies that maintain a non-
            equity tie with the Republic of the Sudan should be modeled off
            US sanctions against Sudan.160 On November 3rd, 1997,
            President Clinton established these sanctions in response to,
            among other things, “the prevalence of human rights violations”
            in Sudan.161 Effectively, the UC should divest from all foreign
            companies whose business practices would be prohibited under
            sanctions if the company were a US company.

            The University of California should divest from companies that,
            either directly or through a subsidiary, do the following:

          o Import goods or services of Sudanese origin into any country
            either directly or through third countries. Exceptions include:

160   The order, issued under the authority of International Emergency Economic Powers
      Act (50 U.S.C. 1701-1706), the National Emergencies Act (50 U.S.C. 1601 et seq.)
      and section 301 of title 3, United States Code, imposed a trade embargo against
      Sudan and a total asset freeze against the Government of Sudan. The Sudanese
      Sanctions Regulations, 31 C.F.R. Part 538 implement Executive Order No. 13067.
161   US Department of the Treasury: Office of Foreign Asset Control. What You Need To
      Know About U.S. Sanctions. An overview of the Sudanese Sanctions Regulations –
      Title 31 Part 538 of the U.S. Code of Federal Regulations. Washington, D.C: 26 July,
      2001. <www.treas.gov/offices/enforcement/ofac/sanctions/t11sudan.pdf> See
      Appendix A.


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        (1) Information or informational materials may be imported
        without restriction. (2) Importation from third countries of
        goods containing raw materials or components of Sudanese
        origin is not prohibited if those raw materials or components
        have been incorporated into manufactured products or
        otherwise substantially transformed in a third country.
    o   Export goods, technology, or services to Sudan either directly or
        through third countries. Exceptions include: (1) Information or
        informational materials and donated articles intended to relieve
        human suffering, such as food, clothing and medicine, and the
        licensed export of agricultural commodities, medicine and
        medical devices. Exportation of goods or technology to third
        countries is prohibited if the exporter knows, or has reason to
        know, that the goods or technology are intended for
        transshipment to Sudan. The exportation of goods or technology
        intended specifically for incorporation or substantial
        transformation into a third-country product is also prohibited if
        the particular product is to be used in Sudan, is being
        specifically manufactured to fill a Sudanese order, or if the
        manufacturer’s sales of the particular product are
        predominantly to Sudan.
    o   Transact business with individuals or organizations that are
        owned or controlled by, or act on behalf of, the Government of
        Sudan anywhere in the world and are named by the U.S.
        Treasury Department as “Specially Designated Nationals”
        (“SDNs”) of Sudan. Their names are published in the Federal
        Register, an official publication of the U.S. Government. A
        listing of such SDNs may be obtained by calling the Office of
        Foreign Assets Control (“OFAC”) at 202/622-2490. While a full
        assessment of all business transactions of a company may not
        be possible, the UC should make a reasonable effort with the
        Conflict Securities Advisory Group to assess a company’s role in
        such transactions.
    o   Engage in any other financial dealings with Sudan. Exemptions
        include: (1) Payments for and financing of licensed sales of
        agricultural commodities, medicine and medical devices. These
        may be accomplished by cash in advance, sales on open
        account (provided the account receivable is not transferred by
        the person extending the credit), or by third country financial
        institutions that are not government of Sudan entities.
    o   Any company that has been fined, penalized, or sanctioned by
        the US Treasury Office of Foreign Assets Control for any
        violation of any United States rules and restrictions relating to
        the Sudan.

   Bonds and Similar Financial Obligations:

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     The University of California should divest from:

    o Any bonds, notes, debentures, or other similar obligations of
      the government of Sudan.
    o Any bonds, notes, debentures, or other similar obligations of
      companies that meet the preceding criteria for divestment.

   Banks:

     The UC should not deal with any bank that:

    o Finances, or arranges offshore financing for, third-country trade
      transactions where Sudan is known to be the ultimate
      destination of, or the Government of Sudan is the purchaser of,
      the goods.
    o Arranges transactions which ultimately benefit Sudan (for
      example, brokering third-country sales to Sudan).




