To show his solidarity with Venezuelans, Gov. Rick Scott held a rally in South Florida and repeatedly promised to punish companies that do business with the Nicolás Maduro regime.
But Scott has offered no details as to how that will work and, although the governor and two other members of the Cabinet oversee the Florida Retirement System and its $150 billion in assets, their options are limited. Additionally, a 16-year-old U.S. Supreme Court ruling may bar him from telling state agencies to boycott companies that do business in Venezuela.
“Next month, at my next Cabinet meeting, I will be proposing a resolution that will say any organization that does business with the Maduro regime cannot do business with the State of Florida,” Scott proclaimed at a July 10 rally at the El Arepazo restaurant in Doral. The crowd cheered.
The governor, attorney general and state chief financial officer act as the State Board of Administration but, because they have a fiduciary responsibility to keep the state pension fund healthy, they may not sell off large amounts of assets if that could affect the profitability of the fund — unless they are ordered to by law.
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“We are required to manage the fund with the best interests of the beneficiaries in mind, and that may restrict what can be done in any situation,” said John Kuczwanski, spokesperson for the SBA. “But the Legislature can go beyond that and require us to do something else.”
Sen. José Javier Rodriguez, a Miami Democrat who has announced he is running for the congressional seat being vacated by Republican Ileana Ros-Lehtinen next year, said Venezuela’s human rights abuses, increasing violence and disrespect for democracy, merit such a law.
On July 5, he announced he has drafted legislation that would require Florida to divest investments in any “institution or company doing business with the government of Venezuela.”
“The idea is to make this something that we can actually implement,” Rodriguez said Friday. “If we can’t take concrete steps, it won’t mean anything to Wall Street. To Wall Street, money talks.”
Rodriguez’s proposal is directed at Goldman Sachs Asset Management, which purchased $2.8 billion in bonds in May from Venezuela’s state-run oil company, and at other firms that engage in “the possibility of future investments of this kind.”
Rodriguez’s research shows that Goldman Sachs manages $478 million in funds in Florida’s Long Duration Portfolio, which totals $8.2 billion. The SBA said the company also manages $21 million dollars in a 2004 fund, Distressed Managers II, and the SBA owns $147 million in Goldman Sachs securities that can be sold on the open market.
By contrast, the only specifics the governor has offered indicate that he wants to punish all companies that do business with Venezuela by preventing them from doing business with the state.
The governor’s office would not answer whether he will apply his plan beyond divesting in investments. Does it mean that because Delta Air Lines flies to Caracas, state employees traveling for business can’t buy tickets on Delta? Because McDonald’s still operates restaurants there, state employees can’t get reimbursed for meals from McDonald’s?
McKinley Lewis, Scott’s spokesperson, answered: “The governor is looking at all available options to ensure the State of Florida does not do business with any organization that supports the oppressive Maduro dictatorship. More details on his policy will be announced prior to the Aug. 16 Cabinet meeting.”
He added that the governor will also consider pursuing changes to state law in the upcoming legislative session.
Meanwhile, there is a legal question as to whether the governor can impose sanctions on companies doing business with the Maduro regime, or if that must be left up to the federal government, said Doug Farquhar, program director for trade at the National Conference of State Legislatures.
The U.S. Supreme Court ruled in 2000 on a Massachusetts law that barred state agencies from doing business with any company that conducted business in Myanmar, saying a state cannot individually impose sanctions aimed at foreign governments.
The court concluded that a 1996 Massachusetts law violated the U.S. Constitution’s Supremacy Clause, which gives Congress the power to preempt state laws, because it “stands in the way of Congress’s diplomatic objectives.”
Florida’s attempt to divest from companies doing business with Venezuela may be seen by the courts as “acting as a business entity, and not engaging in foreign relations,” Farquhar said. “It’s kind of a fine line. My belief is, no one has ever challenged that law.”
The governor’s communications office could not answer whether the governor’s proposal would affect the Goldman Sachs accounts but it worked to stoke attention to his proposed resolution, delivered the message that Goldman Sachs is watching, and last week distributed a notice that he had added a meeting with Goldman Sachs lobbyists to his daily calendar.
The company responded with a statement saying it purchased the Venezuelan bonds for its investment clients through a broker in the secondary market and the bonds were initially issued in 2014 by Petroleos de Venezuela.
“We learned a great deal from the reaction to the investment, and enhanced our investment process to consider a broader array of risk and meet our fiduciary responsibilities,” the company said in its statement.
There is precedence in Florida for legislation to limit state investments in rogue nations. In 2007, the Protecting Florida’s Investments Act was signed into law requiring the SBA, acting on behalf of the Florida Retirement System Trust, to assemble and publish a list of “scrutinized companies” that do business in Sudan or Iran.
Under another law, the Free Cuba Act of 1993, the SBA is prohibited from investing in any institution or company domiciled in the U.S. or foreign subsidiary of a company domiciled in the U.S. that does business in or with Cuba.