Investing in sin.

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JULY 3, 2006

Investing in sin.

In 2004, a group called the Rainforest Action Network (RAN) began
pressuring JPMorgan Chase to cut off ecologically unsound projects,
such as a Morgan-financed oil pipeline through the Ecuadorian
Amazon. The effort consisted mostly of standard activist
fare--protests at branch offices, a blitz of accusatory ads. But
one tactic especially galled conservative busybody Steve Milloy: In
December, RAN dispatched a contingent of second-graders from
Fairfield, Connecticut, to protest the bank's lending policies at
its Manhattan headquarters. Milloy, who would later dub the
incident "ideological child abuse, " mobilized for a fight.Except that Milloy wasn't satisfied with the usual conservative
agitprop. What he had in mind was something new: a mutual fund
dedicated to battling the creeping influence of environmentalists
and other leftists over corporate America. His Free Enterprise
Action Fund would invest in companies being bullied by liberal
activists. These investments would, in turn, allow him to attend
the shareholder meetings as a kind of counter-mau-mau-er. In the
spring of 2005, for example, JPMorgan had appeased RAN and its
allies by, among other things, committing the company to advocating
reductions in greenhouse gases. Milloy subsequently showed up at a
JPMorgan annual meeting and laid into CEO William Harrison for
making the company "a tool of the radical environmental movement."

There was a time when being a right-wing investor meant you cared
about the same things as every other investor, only more so.
Conservatives were the cold, unemotional types who would sell their
kids into slavery if it meant boosting their portfolio. But, these
days, Milloy and a handful of like-minded fund managers seem more
interested in scoring ideological points than in scoring a buck.
It's enough to make you pine for a good old-fashioned tight-wad in
a pinstriped suit.

The annual Doctors for Disaster Preparedness (DDP) conference is
hardly the place you'd expect to find a mutual-fund manager
prospecting for investors. The DDP was formed in the early '80s to
lobby for a strong civil defense as insurance against Russian
nukes. After the Soviet Union's demise, it refashioned itself as a
kind of existential-threat referee, sorting out "manufactured"
dangers (like global warming and ozone depletion) from real ones
(like the risk of a dirty-bomb explosion). Suffice it to say, DDP
members seem more interested in the apocalypse than their
401(k)s--the group's website features an ad for a "24/7 Radiation
Monitor and Alarm" called NukAlert. And, yet, there was Milloy
pitching his fund at last July's DDP gathering in Las Vegas.

Milloy is revered in some conservative circles for his skeptical
writing on subjects like climate change and the dangers of
secondhand smoke. (Under the headline "waiting for gore-doh...,"
his website,, tracks the time elapsed since he
challenged Al Gore to a global-warming debate.) As the new republic
reported earlier this year, much of the financing for Milloy's
science-debunking comes from the oil and tobacco industries, though
that hasn't stopped it from running in such outlets as
(Milloy didn't respond to my requests for comment.) This conflict
of interest doesn't appear to trouble DDP, either. "He has written
so eloquently about rational risk assessment, debunked damaging
myths," gushes DDP president and internist Jane Orient.

Once Milloy finished his spiel, the doctors practically stumbled
over themselves lining up to invest. "During the Q&A period, there
was more than one person that got up and said, before asking a
question, `I'll go home and write you a check,'" says Jack Dini, a
conference attendee who personally forked over


In making the case against Wall Street, conservatives like Milloy
wield a historical narrative that goes something like this: Up
until about 30 years ago, liberalism was the most potent political
force in the country. But conservatives started to regroup in the
1970s, and, three decades later, they finally conquered Washington.
It was then that liberals did something truly insidious: They
shifted their focus onto the boardrooms of corporate America, where
they could implement their enviro-feminist-multi-culti-socialist
agenda without ever winning an election. Recent liberal triumphs
include the anti- sweatshop campaign against Nike and Reebok and
the effort to win gay partnership benefits from Home Depot.

To gauge how exercised conservatives are by "corporate social
responsibility, " you need only consult a recent fatwa issued by
supply-side guru Arthur Laffer, father of the eponymous curve.
Laffer's pronouncement took the form of a study purporting that
socially responsible companies underperform relative to their
competitors. This is the old conservative complaint: Being a
do-goodnik is bad for the bottom line. But there is also a new,
more ideological argument that explains why a corporate shill like
Milloy would transform himself into a CEO- stalking gadfly: If the
social responsibility movement isn't defeated now, it will
eventually undermine the entire American way of life. Call it the
Domino Theory of anti-capitalist subversion.

The irony is that, in order to stop this imminent collapse of the
capitalist order, conservatives are themselves making investments
that are bad for the bottom line. The fine print in the Free
Enterprise Action Fund prospectus notes that Milloy's investing
guidelines "may cause the Fund not to perform as well as other
Funds that choose their investments based strictly on financial
considerations." In 2005, the fund earned an anemic 2.3 percent
return. But, despite this, Milloy attracted over

$5 million from investors in a single year. And it's hard to find
one who isn't satisfied with the fund's psychic rewards.

Consider the case of Hugh Wise, an Action Fund investor who met
Milloy while working as an industrial chemist in Washington, D.C.
Wise says he transferred

$1,000 from his Merrill Lynch account to the Free Enterprise Action
Fund as soon as Milloy mentioned the new venture. He did so because
he deemed it important to "take environmental issues out of the mix
for considerations for major corporations ... to dismiss them with
ridicule if necessary." Wise doesn't expect to make any money from
his investment, but he believes in the cause so strongly that he
eventually kicked in another $1,000.

Not every conservative is ready to blow his nest-egg on an
ideological statement, of course. For those conservatives, Dan
Ahrens has created just the fund. Back in 2002, the Dallas-based
mutual-fund executive could barely contain his schadenfreude when a
group of socially responsible mutual funds (known as SRIs) got
trampled in the tech bust. Ahrens began joking to friends that he
could have made a killing investing in all the tobacco, alcohol,
gaming, and aerospace companies the SRIs spurned. On a lark, he
plotted the recent performance of these sectors and realized he was
right. These efforts eventually begat the "Vice Fund," which Ahrens
promised would invest at least 80 percent of its money in various
"vice" industries.

As gimmick funds go, the Vice Fund has been a minor hit, attracting

$50 million in capital during the three years Ahrens ran it. Ahrens
claims the fund's primary mission is to make money, and it's true
that the fund has posted above-average returns. But it's hard to
avoid the impression that Ahrens was as eager to make a point as
the SRIs he scorns. In his book, Investing in Vice: The
Recession-Proof Portfolio of Booze, Bets, Bombs, and Butts, Ahrens
blasted the hypocrisy of SRI funds that invest in rapacious
monopolists like Microsoft but not honest, well-run corporations
like Anheuser-Busch. The fund's cartoonishly ominous,
black-and-white website notes that the Founding Fathers were
tobacco farmers and suggests there's something patriotic about
investing in vice. It's a shtick that makes conservative
publications giddy. "The introduction of the Vice Fund flies in the
face of so-called socially responsible and morally responsible
investing," crowed a Washington Times article in 2002.

Ahrens left the Vice Fund last September after a falling out with
its parent company. From time to time, he still gets wistful about
his Vice Fund glory days. "I'd love to be managing that fund
still," he confided to me. That probably helps explain his latest
venture: A mutual fund devoted entirely to gambling stocks. It
almost makes you wonder if, somewhere in the conservative
imagination, there isn't a Skin-Flicks Growth Fund lurking just
around the corner.

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