Welcome Barron’s Readers: Why Investors Should Shun Strip Club Profits

Today’s Barron’s contains our letter to the editor, responding to a July 2 interview with Peter Siris, managing partner of Guerilla Capital Management. In the interview (excerpts), Siris recommends strip clubs as an investment. Here is the text of our letter as published:

Turning a Blind Eye

To the Editor:

Strip clubs may be lucrative for their owners (“A Fresh Eye on China Stocks,” July 2), but it’s not true that once you eliminate the organized-crime connection, there’s no problem.

These clubs are like wrecking balls to marriages and communities. The dancers work under abusive conditions. Drugs, disease and prostitution are prevalent, and the realities of sex trafficking from Eastern Europe are not to be taken lightly. It’s no wonder that alert communities use zoning to keep these enterprises away from homes.

Responsible investors need to ask themselves if this is really a business they want to be in.

Adam R. Cohen
Northampton, Mass.

The articles below show the harms strip clubs bring to marriages, communities, and the performers. Some of the language is explicit:

The Science Behind Pornography Addiction (explicit language)
[Performers in the sex industry] have high rates of substance abuse, typically alcohol and cocaine, depression, borderline personality disorder which is a particularly serious disorder and dissociative identity disorder which used to be called multiple personality disorder. The experience I find most common among the performers is that they have to be drunk, high or dissociated in order to go to work. Their work environment is particularly toxic. One study on strippers indicated that they were likely to be punched, slapped, grabbed, called cunt and whore and to be followed home or stalked. Not surprisingly, these women often work with bodyguards. This live form of pornography causes violence and the customers receiving these Permission-Giving Beliefs become carriers of these beliefs back to their homes, onto their jobs, into the street, onto the school yard. There they encounter women and children who do not have bodyguards.

The terrible work life of the pornography performer is often followed by an equally terrible home life. They have an increased risk of sexually transmitted disease including HIV, domestic violence and have about a 25% chance of making a marriage that lasts as long as 3 years.

Carolyn McKenzie: Disease, Intoxicants Prevalent Among Strip Dancers (explicit language)
I’ve had wives call me and say, “I’m reading the credit card bill, and there’s all these strange expenses on it, places I’ve never heard of.” Well, those places are the cover organizations for the clubs, or the massage parlors, or lingerie services that their husbands have been frequenting. The next question I get is, “Well do you think I need to get a physical check-up?” And I say, “Yes, you do.” I can’t tell you how many of them call me back and say they have turned up positive for an STD. I also want to tell you about these 39 women that we have helped to get out of the industry. Out of that number of 39 women, only 6% were married. 90% were single moms trying to support their kids… 75% of them had STD’s when we took them in for their medical check-ups. 16% had felony records that they were working with and 25% had misdemeanors. 95% of them were using drugs and alcohol, and three of them had addictions so severe that we had to put them in long term rehab programs.

“Waitressing, I cleaned the floors and I own a box of men’s wedding rings that I found on the floor.”
I went back to the strip bars to make money. I cannot tell you the lie and the fantasy that it is for men. Waitressing, I cleaned the floors and I own a box of men’s wedding rings that I found on the floor…

The degradation and inferiority and humiliation of being presented as two tits and a hole for entertainment was not as bad as the sexual harassment I received from the management of these places. Customers are not allowed to touch you, but management can and does. You cannot complain to the Labor Board because they say you put yourself there willingly, and usually it’s under the table. I felt worthless…

Strip Club Tips: How to Savor an Exquisite Blend of Fantasies, Lies, Exploitation and Despair (explicit language)
For a stripper’s perspective, we present a selection from 37 Stripper Rants, as posted in March to gripe site Ofuzi…

4) Don’t pull my thong up during a dance and ask me if it felt good. IT DOES NOT FEEL GOOD.

6) No I will not just let you “slip it in real quick” for $50 more bucks.

7) Yeah, my tits are real. As real as my affection for you…

13) My horniness is in direct proportion to your income…

18) STOP trying to grab my tits!!!!!!! That’s extra.

19) SHOWER FIRST, you nasty fuck!

22) Stop asking me why I do this job and try to get all psychologically analytical on me. For the money, you moron, that’s why…

24) NO, I will not take a dime sac for payment. I can tell it’s oregano anyway you stupid motherfucker!…

27) It is not okay for you to bounce me on your cock like a baby on a knee. Not okay.