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IX. CONCLUSION
   It is unacceptable and upsetting to be citizens of the most powerful
   country in the world and witness the repeated perpetration of
   genocide with deadly consistency. Scarcely a decade went by in the
   twentieth century without a major genocide, and the first decade of
   the twenty-first century appears to be a grim reminder of this
   genocidal regularity. While the calls of "never again" were once again
   admonished in April of 2004 as we remembered the 10th
   anniversary of the Rwandan genocide and July of 2005 on the 10th
   anniversary of the Srebrenican massacre, the Darfur genocide has
   ironically, though not surprisingly, endured.

   The US government’s decision to classify the ongoing carnage in
   Darfur as genocide does, however, represent an historic first. It is
   the sincere hope of the petitioners that this small but significant
   step by the federal government spurs indignation and action by US
   institutions. With a governmental declaration of ongoing genocide,
   The University of California has a unique opportunity to act through
   divestment, influencing the situation on the ground and indirectly
   encouraging other like-minded institutions to act. The signal UC
   should send is clear; genocide is unacceptable and demands action.
   In a post-Genocide Convention era, the institution should not
   tolerate another century of recurring genocides.




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APPENDIX A:     OVERVIEW OF SUDANESE SANCTIONS




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APPENDIX B:                   SUDAN CORPORATE MONITOR OVERVIEW
This Overview is designed to help subscribers optimize their use of the Sudan Corporate Monitor
(SCM). The Introduction discusses the risk-related issues addressed in the SCM and the
professional research capabilities of Conflict Securities Advisory Group, Inc. (CSAG). The
Research Methodology outlines the product deliverables, reviews CSAG’s research and verification
process and summarizes the specific elements of individual company profiles.

Introduction
The Sudan Corporate Monitor is a user-friendly online service that identifies and profiles U.S. and
foreign publicly traded companies with business ties to Sudan. The SCM is designed to assist
investors in identifying and evaluating “global security risk” associated with such business
activities. Global security risk is defined as the risk to share value and corporate reputation
stemming from a company’s business activities in or with U.S. State Department-designated
terrorist-sponsoring states (including Sudan) or links to the proliferation of weapons of mass
destruction and ballistic missiles.
In May 2001, the U.S. Securities and Exchange Commission (SEC) determined, "The fact that a
foreign company is doing material business with a country, government, or entity on [the U.S.
Treasury Department's Office of Foreign Assets Control] sanctions list is, in the SEC staff's view,
substantially likely to be significant to a reasonable investor's decision about whether to invest in
that company." Since that determination, investors have primarily focused on those companies
with business activities in or with terrorist-sponsoring states. Conflict Securities Advisory Group
Inc. was formed to provide independent, expert research in this new field of risk.
Pursuant to Congressional legislation, the SEC has since opened an Office of Global Security Risk
to ensure that companies under its jurisdiction properly disclose material information related to
their activities in terrorist-sponsoring states. It should be made clear that, as part of its
mandate, the Office of Global Security Risk will not provide a list of companies operating in
Sudan or other terrorist-sponsoring states. SEC Deputy Director of Corporation Finance Shelley
Parratt spoke to this matter in a letter to the Pennsylvania State Employees Retirement System in
July 2004, stating “It would be inappropriate for [the SEC] to publish a list of companies whose
securities might be deemed to involve terrorist-related investment risk without publishing
corresponding lists for every other possible type of investment risk.”
The methodological differences between the SEC’s process and an independent research provider
such as CSAG helps explain why investors cannot reasonably expect the Office of Global Security
Risk to provide the type of data included in the SCM. Unlike the SEC, CSAG identifies publicly
traded companies that have any type of business tie to Sudan – no matter how large or small –
thereby allowing the investor to differentiate among such companies and assess the risk. CSAG
takes this approach, in part, based on the fact that investors concerned about the social
relevance of holding Sudan-active companies employ a different materiality threshold than the
SEC.
SEC jurisdiction is relevant to this matter as well. The SCM identifies some 130 publicly traded
companies that have business ties to Sudan. Of those, the SEC only has jurisdiction over 31
according to the SEC’s List of Foreign Companies Reporting and Registering with the SEC. Were
the SEC to determine that all 31 of these companies had material ties to Sudan, investors would



