Putnam’s Lasser Quits Amid Growing Mutual Fund Scandal
Lawrence Lasser, who built Putnam Investments into a mutual fund powerhouse, became the industry’s most-senior executive to lose his job in a growing scandal when he resigned Monday under pressure.
Lasser’s departure, after 33 years at Putnam, 17 of them as president, sent shock waves through the $7-trillion mutual fund industry. And it comes as investors pulled billions of dollars out of Putnam funds after regulators charged the company with civil securities fraud as part of the investigation into improper trading of fund shares.
The scandal has left the company fighting for its life.
“The kind of conduct that has occurred has no place at Putnam,” said Jeffrey Greenberg, chief executive of Putnam’s parent company, Marsh & McLennan Cos., in announcing Lasser’s departure. “We are taking measures to see that this does not happen again.”
Sources close to Marsh said the board of trustees felt compelled to act after pension plans in at least six states pulled more than $4.3 billion of investments out of Putnam funds after regulators last week filed charges against Putnam, the fifth-largest U.S. mutual fund company with $272 billion in assets.
Federal and Massachusetts regulators have accused Putnam of letting some clients and several managers engage in so-called market timing, a practice Putnam publicly prohibits. Two Putnam managers also were accused of securities fraud.
Putnam also may face criminal investigations. Federal prosecutors in New York subpoenaed records last week. The Boston Globe reported Monday that Massachusetts regulators had subpoenaed Lasser’s own trading records, taking a step industry analysts said may lead to more revelations.
Market timing involves buying and selling shares of mutual funds very quickly to try to profit from outdated prices. Although the practice is not illegal, fund companies say they discourage it because it drives up trading costs and waters down the profits of long-term investors.
Putnam has denied wrong-doing and said market timing stopped in 2000. Regulators, tipped off by a Putnam employee, alleged that it continued into this year.
A number of pension funds, including the $29-billion Massachusetts state plan, fired Putnam as their investment manager, in part because state treasurers said they felt Putnam duped them about the probe.
Marsh’s stock fell nearly 10% in four days of trading last week. It rose $2.13 to $44.88 on Monday on the New York Stock Exchange.
Marsh named Charles Haldeman, 55, who joined Putnam only last year as senior managing director and co-head of investments, to succeed Lasser as Putnam’s president and chief executive.
In the mutual fund industry, the 60-year-old Lasser was known for his hard-driving management style -- he often fired off sharply worded e-mails, dubbed Lassergrams, demanding information on funds’ performance. He transformed Putnam from a sleepy Boston-based mutual fund firm into a highflying company that built a reputation with big bets on growth stocks.