31) Girls–what’s with the pole smell? Can we do a little hygiene check? Nothing than worse than twirling around the pole and getting a whiff of stale pussy…

Strip Clubs Are the Next Hot Thing on Wall Street, Fund Manager Tells Barron’s
“…the girls who work there, the dancers, or what the industry calls the “talent,” pay $150 to $200 a shift for the privilege of working…

“I asked one guy in the business, ‘What’s the biggest risk to your business model?’ He said if the government stops immigration from Eastern Europe.”

New York Times: “The Girls Next Door”; Worldwide Sex Trafficking; Role of Porn
In Eastern European capitals like Kiev and Moscow, dozens of sex-trafficking rings advertise nanny positions in the United States in local newspapers; others claim to be scouting for models and actresses…

”…[Young women’s] idea of prostitution is ‘Pretty Woman,’ which is one of the most popular films in Ukraine and Russia. They’re thinking, This may not be so bad…”

Kevin Bales of Free the Slaves says: ”The physical path of a person being trafficked includes stages of degradation of a person’s mental state. A victim gets deprived of food, gets hungry, a little dizzy and sleep-deprived. She begins to break down; she can’t think for herself. Then take away her travel documents, and you’ve made her stateless. Then layer on physical violence, and she begins to follow orders. Then add a foreign culture and language, and she’s trapped…”

”There’s a vast misunderstanding of what coercion is, of how little it takes to make someone a slave,” Gary Haugen of International Justice Mission said. ”The destruction of dignity and sense of self, these girls’ sense of resignation…”

If anything, the women I talked to said that the sex in the U.S. is even rougher than what the girls face on Calle Santo Tomas. Rosario, a woman I met in Mexico City, who had been trafficked to New York and held captive for a number of years, said: ”In America we had ‘special jobs.’ Oral sex, anal sex, often with many men. Sex is now more adventurous, harder.” She said that she believed younger foreign girls were in demand in the U.S. because of an increased appetite for more aggressive, dangerous sex. Traffickers need younger and younger girls, she suggested, simply because they are more pliable. In Eastern Europe, too, the typical age of sex-trafficking victims is plummeting; according to Matei of Reaching Out, while most girls used to be in their late teens and 20’s, 13-year-olds are now far from unusual.

US Appeals Court Upholds Daytona Zoning and Public Nudity Ordinances; No Grandfathering for Lollipop’s Gentlemen’s Club; Rebutting Daniel Linz
In 1981, after years of increasing urban blight and economic decline, the City of Daytona Beach adopted various zoning ordinances in an effort to reduce the perceived secondary effects of adult businesses by limiting the locations where they could open and operate.[1]…

Langston testified that the blight deterred investment — hotel development ceased in 1975, and in the late 1970’s, Daytona Beach was denominated the “City of Sleaze…”

David Smith, an assistant state attorney who had prosecuted drug and prostitution offenses in Daytona Beach, also testified that “‘most definitely’ there were more drug and prostitution offenses in topless bars than in other bars…”

…the City of Daytona Beach plainly carried its initial burden to show that the three challenged nudity ordinances furthered its interest in reducing the negative secondary effects associated with adult theaters. The City has produced a substantial body of evidence that it reasonably believed to be relevant to combating those problems…

…the City also relied on its own experiences to support its rationale. That legislative history includes: a document describing the difficulties faced by law enforcement in arresting and successfully prosecuting crimes relating to prostitution and pornography and listing arrests for prostitution and other crimes that occurred in or near many Daytona Beach adult businesses; a short memorandum written by the City’s police chief that provides “a partial list of situations, offenses and incidents which have occurred within the areas of topless bar establishments . . . . [that] can be substantiated by police reports and testimony of various police officers”; police dispatch records of calls for service (“CAD data” [“CAD” stands for Computer Automated Dispatch] [22]) from areas around adult businesses from November 1980 to July 1981, which were attached to the police chief’s memorandum; police reports of eighty-three prostitution arrests; police reports of seven arrests for assault and battery of a police officer in or near an adult theater; and the minutes of a public hearing summarizing local business owners’ firsthand accounts of criminal activity in and around adult businesses…

The Ordinance sets forth the following findings: “The appearance of persons in the nude in public places . . . increases incidents of lewd and lascivious behavior, prostitution, sexual assaults and batteries, attracts other criminal activity to the community, encourages degradation of women, and facilitates other activities which break down family structures and values…”