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still have to await disclosure by the companies and sift through lengthy 20F and 10K filings to
develop an incomplete list of only one-quarter of those companies covered by the SCM.
Risk
Investors and corporations understand that company financials and share value can be affected
by public perception of corporate activity and shareholder activism. For instance, in 1998, Nike
Corp. suffered losses for the first time in more than a decade in the wake of allegations that the
firm employed sweatshop labor in Asia. Industry experts also cite Talisman Energy of Canada as
an example; the company experienced a "Sudan discount" to its share price for some three years
due to divestment pressures arising from its operations in Sudan. Today, investors are
increasingly under pressure to initiate corporate governance measures or divest all together for
humanitarian reasons from companies operating in Sudan.
While some investors choose to view companies operating in Sudan through a “socially-
responsible” lens, others recognize that corporate ties to Sudan and other countries of concern
introduce financial risks as well. For example, sanctions or other policies directed against a
government regarded as a state sponsor of terrorism or violator of human rights can affect a
firm's operations and performance, particularly if the firm in question has made significant
investments in that country. Other risk factors include negative publicity, lawsuits and the
possible diversion by the Khartoum government of sensitive equipment and technology to non-
civilian projects.
Professional Expertise
It is CSAG’s view that when taking steps that can affect the performance of a university
endowment or pension plan, decision-makers benefit from data compiled -- and analysis provided
-- by a professional research staff that specializes in global security risk. This is especially true
given the dynamic nature of the information (i.e., companies are routinely developing or
concluding business ties to Sudan).
The Sudan Corporate Monitor is designed to provide impartial, documented research that can be
used by the investor in any way deemed appropriate (i.e., to assess risk, serve as a screen, inform
corporate governance initiatives, etc.). The SCM provides extensive documentation and analysis
that allows the investor to differentiate among companies based on the scope of their activities in
Sudan or the type of each firm’s business tie. In the case of each company profiled, serious care
is given to ensuring that the data is accurate, unbiased and includes as much relevant
information as available. The methodology underpinning the SCM research process and its
updates is explained in greater detail below.
Profiles of those companies included in the SCM are extracted directly from the research provided
in CSAG’s Global Security Risk Monitor (Monitor). The Monitor is an on-line database that tracks
over 400 publicly traded companies that have business ties to U.S. State Department-designated
terrorist-sponsoring states, including Sudan. Accordingly, the description below of CSAG’s
research methodology is directly applicable to both the SCM and the Monitor products.

Research Methodology
CSAG's approach to collecting and presenting information in the Global Security Risk Monitor and
SCM is based on two assumptions: first, that subscribers will benefit from a distilled,
summarized presentation of relevant information while having access to specific reference
materials; and second, that consistency in the procedures for compiling, validating and




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UNIVERSITY OF CALIFORNIA SUDAN DIVESTMENT TASKFORCE

presenting information on each company is essential for providing usable data. The basic
elements of the SCM are as follows:
•          Company Lists and Company Profiles are updated quarterly, with real-time additions or
modifications as new data becomes available.
•          Sudan Overview, updated annually, provides an overview of the country as well as U.S.
policy positions.
•          Search Functions, that allow the user to sort companies by type of business tie to
Sudan, keyword, country of domicile and company name.
•          Glossary of key terms.
Company Lists
CSAG consults numerous subscription databases and business intelligence sources to establish
its database of companies operating in the countries tracked in the Monitor and SCM. CSAG also
obtains information on business links to terrorist-sponsoring states through corporate filings,
international newspapers, trade publications, magazines and directories. Whenever possible,
CSAG relies on materials produced by companies themselves, including annual reports, filings
with the Securities and Exchange Commission and corporate websites.
CSAG compiles information from these sources and then sends questionnaires to each of the
parent companies profiled in the Monitor. Each questionnaire includes a draft profile of the
company's ties to Sudan or other countries tracked in the Monitor and requests that the company
verify or correct its profile. CSAG continues to employ an active corporate communications
process to ensure the accuracy of the data.
The SCM is likewise subject to a multi-tiered update and verification process. CSAG employs a
team of researchers tasked with updating the content of those companies profiled in the product
and are continuously seeking to identify U.S. and foreign publicly traded companies that may
establish a business tie to Sudan. When new entrants are identified, they undergo a thorough
evaluation reinforced by the corporate communication process described above. As part of the
research process, CSAG has reviewed over 13,000 publicly traded companies worldwide.
References regarding the accuracy and utility of CSAG’s products and services are available upon
request.

