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Tuesday, Sep 19, 2017
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Florida Cabinet supports Rick Scott, approves investment prohibitions on Venezuela

TALLAHASSEE — Rick Scott and the Florida Cabinet unanimously voted Wednesday to continue to refrain from allowing state investment managers to use Florida funds to invest in companies controlled by the Nicolás Maduro regime or companies that violate federal law by doing business in Venezuela.

The state currently has no direct investment with the government of Venezuela and the proposal will continue that, but the resolution falls short of a plan initially pitched by Scott that would have required the state to divest its assets in companies that do business with the Maduro regime, including Goldman Sachs.

Instead, the mostly symbolic measure is designed to send a message to the emerging dictatorship that Florida will not sanction the regime's brutality.

"I stand firmly with the Venezuelan people," Scott said before the vote of the State Board of Administration, which includes the governor, the chief financial officer, and the attorney general, and is charged with oversight of the Florida Retirement System and its $150 billion in assets.

He said he may pursue legislation next session that pressures more companies to stop doing business in Venezuela, but "this was a great start."

Goldman Sachs' investment arm was criticized earlier this year when it purchased $2.8 billion in what were called "hunger bonds" from Maduro's state-owned oil company. The reference to the low-cost bonds was seen by critics as providing the Maduro regime an economic lifeline when the government's policies were causing a shortage of food and leading to malnutrition, unrest and violence.

Goldman responded that it bought the bonds for asset-management clients through a second-party broker, and didn't send the money directly to the government.

The Florida Retirement Fund holds $147 million in Goldman Sachs shares, $171 million in Goldman Sachs bonds and other financial instruments and pays the firm $1.9 million in yearly fees to manage some accounts.

Scott, who is expected to run for U.S. Senate next year, has been courting South Florida voters in the last two months with tough talk on the Maduro government. He backed off his initial comments, made at a series of media events in Miami, after Goldman Sachs sent its head of its Investment Management Division, Tim O'Neill, and the firm's chief of staff, John Rogers, to meet with Scott, the other members of the Cabinet, and SBA Executive Director Ash Williams in mid-July.

They would like to introduce themselves to you, answer your questions, and share the story of the trade and what the firm will do for trades of this magnitude going forward," wrote Lisa Rotenberg, Goldman Sachs' asset managing director, in a July 13 email to Williams.

In July, state Sen. Jose Javier Rodriguez, D-Miami, proposed legislation, SB 70, which would add the Maduro dictatorship to Florida's existing divestment programs — Sudan and Iran — and force the state to sell its Goldman assets.

If the governor follows through and supports a similar proposal, Goldman Sachs and numerous other companies who derive revenue from Venezuela could lose Florida as an investor.

According to Enterprise Florida's annual report, at least three companies that derive revenues from Venezuela — General Electric, United Technologies International and Citibank — have collectively received more than $4.26 million in Florida incentive funds.

The governor did not say whether those companies will be part of his legislation.

"My focus today was on the SBA doing business with the Maduro regime but I'm going to continue to look at ways to make sure we don't support the Maduro regime," he told reporters.

"Companies that do business with the Venezuelan people, that's not our target. Our target is companies that do business with the Venezuelan regime," he said.

According to internal SBA correspondence obtained by the Times/Herald, divesting of all investments from Goldman Sachs and companies that do business in Venezuela could have a broad impact on the retirement fund.

"As you would expect, the list of companies with revenue exposure in Venezuela includes major consumer staple, auto, electronic and airlines companies as well as some oil, infrastructure and financial companies. The list is extensive so any prohibition on holding these companies would have a significant impact on returns," wrote Alison Romano, senior investment officer, in a July 7 email to other investment team members.

She also noted, however, that "many of the companies that had business in Venezuela have either shrunk those businesses or pulled out entirely."

Under the proposal approved Wednesday, the SBA will be prohibited from investing in any securities issued by the Venezuelan government; prohibited from doing business with any financial institution or U.S. company which directly, or through a subsidiary, violates federal law by making a loan, extending credit, or makes purchases with the government of Venezuela, and will be prohibited from taking a shareholder proxy vote that advocates or supports the Maduro regime.

"These guidelines will be in place to keep us in the posture we are in today," Williams told reporters Wednesday. He said they will have "zero" impact on any current investments.

Rodriguez said in a statement that he welcomed the SBA's "initial step" but urged them to "take stronger action in the face of the deepening crisis in Venezuela."

Contact Mary Ellen Klas at meklas@miamiherald.com. Follow @MaryEllenKlas

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