Do You Support Terrorists?

If asked if they would like to buy stock in a company that does business in a state sponsor of terrorism, most investors would be quick to say, "No, thanks." But chances are they already do.

The Securities and Exchange Commission this week made it easier to find out which companies are generating revenue from Cuba, Iran, North Korea, Sudan, or Syria. Anyone with an S&P 500 index fund in his or her retirement account is likely to be investing in such a company.

Schlumberger, Halliburton, Western Union, and Xerox are among those in the S&P 500 that do business in those countries. There's a Four Season Hotel in Damascus, Syria. AstraZeneca has drug reps in Cuba (probably no surprise to Michael Moore). And Unilever has discovered that people in Sudan, Syria, and Iran want to buy soap, too.

The information was always on the S.E.C.'s website -- publicly traded companies must disclose that information in their annual reports, which are all online. But the S.E.C. now has a dedicated section its website where it has culled that information for investors.

The site was launched after Congressional hearings earlier this year stepped up the pressure on the S.E.C. In May, Senator Christopher Dodd sent a letter to S.E.C. Chairman Chris Cox asking for increased scrutiny on the disclosures and transparency for investors.

Now that the site is up and running, the companies doing business in these countries are none too pleased. According to an article in the Financial Times, many of the companies are outraged by the S.E.C.'s move.

They say the site doesn't make it clear to what extent they are involved in those countries, even though the site includes excerpts from the relevant passages of their annual reports.

Others complain that the site is misleading because they may have begun divesting their operations since their last filing. And they seem to have a point -- it appears the S.E.C. did little more than search for mentions of the countries in their library of filings.

Cadbury Schweppes, for instance, appears on the list for Syria. But its filing clearly states that it's no longer there. "During 2006, we sold our beverage businesses in Europe, Syria and South Africa, markets where we did not have sustainable competitive advantage," it reads.

Perhaps next year these companies will become more creative with the wording in their annual reports to avoid appearing on the site. Until then, we doubt if we'll see many 401(k) investors unloading shares of S&P 500 Index Funds.

by Megan Barnett