Doyle's Mutual Fund Investments Include Oil, Tobacco Companies

Source from:  By Keegan Kyle Post-Crescent Madison bureau July 2, 2007 07/05/2007

Two industries often criticized by Gov. Jim Doyle - Big Oil and Big Tobacco - are among his personal investments, according to financial documents filed with the state Ethics Board. Doyle invests in several mutual funds that contain two of the largest U.S. oil companies, ExxonMobil and ConocoPhillips, and one of the world's largest tobacco companies, British American Tobacco. The governor, who has accused Big Oil of gouging consumers at the gas pump and attacked Big Tobacco for putting a squeeze on Wisconsin's economy, said through a spokesman on Friday that he has no problem with investing in mutual funds that include oil and tobacco companies and has no plans to divest from them. Doyle's spokesman Matt Canter said that Doyle has never considered his personal investments while conducting the state's business. "His job is to do what's in the best interest of this state, not what's in the best interest of some of these big oil and tobacco companies," Canter said. Though Doyle's investments fall within Ethics Board guidelines, and are common among investors, an advocate for open government says the public has a right to scrutinize the financial holdings of the state's highest elected official. "That's exactly what the public ought to know - whether there are issues of hypocrisy," said Bill Lueders, president of the Wisconsin Freedom of Information Council. "Why should Governor Doyle be benefiting from tobacco sales?" Doyle's financial disclosure In his 2007 economic statement filed with the Ethics Board in January, Doyle reported investing more than $50,000 in each of six mutual funds as of Dec. 31, 2006. Measured by net assets, three funds contain oil and tobacco companies in their top five holdings, according to recent fund reports. ExxonMobil ranks second in the Hussman Strategic Growth Fund with 2.3 percent. ConocoPhillips ranks fourth in The Muhlenkamp Fund with 5 percent. British American Tobacco ranks second in The Causeway International Value Fund with 3 percent. Mutual funds are investment portfolios managed by individuals who then sell shares to others. The portfolios invest in multiple - sometimes hundreds - companies to varying degrees. The profits earned by these companies are shared with the mutual fund and, in turn, the fund's investors. William Lepley, a finance professor at the University of Wisconsin-Green Bay, said most mutual funds don't invest more than 5 percent in a single company. He said 3 percent is about average for a fund's top holdings. Lepley also said most investors probably couldn't name their mutual fund's top holdings. "I think most people who buy them (mutual funds) don't want to worry about managing stocks," he said. When Doyle was elected governor in 2003, Canter said, he consulted the Ethics Board, other elected officials, financial advisers and the National Governor's Association about his investments. Mutual funds seemed like the best option because they provide transparency and eliminate conflict of interest, Canter added. "Mutual funds are a way that a lot of people choose to invest. It leaves the decisions up to the people who run the fund," he said. "Since he became governor, he has not become involved in specific decisions that involve those funds." Doyle within ethics guidelines Roth Judd, executive director of the Ethics Board, said Doyle's investment decisions likely would not warrant an ethics violation. In fact, Judd said, he generally recommends public officials invest in mutual funds because they tend to represent an investment in the economy rather than one industry or one company. "Well diversified mutual funds are a good strategy to invest independently," Judd said. "The great advantage of a mutual fund is that all funds are public." By law, public officials are required to file a statement of economic interests with the Ethics Board during each year of office. Lawmakers must report investments, sources of income and gifts. Reported investments fall into two categories: less than $50,000 or more than $50,000. In his most recent statement, Doyle reported 14 small and six large mutual fund investments. He reported no money in direct company stocks. David Kathman, a mutual fund analyst with Morningstar, said some fund managers attract certain investors by avoiding industries like tobacco or gambling. Other managers create "green funds" that aim to invest in companies with good environmental records. Unless an investor purposely seeks a discretionary fund, oil companies like ExxonMobil or ConocoPhillips are common, Kathman said. "You would have to make a special effort to avoid an investment that contains oil companies," he added. Lueders called the Ethics Board financial reports "lamentably vague" because investment specifics are not required. He said the public should require disclosure of shares of stocks or mutual funds. Nonetheless, he said, the current system is a "mechanism for checking for potential conflicts of interest." Taking on Big Oil In his tenure as governor, Doyle has criticized the oil industry for gross profits - ExxonMobil posted a U.S. record $39.5 billion in 2006 - and this year proposed a new tax on oil company gross revenues in his state budget proposal. In his Feb. 13 state budget address, Doyle said oil companies have driven up the cost of gasoline - making road construction more costly - and should therefore help finance transportation projects. "From the price of gas to the price of asphalt, the oil companies have gouged this country in every way they can think of," Doyle said in his address. "In the next 24 hours, the oil companies will make $310 million in profit. That's not their expenses - that's just pure profit and it's coming right out of our pockets." Some of that profit filters back to investors, including Doyle. It's a scenario that New London resident Nancy Dalpiaz said she wondered about, but never checked out. "I think the average person doesn't realize most mutual funds contain oil companies," said Dalpiaz, who submitted questions to a public hearing in 2005 where Doyle ordered the state to subpoena oil companies regarding high gas prices. "I think a lot of people are naive to it." Fighting Big Tobacco Even before his time as governor, Doyle supported anti-smoking initiatives in Wisconsin, and as attorney general helped to negotiate in 1999 a settlement with tobacco companies worth $5.9 billion. The state under Gov. Scott McCallum eventually converted that settlement into a deal for a one-time payment of $1.6 billion to pay down debt. Recently, Doyle called on the Legislature to approve a $1.25 per pack tax increase and a statewide workplace smoking ban. Speaking at a May 1 Tobacco Control and Prevention Conference in Madison, Doyle said the anti-smoking initiatives would improve Wisconsin's health and economy by placing less stress on the health system. "Although we have made a great deal of progress over the last few decades, the cost of treating tobacco-related illnesses continues to drive up health care costs for everyone, and is putting a squeeze on businesses and families across Wisconsin," Doyle said. His economic interest in Big Tobacco doesn't surprise the anti-smoking lobby. Maureen Busalacchi, executive director of SmokeFree Wisconsin, said she also tries to avoid investing in tobacco companies, but said, "It's difficult because it seems like big tobacco is everywhere." Although Busalacchi said she hopes Doyle will divest from his financial interest in Big Tobacco, she understands tobacco-free mutual funds can be hard to track down. "There is no doubt in my mind where he's at on big tobacco," she said. "It would be different if he was buying pure stock" from a tobacco company. Enditem