The City also relied on several controlled studies conducted by Dr. William George about the relationship between drinking alcohol and sexual conduct. Thus, for example, one study found that exposure to erotica led male subjects to drink more alcohol than did exposure to non-erotic materials.[27] Another study found that young men who believed they had consumed alcohol — regardless of whether they had in fact done so — displayed greater interest in viewing violent and/or erotic images and reported increased sexual arousal than young men who believed they had not consumed alcohol.[28] Still another study found that study participants perceived a woman they believed had consumed alcohol as being “significantly more aggressive, impaired, sexually available, and as significantly more likely to engage in foreplay and intercourse” than a woman whom study participants believed had not consumed alcohol.[29]…

…many crimes do not result in calls to 911, and, therefore, do not have corresponding records in the City’s CAD data.[31] This is especially true for crimes, such as lewdness[32] and prostitution, that the City sought to reduce by enacting the challenged ordinances…

See Henry Frederick, Police Chief: Spring Break, BCR Hurt Family Tourism, Daytona Beach News-Journal, Apr. 16, 2002 (“‘Youth-oriented street festivals like BCR and Spring Break keep family tourism away.’”); Anne Geggis, Barter on the Beach: Beads for Breasts, Daytona Beach News-Journal, Mar. 24, 2002 (“Daytona Beach police confirm they’ve been seeing more than usual this year — and issuing more $104 tickets for exposure of female breasts than at previous Spring Breaks. . . . ‘Even the chief this (past) weekend witnessed it and moved to make an arrest of a mother and daughter on Atlantic Avenue,’ says [a] spokesman for the Daytona Beach police.” . . . Some are concerned the atmosphere is ripe for an incident like the New York City ‘wilding’ of 2000 during which women’s clothes were torn off their bodies.”); Audrey Parente, BCR ‘Shocking’ for Pennsylvania Sisters, Daytona Beach News-Journal, Apr. 15, 2002, at 6A (“‘I saw guys exposing themselves,’ Miller said. Schubert said she saw ‘. . . w
omen in small clothes — thongs and very exposing bras. . . .’ Worse than the exposure, she said she saw drug use and drug sales. ‘I saw a young man in a car in front of me smoking a joint and passing it from car to car. They were walking around on the road.’”)…

In addition to crimes against persons, crimes against property, and sex crimes, the study that focused on Ordinance 81-334 also analyzed “miscellaneous incidents that share in common that they involve violations of social norms . . . ., includ[ing] drunkenness, disorderly conduct, drug offenses, liquor law violations, and weapons complaints.” (Experts’ Report 27.) The study found a statistically significant increase in these so-called “norm violations” in areas with adult theaters compared to control areas, (id. at 33-34), which could be read to support part of the City’s rationale for Ordinance 81-334. See Ordinance 81-334 § 2 (seeking to reduce “undesirable behavior” and “dangers to the health, safety and welfare of the public”). Similarly, the study that focused on Ordinance 02-496 found a statistically significant increase in drug related offenses in areas with adult theaters compared to control areas. (Experts’ Report 80, 105 tbl.10.)

State of Minnesota, Report of the Attorney General’s Working Group on the Regulation of Sexually Oriented Businesses, Office of the Attorney General (June 6, 1989)
This is a seminal work which investigates the secondary effects of adult businesses from a number of different research perspectives. Not only is the effect on crime included, so is the effect on neighborhood disorganization and disorder, as are the effects on property values addressed. The New York study also concluded that business locations with adult-oriented businesses had a significant loss of sales tax collections (42%) as compared to control areas. Studies of Minneapolis, St. Paul, Indianapolis, Phoenix, and Los Angeles are cited. RICO and organized criminal elements of the industry are also discussed. It was found that dramatic increases in crime rates were directly associated with the introduction of adult-oriented businesses into any community studied. Evidence is articulated indicating that property crimes were forty to fifty percent higher, and sex-related crimes were found to be seventy to as much as 500 percent higher–depending upon the municipality. Other non-crime community issues are also discussed.

Crime, Nuisances Motivate Cities to Regulate the Location of Adult Entertainment Uses

The City of Kent, Washington had similar experiences with the Roadside Inn Tavern. Prior to its forced closing, the Roadside Inn offered topless dancing and table dancing in conjunction with its selling of alcoholic beverages. Kent police investigations conducted in the summer of 1981 revealed a very high incidence of criminal activity at the Roadside, related primarily to sex crimes (prostitution) and drug related offenses. As a result of 57 hours of on-premise investigation, 162 charges were brought against 21 persons by the Kent Police Department. The report filed by the police stated: “The total time involved, and the number of charges, break down to a time expenditure of slightly more than 20 minutes per charge, attesting to the relative ease by which the subject of prostitution arises within an environment such as the Roadside.” In September, 1981, the Roadside Inn Tavern was closed by the City of Kent.

