Massachusetts Is Sued by Putnam Whistle-Blower

A man who helped expose improper mutual fund trading at Putnam Investments is suing Massachusetts for money under the state’s whistle-blower law after officials last month denied his request for an award, his lawyer said Tuesday.

Peter Scannell, who rose to fame by alerting Massachusetts regulators to the practices at Boston-based Putnam, sued the state and its attorney general, under the state’s False Claims Act.

Scannell sought $15 million, or 30% of the fines that Putnam paid to the state. His lawyer, Robert Autieri, argued that he qualified for the award under the state’s whistle-blower law.

The law provides “protection and financial award upon reporting and exposing false or fraudulent actions” in cases that harm the state or any of its cities, towns or counties.

Scannell filed the lawsuit after Massachusetts’ Atty. Gen. Tom Reilly’s office last month denied him any award. Reilly’s office said Scannell, a former Putnam call center employee, played an important role in the case but that he did not qualify for the award under the whistle-blower law.

Putnam, the first big mutual fund firm to be charged in an industrywide scandal that cost it billions of dollars in lost assets, agreed to pay $193 million in fines to state and federal regulators and in restitution to investors hurt by the trades. Putnam is a unit of insurance broker Marsh & McLennan Cos.

Scannell now works for the state’s securities regulator that charged Putnam with fraud in 2003.