California State controller John Chiang has sent a letter to the state employees’ huge retirement fund known as CalPERS, advising it to be wary of Chevron’s attempt to buy the tainted assets of Russia’s dismantled Yukos oil company. "Specifically, I am interested in an assessment of the inherent risks to the safety of the CalPERS investment portfolio should Chevron succeed," says the letter.
Chiang, noting that Chevron is currently among the fund’s top 20 investments, is doing his fiduciary duty to the state,. "I am concerned," he says,"that Chevron may be exposing itself to litigation and divestment campaigns based on allegations of complicity in illegal and unethical activities by the Russian government."
Chiang stops barely short of advising that CalPERS reduce its investment in Chevron. Yukos, once privately held by a friend-turned-opponent of President Valdimir Putin, produced about 20% of Russia’s oil and 2% of world production as recently as four years ago, says Chiang, but is now bankrupt and "burdened with with billions of dollars in tax debts."
He quotes a U.S. State Department report on the sharply questioned legal proceedings that led to the forced sale of Yukos assets and imprisonment of its former owner:
"…[T]he dismantlement of Yukos raises serious questions about the rule of law in Russia, Many of the actions in the case against [Yukos] have raised serious concerns about the independence of the courts, sanctity of contracts and property rights, and the lack of a predictable tax regime. The conduct of Russian authorities in the [Yukos] affair has eroded Russia’s reputation and confidence in Russian legal and judicial institutions."
CalPERS in its latest annual investment report lists a holding of 11.3 million shares of Chevron, worth about $850 million at the current stock price.
Chevron is unlikely to listen to either the warnings in the State Department report or Chiang’s concerns about the deal’s effect on the retirement and medical security of state employees. It is running a nationwide ad campaign that, cloaked in high-toned language about the global nature of oil, argues that it must be free to deal with despots and tyrants as long as there is oil to be pumped and profited from. Unfortunately, when Chevron gets stung in deals like Yukos, it will no doubt find a way to make U.S. taxpayers take the loss for its attempts to reap plunder from others’ corruption.