Bothell’s experiences with Mama Hoopah’s in 1982 demonstrated similar association between the use (an adult dance hall) and the occurrence of crime. Research by the Bothell Police Department also demonstrated the regional attraction that such an establishment can have. In one investigation of the 321 vehicles checked, 8 were registered in Bothell with most of the remainder from the Puget Sound region, though others had out of state registration. This is potentially significant in that nonresidents of an area may be less inhibited in their personal behavior when away from their community. Nonresidents may also be unaware of the needs or concerns of residents/owners of areas adjacent to the adult entertainment use…

Prosperous Minneapolis Commercial Area Blighted by Proliferation of Adult Enterprises
The adult bookstores and theaters which now line Lake Street have indelibly marked the character of the business community. Once a prosperous commercial area, East Lake Street now is characterized by decline and deterioration. Many legitimate businesses have moved out of the neighborhood and new ones have not replaced them. Business owners are frightened by the real possibility of business failure. When women do not feel safe on the streets, they will not come to the stores to shop. Legitimate businesses do not want to subject their employees, especially women employees, to harassment from the customers of the adult bookstores and theaters.

People in this neighborhood are demoralized and increasingly cynical about the fairness of the political process and of the legal system itself.

Secondary Effects Across America: 1977-1999
Austin, TX, 1986: Of 81 license plates traced for owner addresses, only three lived within one mile of the sexually oriented business; 44 percent were from outside Austin…

Seattle, WA, 1989: The increased number of cabarets resulted in citizen complaints, including phone calls, letters (from individuals and merchant associations) and several petitions with hundreds of signatures. Protests cited decreased property values; increased insurance rates; fears of burglary, vandalism, rape, assaults, drugs and prostitution; and overall neighborhood deterioration. The report noted that patrons of these cabarets most often are not residents of nearby neighborhoods. Without community identity, behavior is less inhibited. Increased police calls to a business, sirens and traffic hazards from police and emergency vehicles are not conducive to healthy business and residential environments.

Report to the Rome City Commission–Adult Entertainment, Police Department, City of Rome, Georgia, (March 6, 1995) (PDF)
This report includes crime data from the city of La Grange, Georgia… Located in that small suburb of Atlanta, is a three-year-old “adult nightclub.” In just one year (1994) that single adult-oriented nightclub generated 141 calls-for-service, with thirty-five of those calls being criminal in nature. Those crimes included such violent crimes as: eight criminal batteries and eight aggravated assaults (knives, baseball bats, and firearms with shots fired). The report also includes many of the other municipal studies articulated elsewhere in this digest.

A Study of Crime and Adult Entertainment, Police Department Memorandum, City of Tucson, Arizona, (May 11, 1990) (explicit)
In sum, a covert observational study. Investigating officers found that many of employees of the adult-oriented businesses were prostitutes who were offering private shows where customers could, for a price, observe them performing live sex acts. For “the right price” customers would be allowed to “touch the dancers.” Undercover operatives also learned that customers could hire the dancers to engage in acts of prostitution, and in some instances, these acts actually occurred on the premises with the knowledge of the management. Underage females were also being hired to dance nude. The report also confirmed many health-related perspectives: Ad
ult entertainment establishments provide an environment and atmosphere that is conducive to high risk sexual behaviors and practices with respect to sexually transmitted diseases (HIV and hepatitis B included).

Viewing Booths and HIV: An Open Letter to Thomas Lesser of Northampton, Attorney for Capital Video
Police reports suggest a number of Springfield Capital Video patrons are drunk. Scientists are finding that high-risk sex, intoxication and being HIV-positive correlate with each other.

Testimony in Minneapolis: Secondary Effects Around Adult Theaters; Police Suggest that Concerned Citizens Move Away
The police have gone to the Flick and tried to bust it time and time again. Finally the police in our residence have said, forget it, we are giving up, nothing has been done. We are not going in there and taking the chance of having our heads blown off. Us, the people that live in the neighborhood, we have to fear that day in and day out, especially the women…

It is a sad case when the police have approached my neighbors and myself and they said, “The best recourse you have and your husband have and your children is to get up and move.”