Company Profiles
Each company profile is divided into several sections.
•          The Company Description provides corporate contact information, website and stock

identifiers (when available), as well as an overview of the   firm.
•          The Tie Matrix identifies the type of business tie each company has to Sudan. Tie
classifications include:
1.                  Equity Tie: Company or subsidiary has employees or facilities physically located
in the country;
2.                  Non-Equity Tie: Company or subsidiary sells products or services in the
country, purchases goods or raw materials from the country, or has distribution agreements with
another party for the company's products in the country.
3.                  Other Tie: Company ties that do not appear to meet the definition of either an
equity or non-equity tie. One example would be a company that sponsored a booth at a trade
show in the country.



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UNIVERSITY OF CALIFORNIA SUDAN DIVESTMENT TASKFORCE

•       The Overview of Operations details the company's operations or sales in Sudan. This
section may include information about company subsidiaries or affiliates, contracts, licensing,
distribution or franchising agreements, and employees in Sudan. Unless otherwise noted,
company operations are assumed to be legal.
•       The Revenue and Financials section provides data on the financial implications for the
company, and when available for the government of Sudan, related to its operations in that
country.
•       The Points of Interest section provides any information of note that defies other
categorization. Information in this section may include references to sanctions against the
company related to its operations in Sudan, or corporate programs or publicity that merit note.
•       The Company Response section provides company data in response to CSAG's
questionnaire and any comments on other components of the profile.
Sudan Overview
The Sudan Overview provides users an in-depth description of the political and security
dimensions of Sudan. Included in this description are: 1) a brief history of the country's political
situation over the past 30 years; 2) a summary of why the country has been identified by the U.S.
State Department as a state-sponsor of terrorism; 3) an overview of U.S. government-documented
concerns related to Sudan's development and proliferation of weapons of mass destruction and
ballistic missiles; and 4) a brief description of U.S. foreign policy with regard to Sudan. The
Sudan Overview is designed to help subscribers understand more fully these country-specific
dynamics in their use of the research provided in the Sudan Corporate Monitor.


Client Feedback
CSAG is interested in your comments and suggestions. The SCM is the first database and
research tool of its kind, and we hope to increase its long-term utility with your input.
Staff
Research for the Global Security Risk Monitor and SCM is managed exclusively by CSAG. CSAG
staff overseeing the product are Adam Pener and Andrew Davenport. Either can be reached at
202-223-8034.
Disclaimer
Disclaimer: All company activities reported in the SCM are assumed to be legal, unless otherwise
noted. The SCM does not make any value judgments concerning the presence and operations of
those companies or presume any wrongdoing on the part of the companies profiled.
All company specific information was culled from publicly available sources or from the company
itself. All companies profiled in the SCM have been provided their profile and an opportunity to
comment prior to publication. Company statements or responses, when provided, have been
included in the product.
The SCM was prepared for educational purposes, not to advocate any public policy position or to
suggest any specific action or investment policy on the part of shareholders.
The SCM is exclusively offered by Conflict Securities Advisory Group, Inc., a Washington-based risk
management firm that provides specialized research and assessment services in the field of global
security risk. While CSAG exercised due care in compiling information in this product, from time to
time errors may occur. CSAG makes no warranty, express or implied, as to the accuracy,




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UNIVERSITY OF CALIFORNIA SUDAN DIVESTMENT TASKFORCE

completeness or usefulness of this information, nor does it assume any liability with respect to the
consequences of the use of this information. Changing circumstances may cause the information to
be obsolete.




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