A new storm is brewing on the horizon for companies reincorporating in Bermuda.

California State Treasurer Phil Angelides yesterday said he will prohibit the Treasurer's Office and various state boards chaired by the Treasurer from engaging in business dealings with companies that have relocated, in name only, to offshore tax havens so they can "avoid paying taxes and to skirt legal protections for investors".

In a press release, Mr. Angelides also announced that he was prohibiting investments in such companies by a state-run pool of taxpayer funds and discouraging investment by the state's giant pension funds.

"Corporations hiding behind a mailbox in Bermuda are shirking their duty as Americans, and undermining confidence in the financial markets. These sham transactions, like the accounting scandals at Enron and WorldCom, are the kinds of deceptive corporate practices that have shaken the financial marketplace, and cost families, pensioners and taxpayers billions," said Mr. Angelides.

California's $45 billion Pooled Money Investment Account (PMIA), which is made up of state and local taxpayer funds, is now prohibited from investing in such companies.

Ingersoll Rand, which has expatriated to Bermuda, was eliminated as of yesterday from a list of eligible investments.

Meanwhile, Mr. Angelides said he had proposed that the state's pension funds, which hold approximately $250 billion in assets, stop investing in or otherwise doing business with US corporations that expatriate for tax purposes.

The California Public Employees' Retirement System or CalPERS has $351 million in holdings that Angelides has suggested they sell, including $287 million in equity and $63 million in fixed income investments.

The California State Teachers' Retirement System or CalSTRS has $401 million in such holdings, including $94 million in equity investments and $306 million in fixed income investments.