Do you know where your investment cash is going? If you are in a public pension fund, there's a good chance that you may be unknowingly investing in companies that do business in terrorist-sponsoring states.

America's largest and most prominent public pension systems invest between 15 and 23 percent of their portfolios in such companies, according to a report released Thursday by the Center for Security Policy.

"One of the things that has been of prominent concern to us as national security professionals is the role that financial, economic, technology and energy developments have on our security," the center's president, Frank Gaffney, said during a conference call with reporters.

To that end, it's vital to determine the extent to which foreign governments, their state-owned companies and others working with terrorist states have "contributed to the threat we face to our national security and, for that matter, to our individual security, as terror has come to the United States," Gaffney said.

The CSP report found that of the 87 public pension funds that provided data — which represents just a few companies doing business in rogue states (search) — the pension systems ranged from Rhode Island, with close to $400 million invested in 41 companies that are active in terrorist-sponsoring states, to the California Public Employee Retirement System, which has over $17 billion invested in 201 such companies.

Those 87 public funds provided their data "kicking and screaming," Gaffney said.

"No effort has been made on the part of the vast majority of these institutional investors to disclose to their subscribers and beneficiaries the extent of their exposure [to such nations], let alone end that exposure by divesting themselves of doing business with state sponsors of terror," he said.

The center also announced the launch of its DivestTerror.org Web site, whose primary objective is "to starve terrorists of essential funding and technical support."

The report identified six state sponsors of terror (search), as designated by the U.S. State Department: Iran, Libya, North Korea, Sudan, Syria and Iraq when it was ruled by Saddam Hussein.

The $73 billion in projects being undertaken in terror-friendly states by companies that America’s pension systems hold in portfolio is just a fraction of the actual total business being done there, according to the report.

On average, the leading U.S. public pension funds had investments in: 73 companies doing business in Iran (search); 24 companies doing business in Libya (search); 26 companies doing business in Sudan (search); 31 companies doing business in Syria (search); and 9 companies doing business in North Korea (search).

Taking On Corporate America

Some state and federal leaders have tried to rein in such activity.

New York City Comptroller William Thompson, for example, has tried to shine light on the issue, since he oversees $80 billion in pension funds for city workers, including firefighters and police officers. He identified companies such as Halliburton, Conoco-Phillips and General Electric as among those that invest in such countries.

The Houston-based Conoco-Phillips has a huge gas production business in Syria, while General Electric does a great amount of electrical work in Iran. After pressure from Thompson, the New York City Fire Department Pension Fund and the Police Pension Fund, Conoco-Phillips adopted a policy in February that limits its domestic and foreign subsidiaries' future business activities with rogue states.

"I hope that these decisions will encourage other companies to thoroughly examine their relationships with rogue nations, and end any ties that can promote terrorism," Thompson said in a statement.

Added Patrick Lynch, president of the New York City Patrolmen’s Benevolent Association: "There are hundreds of New York City police officers serving double duty in the military in Iraq … it is simply wrong to have their pension money invested where it might support terrorism."

U.S. law bans almost all commerce with such rogue nations, but federal law doesn't apply to any foreign or offshore subsidiary that is not run by Americans.

Halliburton, for example, has an offshore subsidiary in the Cayman Islands that does business with Iran.

"Halliburton's business in Iran is clearly permissible under applicable laws and regulations," reads a Halliburton statement. "We do not always agree with policies or actions of governments in every place that we do business and make no excuses for their behaviors … [but] it is neither prudent nor appropriate for our company to establish our own country-by-country foreign policy."

Both GE and Conoco-Phillips also maintain that they aren't doing anything illegal.

National security professionals say if more pressure is put on such companies to reveal where their investors' money goes, it may make a difference.

"If you could stop even $1 billion, let alone many billions of dollars, that American investors are unknowingly making available to terrorist-sponsored regimes, I think it would have a vastly more pronounced effect," Gaffney said.

Lawmakers Warn of Threat

Lawmakers on Capitol Hill have also seized on the issue as one of great importance to the nation's security.

Rep. Tammy Baldwin, D-Wis., earlier this year sent a letter to Attorney General John Ashcroft asking for a special counsel to be appointed to investigate whether certain corporations are violating U.S. law by conducting business with state sponsors of terrorism.

"In order to address these [terrorism] threats, over the past two decades, Congress has passed laws to prevent U.S. persons and U.S. corporations from doing business with these regimes," the letter states. "Enforcement of these laws is crucial to our national security."

Sen. Frank Lautenberg, D-N.J., sent letters last week to all 50 state governors and pension fund managers informing them that many publicly traded companies around the globe are doing business with terrorist-sponsored states.

"I am writing to alert you that many of these foreign and U.S. companies are held in the portfolios of public pension funds such as your own, despite the serious risk these business dealings with terror-sponsoring regimes pose to our homeland security and the companies' long-term performance and reputations," Lautenberg wrote.

He noted that Securities and Exchange Commission Chairman William Donaldson recently called corporate ties to such countries a "crucial issue for investors." That agency recently opened an Office of Global Security Risk to, in part, ensure that companies properly disclose such business activities to investors.

Lautenberg also introduced legislation in May to strengthen sanctions in law prohibiting commercial transactions between U.S. companies and State-designated rogue nations, but that measure was defeated.

Many state pension funds currently have investment restrictions concerning companies linked to alcohol, gambling and tobacco. Many critics argue that terrorism is an equal -- if not greater -- concern.

"If it's good enough for tobacco, it seems to be that this kind of investor activism and this kind of free market play is certainly good enough for terror," Gaffney said. "Tobacco won't necessarily kill us en masse, but terrorists will."