FOR IMMEDIATE RELEASE, March 18, 2008 -- Pennyfarthing Investment Management, L.L.C., an independent investment adviser and newsletter publisher, today announced that it has launched a critical examination of the socially responsible investment (SRI) mutual fund industry, to be posted as a collaborative effort. A diversity of perspectives, opinions and further analysis are welcome.

The forum will be moderated according to civil terms of discussion. Contributors should distinguish between opinions and facts, with links to sources integrated within their comments.

For too long, the portfolio management of SRI mutual funds has not agreed with their marketing. “If the SRI industry were a corporation, it wouldn't qualify in a rigorously screened portfolio,” stated the environmentalist Paul Hawken who authored a critical report Socially Responsible Investing, published by the Natural Capital Institute in 2004. “The SRI industry needs to change. While SRI investors call for corporate transparency, the industry is closed, proprietary and secret.”

For more, see our press release announcing the launch of

Thursday, December 15, 2011

Principle Profits an SRI adviser accused by the Commonwealth of Massachusetts

The Massachusetts Securities Division on December 14, 2011 accused Principle Profits Asset Management of fraud.  The firm is a one-man investment adviser led by Dan McKenna operating as a socially responsible investment adviser.  Doing business in Amherst, Mass, he managed $18 million for 115 clients.

McKenna solicited twenty-two of his clients to invest over $1 million into the equity of his business, both at its founding in 1993 and nearly every subsequent year after that.  Unknown to them, his business was posting losses and had a negative net worth, even as it generated revenue of over $100,000 per year.  In effect, he withdrew the money that clients invested for his own personal use while he boasted to them, as quoted from his web site:

Principle Profits Asset Management, Inc. is firmly committed to the concept and practice of socially responsible investing. This is not just a part of what we do it is all that we do. We believe that social-issues assessment is a vital component of a wise and prudent investment philosophy. The dual bottom line of social responsibility and long-term profitability are inextricably linked, creating not only a moral imperative, but also the potential for enhanced financial returns.
-- Principle Profits' web site.

This is quite a stunning revelation and appears it would result in severe financial losses for his clients.  While we only know what the state accuses McKenna of, it might well be ruinous for many of them.  One woman he convinced to invest into his business over half her $25,000 in savings.

(As way of disclosure, I am an investment adviser located in a neighboring town and had previously advised an individual who fled McKenna's web.  She did not tell me of and I did not see any such suspicious investment listed on her account statement.  She was one of the lucky ones.)

In many other cases where this has played out with the clients of other disreputable investment advisers, it has resulted in nearly total losses, the money spent, not to be returned.

The moral of these unfortunate stories is that so-called socially responsible advisers can be just as nefarious in their activities as anyone else.  It might well be their appearance of ethical upstandingness that allows these scam artists to get away with their schemes. 

At least until the jig is up....