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Pension funds representing New York City's police officers and firefighters have accused General Electric Co. of using its Canadian subsidiary to skirt rules prohibiting U.S. companies from dealing with terrorist-linked countries.

William Thompson, the city's comptroller, filed a shareholders' resolution yesterday demanding that GE's board of directors create a committee to review the company's business operations in Iran, which has been classified as a "sponsor of terrorism" by the U.S. federal government.

General Electric Canada Inc. is supplying four hydroelectric generators to Iran Water and Power Resources Development Co. as part of a continuing $1.44-billion (U.S.) extension to the Masjed-e-Soleyman hydro plant on the Karun River in the western reaches of the country.

The sale of the turbines, first announced in July, 2000, was completed with $28-million (Canadian) in vendor financing from the Canadian federal government's Export Development Corp., a Crown corporation. EDC may commit up to $5.9-million more in financing for additional equipment, according to a spokesman with GE Canada. The company is still designing the generators and expects to ship them to Iran in 2005.

In his submission on behalf of the pension funds, Mr. Thompson suggested that GE's use of its Canadian subsidiary to carry on business with Iran "violates the spirit of the law," and could impair shareholder value by exposing the company to possible "negative publicity, public protests, and a loss of consumer confidence."

He submitted similar resolutions yesterday calling for reviews at Halliburton Co., a Houston-based company that provides services to the oil sector, and ConocoPhillips, an energy company also based in Houston.

"If we are trying to eradicate terrorism, we must ensure that companies in our portfolio are not using offshore subsidiaries to legally evade United States sanctions against terrorist-sponsoring states," said Mr. Thompson, who acts as custodian for the $80-billion (U.S.) worth of assets held by New York's five public pension funds. "This is an issue of paramount importance."

Gary Sheffer, a spokesman for GE in the United States, said the company has no plans to cease its business operations in Iran.

"We adhere to all U.S. laws regarding our business activities in Iran," he said, adding that representatives of GE discussed the issue with Mr. Thompson in a meeting last week. "It's all compliant with U.S. law and we take these things very seriously."

Mr. Sheffer said GE's Canadian hydro operations report to GE's Norway-based European subsidiary, which in turn is responsible for managing the project in Iran.

Although GE believes its business in Iran is legal, it will not mount a formal challenge to the shareholder proposals, Mr. Sheffer said.

Adam Pener, chief operating officer of the Conflict Securities Advisory Group in Washington, D.C., said he expects to see similar investor resolutions, especially in light of escalating geopolitical unrest.

His company, in partnership with the Investor Responsibility Research Center, has developed a "global security risk" product that monitors companies doing business in six countries -- Iran, Iraq, Libya, North Korea, Sudan, and Syria -- that are regarded by the U.S. government as state sponsors of terrorism.

The product, which is used by New York's comptroller's office, assesses possible financial or reputational risk to companies conducting investment or trade in these areas.

"This is really at the infant stage of where this is going to be two or three years from now," Mr. Pener said. "It is a lasting, and soon to become boilerplate, part of the investment community, not just in the U.S. but in Canada, in Europe, and elsewhere. This is something that's going to affect every single asset manager and portfolio manager in the business."

Halliburton, which opened an office in Iran through its Cayman Islands subsidiary, has challenged the pension funds' resolutions, according to the comptroller's office.

Mr. Thompson's office said ConocoPhillips, which has operations in Syria and Iran through its U.K. division, has not challenged the resolution.