Putnam Says Ex-CEO Hid Abuses, Fights SEC Fines | AccountingWEB

Putnam Says Ex-CEO Hid Abuses, Fights SEC Fines

Putnam Investments accuses its ex-CEO of covering up improper trading at the company, which is planning to fight the Securities and Exchange Commission over fines levied in the case.

In documents released by the SEC this week, Putnam wrote that former CEO Lawrence Lasser knew employees were violating company rules but said nothing in order to protect his compensation, which totaled more than $100 million over the last five years.

"When it came time to respond to evidence of market timing by Putnam employees, Lasser made a conscious decision to stick his head in the sand," Putnam said in the documents.

Market timing is the quick buying and selling of mutual fund shares, which profit only a small number of employees and investors. Putnam last fall was the first of the mutual fund firms to be charged with securities fraud for improper trading, a practice that enveloped the entire industry in scandal.

The independent board of trustees of the Putnam Funds found that in addition to Lasser, two other top executives did not reveal their knowledge of market timing abuses at Putnam.

Board chairman John Hill told Reuters on Tuesday, "There were three officials at Putnam who had knowledge of the market timing activities of the Putnam employees in 2000 and 2001 who we felt were in a position of responsibility that they should have informed the board."

Hill named former chief investment strategist Tim Ferguson and general counsel William Woolverton, who still works at Putnam.

Putnam agreed to a partial settlement with the SEC last year, but the amount of fines was not finalized. The fines are set to be discussed at an April 19 hearing. A source familiar with the matter said the SEC is seeking at least $138 million in penalties, plus disgorgement.

A spokeswoman for Putnam said the company is prepared to pay a reasonable penalty that is proportionate to the conduct at issue.

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