Missouri board divided on Arab Bank

The board is debating how to handle state money invested in the bank, a target of terrorism-related lawsuits.

JEFFERSON CITY, Mo. -- The state retirement system board refused Thursday to pull money out of a bank that State Treasurer Sarah Steelman believes has terrorism ties.

Steelman, who is a member of the retirement board, contends Missouri's money doesn't belong in Arab Bank. She also wants to change the anti-terrorism investment policy of the Missouri State Employees' Retirement System.

But other board members said it's tough to judge which companies are really acting for or against U.S. interests, regardless of where they are operating. Board vice chairman Rep. Todd Smith, R-Sedalia, said there also is a concern that terrorism wouldn't be the only defining criteria, as other people could have strong concerns about investing in tobacco or casino companies, for example.

"The question becomes where do you draw the line," he said. "This makes for good sound bites, but it's a slippery slope of political correctness."

On a tie vote, the board rejected Steelman's plea to pull out about $80,000 invested in Arab Bank. But the board agreed to review its policy in the next month to see if changes should be made.

Arab Bank faces several U.S. lawsuits by relatives of terrorism victims in Israel, including a Missouri native, who allege the bank supported terrorism by funneling donations to Palestinian suicide bombers and their families.

The retirement system invests about $6 billion overall and relies on investment professionals to handle day-to-day transactions.

The current policy is to annually check a list, if provided by the federal government, of companies with terrorist ties. Steelman, a Republican, said the board should do more, especially as the state has never received that list.

"We need to think about the big picture here," she said.

She wants the retirement system not to invest in companies tied to countries under U.S. sanctions, such as Iran, or in companies supporting terrorist activities. She also wants the board to look for fund managers who could screen for businesses with terror ties.

Smith criticized Steelman for raising the issue last month with the media, rather than discussing it first with the board.

"I had to question the motives of the treasurer," he said. "If it was to get publicity, she did a bang-up job."

Voting with Steelman to pull out of Arab Bank were Sen. Jason Crowell, R-Cape Girardeau; Sen. Tim Green, D-St. Louis; former Sen. John Russell, R-Lebanon; and Jefferson City businessman and lobbyist John Pelzer. Voting against the idea were Smith; Rep. Bill Deeken, R-Jefferson City; retired college professor Don Martin of Independence; Office of Administration commissioner Mike Keathley; and board chairwoman Marsha Buckner, an administrator in the Missouri Department of Mental Health.