FIGHTING APARTHEID

June 22, 1990

Bond Buyer (USA)

Chicago Alderman's Plan Would Keep Firms With South Africa Ties Out of Underwritings

By Karen Pierog

Chicago could be the next U.S. city to bar firms that do business with South Africa from its bond underwritings if a local official's plan is adopted.

An ordinance that Alderman Helen Shiller said she plans to propose to the City Council Finance Committee today would expand the city's South Africa prohibition to include banks and securities firms involved in bond underwriting, a financial activity not specifically mentioned in the current ordinance.

The proposal follows New York Mayor David N. Dinkins' call last week for his city to step up pressure on South Africa by stiffening laws barring the city from doing business with companies, including commercial banks and securities firms, that have ties to South Africa.

Ms. Shiller said Chicago's current ordinance, which went into effect in 1986, did not require firms or banks involved in bond deals to fill out the city's notarized anti-apartheid affidavit. Since 1986, any financial trustee, bank depository, or contractor serving the city had to sign the affadavit.

However, City Comptroller Walter Knorr said his department has been asking financial institutions and firms involved in city bond issues for certificates of board action or copies of official corporate policy regarding South Africa "as a matter of course." He added that firms and banks were now starting to be asked to fill out the anti-apartheid affidavit, as well.

The proposed ordinance would prohibit banks and securities firms from acting in any fiduciary capacity or as an underwriter in a bond issue if they do business with South Africa. The chief executive officer of the bank or firm, or his representative, would have to certify by sworn affidavit that the company's business dealings do not include loans or letters of credit to South Africa or to a South African company, the sale of Krugerrands, underwriting of South African securities, or any participation in third party loans to that country.

The proposal also would require banks and firms to reaffirm their affidavits on an annual basis.

Mr. Knorr said the city had yet to face a compliance problem with any firm involved in city bond deals, under the restrictions of the current ordinance.

"In our situation, we have not had one where it's failed to comply (with the ordinance)," he said.

"Our objective is to create an atmosphere towards divestment," Ms. Shiller said, adding that she hopes a more restrictive ordinance would make Chicago residents more aware about firms that do business with South Africa.

Thirty-three of Ms. Schiller's fellow alderman supported the drafting of her proposal, and Mayor Richard Daley's administration worked with her on the measure.

"We're very enthusiastic about what she is trying to do," said Valerie Jarrett, the city's deputy corporation counsel. "But, we want to come up with something that's workable for the comptroller and the purchasing agent and everyone."

Ms. Shiller also said she hopes to get a "direct signal" for Chicago from Nelson Mandela, South Africa's black leader, during his visit to the United States. While his schedule does not include a stop in Chicago, Ms. Shiller said the African National Congress was aware of what she is trying to do with the ordinance and that Mr. Mandela may address Chicago in one of his talks.