CONCORD, N.H. (AP) -- The New Hampshire Retirement System will ask the state Supreme Court if the Legislature can order it to divest of holdings in the Sudan.

A law adopted this spring ordered the pension system for state and other public workers as well as the pension system for judges to shed any investments that support Sudan's campaign of genocide and rape in Darfur.

Retirement System Board Chairwoman Lisa Shapiro said Thursday that the board voted unanimously this week to find out if the order to divest is unconstitutional.

The constitution says public retirement plans must make investment decisions "for the exclusive purpose" of benefiting current and future retirees and retirement funds "shall not be encumbered for, or diverted to, any other purposes."

Shapiro said the board got legal advice that the system could probably comply with the law while maintaining its fiduciary duty to workers if no money was lost when it sold Sudanese-related investments, but the action may conflict with the board's stricter financial obligation to the workers under the state constitution.

"A broad reading of Article 36-a, Part I of the constitution could lead one to believe that investment of NHRS's assets is the sole purview of the trustees and the Legislature cannot dictate to the trustees in what they can or cannot invest," advised Gregory Needles of Morgan, Lewis & Brockius in Washington, D.C.

The duty to look out for the interests of beneficiaries, or fiduciary duty, and the mandate to avoid outside influence are spelled out in state law as well as the constitution.

Debra Douglas, chairwoman of the board's investment committee, said the system would have to pay transaction costs to divest. Some of the $6 billion of the fund's investments are in index funds, which means Sudanese-related investments could not be sold off individually.

"(The law) is putting us in a difficult position," she said in a telephone interview from Florida.

The costs would continue if the pension system had to buy and sell funds to comply with the law going forward, she said. Annual transaction costs could run $250,000 per year, she said.

Shapiro said the board wants to know if "the first dollar of transaction costs is unconstitutional."

Shapiro said if the Judicial Retirement Plan board votes to take a similar action, the retirement system will investigate whether the two should file the request to the court together.

"The constitutional provision hasn't been litigated in this context," she said.

The judicial plan raised the same constitutional questions earlier in a letter asking Gov. John Lynch to veto the bill, which he declined to do.

The funds have 90 days to identify problematic investments in companies doing business with the Sudanese government, including oil and arms trading. The funds then would have 90 days to persuade the companies to remedy the problems, but, if the companies refused, would have to sell their investments.

Daniel Millenson helped found the Sudan Divestment Task Force, which is behind the model law. He said it targets only the worst offenders, mostly foreign oil companies or arms suppliers.

Millenson said pension systems with policies similar to New Hampshire's have not had more than 0.3 percent invested in companies meeting the law's divestment criteria. He argues the state constitution does not prohibit the pension funds from replacing investments for superior alternatives.

The Darfur conflict began in 2003 as a crackdown on anti-government ethnic-African rebels by the Arab-dominated Sudanese government. The United Nations estimates 300,000 people have died.

The U.N. says Sudanese forces and their janjaweed militia proxies now deliberately target civilians in villages and camps rather than the rebels, sometimes even bypassing rebel encampments. They destroy villages and rape women and girls.

In December, President Bush signed legislation to allow states and local governments to cut investment ties with Sudan.

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On the Net:

New Hampshire law: http://www.gencourt.state.nh.us/legislation/2008/HB1516.html

Sudan Divestment Task Force: http://www.sudandivestment.org/divestment.asp

New Hampshire Constitution, Art.36-A: http://www.nh.gov/constitution/billofrights.html

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