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Mutual fund putnam profits expense costumers { November 4 2003 } Original Source Link: (May no longer be active)
http://www.nynews.com/newsroom/110403/d01a04lasser.htmlhttp://www.nynews.com/newsroom/110403/d01a04lasser.html
Putnam's Lasser ousted
By AARON PRESSMAN
BLOOMBERG NEWS
(Original publication: November 4, 2003)
Putnam Investments ousted Chief Executive Officer Lawrence Lasser, one of the mutual fund industry's highest-paid and longest-serving executives, after the company was charged with fraud for improper fund trading.
Marsh & McLennan Cos., Putnam's parent, named Charles Haldeman, 55, to replace Lasser as head of the fifth-largest U.S. fund manager, the company said in a written statement. Lasser, 61, who was paid $163 million during the past six years, will leave immediately. His departure comes after the withdrawal last week of more than $4 billion by pension clients.
Lasser, who led Boston-based Putnam for 18 years, is the highest-ranking manager to lose his job in the biggest inquiry of the fund industry since the writing of the Investment Company Act in 1940. Strong Capital Management Inc. said Sunday that founder Richard Strong stepped down as chairman of its mutual funds group. In all, more than 30 people have been suspended or fired since New York Attorney General Eliot Spitzer started the probe in September.
Since the allegations of short-term trading by Putnam managers emerged on Oct. 28, pension clients in states including Massachusetts and Iowa have pulled their accounts from Putnam.
"To lose that many high-profile fund accounts in such a short time is probably unparalleled," said Burt Greenwald, a fund industry consultant in Philadelphia.
On Oct. 28, the Securities and Exchange Commission said Putnam failed to properly enforce its code of ethics to prevent two former money managers from taking advantage of inside knowledge about the international funds they oversaw to generate quick profits for themselves at the expense of their customers.
As part of a management overhaul, Marsh & McLennan said Steven Spiegel, 58, Putnam's senior managing director, will be vice chairman, and A.J.C. Smith, 69, Marsh & McLennan's former chairman and CEO, will return as chairman of Putnam.
New York-based Marsh & McLennan also said Barry Barbash, the former chief mutual fund watchdog at the Securities and Exchange Commission, will conduct an independent review of Putnam's policies and controls.
"This is a step in the right direction," said Jeff Thompson, an analyst at Keefe Bruyette & Woods in Hartford, Conn., who has a "market perform" rating on Marsh & McLennan and holds no shares of the company. "It's still going to take a while to get things back on track," he said.
Shares of Marsh & McLennan, which had lost 14 percent since Massachusetts announced its investigation on Sept. 16, rose $2.13, or 5 percent, to $44.88 in New York Stock Exchange composite trading.
Born in 1942, Lasser was the eldest of three sons. His father owned a garment-making business in New York and the Lasser boys were raised in Scarsdale.
Marsh & McLennan spokeswoman Barbara Perlmutter said the company was reviewing terms of Lasser's contract. She declined to be more specific about how much more Lasser may receive after leaving. Under 1997 and 2000 contracts, Lasser may be owed more than $30 million, according to company filings.
Marsh & McLennan Chairman Jeffrey Greenberg is meeting with Putnam employees and clients in Boston, and isn't available for comment, Perlmutter said. Lasser's cash compensation was about five times what Greenberg earned during the past six years, according to company filings. During the third quarter, Putnam contributed 23 percent of Marsh & McLennan's profit, down from 44 percent in 1999.
Greenberg apologized yesterday to investors for the improper trading at Putnam in a written statement. "The kind of conduct that has occurred has no place at Putnam," he said.
SEC Chairman William Donaldson said the management change was appropriate. "It was on his watch that some of these things happened, and he's taking responsibility for it," Donaldson said after a speech at the University of Connecticut.
The fraud charges have tarnished one of the oldest names in the fund business. Putnam was started in 1937 by a descendent of Massachusetts Supreme Court Justice Samuel Putnam, whose 1830 ruling that funds in trust should be managed from the perspective of a "prudent man" helped create the basis for the industry.
The Putnam scandal also claimed another executive yesterday. The SEC said Juan Marcelino, the head of its Boston office, resigned after criticism that his office failed to follow up on a Putnam employee's tip in the mutual fund trading scandal. Marcelino, who first joined the SEC in 1984, stepped down "to minimize any further distraction for his staff," the SEC said in a written statement.
Haldeman came to Putnam last October from Lincoln National Cos., where he was president and CEO of the company's Delaware Investments unit. A graduate of Dartmouth College with degrees from Harvard Business School and Harvard Law School, Haldeman has worked in the investment business for almost 30 years.
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