Retire Rich

September 10, 2007

Editor's Desk: Putnam Whistleblower Unlikely to See Reward

When Peter Scannell appeared before Congress to testify about market timing at Putnam Investments, he hardly appeared the picture of a valiant hero. Scannell was somewhat incoherent, his written testimony riddled with misspellings, according to one of our reporters who was there.

A former waiter at a casino, Scannell got a job as a customer service rep at Putnam's call center, where he noticed irregular trading by a number of clients, including a chapter of the Boilermakers union.

As the story of Scannell's involvement in the scandal unfolded, it continued on a bizarre path, with Scannell claiming he was hit on the head with a brick by a man wearing a Boilermakers sweatshirt outside an Alcoholics Anonymous meeting site, where Scannell was headed.

While Scannell may not appear to be a champion, not only did he do investors a good turn by exposing pervasive greed throughout the industry, but he also helped regulators put an end to the malfeasance in 2003 before it got even more out of hand and became even more of a black eye for an industry that has always touted its fiduciary honor. Although the national media briefly touched on the scandal, it largely dropped it and left it to the financial and business press.

As it was, the market timing was largely confined to three years, beginning in 2000 as the market tanked and hedge funds and mutual funds resorted to desperate measures to seek sure profits.

For the Appeals Court of Massachusetts to deny Scannell's case seeking as much as $15 million of Putnam's $193.5 million settlement with regulators because he failed to sue Putnam-although he did sue the state-appears to be based on a technicality rather than on merit. The appeals court said Scannell is not entitled to an opportunistic "bounty."

Although Scannell might appeal the ruling to the Massachusetts Supreme Judicial Court, it now appears highly unlikely he will ever be compensated.

No, Scannell is not the picture of a hero and probably had no idea of what he was getting himself into. That includes not getting involved, as the court has alleged, for monetary gain.

Scannell certainly made a great sacrifice by coming forward. It is not only fitting to compensate him in some way but to set an example so others can be as brave.

(c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

http://www.mmexecutive.com http://www.sourcemedia.com

Recent Posts

Mutual Funds Must Go High-Tech-v. 3.0

Over the last number of years, mutual fund transfer agencies and shareholder communications companies have tried to convince shareholders to accept paperless summary prospectuses, proxies, trade confirmations and electronically stamped signatures. Fund supermarkets and web home pages have broadened their horizons to include market commentary, videostreaming and personal financial news. At the same time, exchange-traded funds, funds-of-funds, hedge FoFs, unified managed accounts, target dates, 401(k) auto enrollment and heightened awareness among people throughout the country of the difficulties of being retired-have taken off.

Test of the Massey Mine

Fund giant boards of directors at AllianceBernstein, American Funds, Fidelity, Vanguard and others are reportedly starting to bring about meaningful change in the corporations in which they are invested. Proof should come any day now, when the shareholder proxy votes from the annual meetings are released. Fund chief executive officers spoke about the power and influence their proxies wield in an interesting Reuters article last week, "Mutual Funds Seek to Shed 'Rubber Stamp' Tag."

Milestones

In 2011, 401(k) plans will turn 30, but the milestones the mutual fund industry has reached in this time are but a nanosecond in the history of U.S. retirement policy. Executives we interviewed for this special edition of Money Management Executive for the Investment Company Institute's meeting in Washington, speak to important milestones of the recent past and into the future. Look inside for observations and forecasts by Ted Benna, Robert L. Reynolds, Dan Fuss, David C. John, Steven Miyao and others.

At Age 30, It's Time for a Revamping for the 401(k)

This year marks the 30th anniversary of the 401(k), the revolutionary retirement savings vehicle that has been annihilating pension plans, empowering individuals to take part in the stock market-and, sadly, that left retirees with the misfortune of leaving the workforce in 2000 or 2008 very badly off. The cracks in the system are prompting many asset managers, regulators and retirement experts to take a hard look at 401(k)s and how they can be fixed.

Index of Posts

0 Comments

Be the first to comment on this post using the section below.

Add Your Comments...

Already Registered?

If you have already registered to Money Management Executive, please use the form below to login. When completed you will immeditely be directed to post a comment.

Not Registered?

You must be registered to post a comment. Click here to register.