Lasser's side of the story

Three years ago today, executives of Marsh & McLennan Cos. met at Boston's Four Seasons Hotel, preparing for a big announcement the next morning. Larry Lasser, the man who had spent his career building their Putnam Investments into a mutual fund giant, had to go.

Putnam was in trouble. First, it was embroiled in a state investigation over a handful of customers who had timed purchases and sales of fund shares, to the detriment of long-term investors. Then, six Putnam managers were found to have made excessive short-term fund trades, including four who engaged in market timing in their own funds. Customers began pulling billions of dollars out of Putnam, bleeding that the company has been unable to fully stanch to this day. Marsh & McLennan recently put Putnam up for sale in very public fashion.

Over the past three years, there has been no shortage of people (including me) offering very public opinions about the debacle at Putnam and the rise and fall of Lasser as one of Boston's most important executives in its most important industry. One person who never said a word in public was Larry Lasser.

Then Lasser appeared at Olin College in Needham this week, speaking to an audience of business students and academics on the lessons he had learned. Between those remarks and a phone conversation with me yesterday, he had a lot to say about Putnam and his own career.

First of all, he has nothing to complain about personally and knows it. Lasser continues to live a very good life and walked away from Putnam with $78 million in deferred compensation, even though he had to sue Marsh & McLennan to get it. His regrets are voiced mostly for family, staff, and management colleagues hurt as collateral damage, as well as the decline of a business he spent his working life growing. "The Putnam I loved and built and led is a skeleton of what it was," he says.

Lasser had done an extraordinary job of growing Putnam over decades. The firm, which had $1.6 billion under management and 369 employees when he was hired in 1969, ran $8 billion for customers by the time he became chief executive in 1985. At the peak of the stock market in 2000, Putnam managed $437 billion and employed 6,500 people at its Boston headquarters and elsewhere.

Then Putnam took a header unlike any other company in the mutual fund industry. Business fled like the building was on fire. Assets under management shrunk to $179 billion. Who was responsible for that? Lasser thinks that's a complicated question, but his name is part of the answer.

"In retrospect, there are things I wish I had done that might have mitigated against what happened," Lasser says. "I take some responsibility, and our management team needs to take some responsibility."

But he thinks the people who abused Putnam's system for profit, trading fund shares in ways that hurt other customers, bear their own serious responsibility for the company's problems. He says regulators, specifically New York Attorney General Eliot Spitzer and William Galvin , the Massachusetts secretary of state, pursued real issues and financial abuses, but also political agendas. Lasser is critical of the treatment Putnam received in the press, including the Globe. "Political campaigns take place on the pages of newspapers," he says.

In a broader view, Lasser sees Putnam's greatest achievements of the 1990s connected with its decline of the past six years. He says he had more fun at work when Putnam was small, but his pride in the company grew as its business expanded. The aggressive growth that made him so proud also created an environment for problems Lasser wishes he had managed better.

"Looking back, I know now we grew too fast," he says. "What we thought would be an 18-month [bull market] opportunity became an eight-year opportunity. If I had to do it again, I would recognize the limits to growth. Growth does not occur without risk."

Lasser says Putnam warned customers against pouring too much of their money into the company's growth stock funds, which had generated huge returns during the 1990s, but "when our caution was rejected, we took the money anyway."

Lasser says Putnam's hypergrowth added so many employees that its longstanding reputation for integrity may have suffered. Looking back, he wishes Putnam had put more aggressive policies and procedures in place.

"We should have had stronger locks on the doors. Our compliance system, which was rigorous, explicit, and unambiguous, probably was not equal to the size to which the company had grown. The '90s, in retrospect, were a crazy time. Certainly in society -- and I have to accept that Putnam in these ways is a microcosm of society -- there was a great deal of greed."

As for his own unceremonious exit from Putnam, Lasser says the possibility hadn't occurred to him. "I never thought about being fired," he says. "I was important to Putnam and Putnam was important to the parent company. Wrong again."

Lasser declines to talk about most details of his exit from Putnam. But he makes it clear some executives were his allies and others ultimately were not, at both Putnam and its parent company, when the wagons were circled.

Lasser says he had been invited to become a candidate to succeed Marsh & McLennan chief executive Ian Smith, who had taken a hands-off approach to Putnam, in 1999. Lasser declined; Jeffrey Greenberg became the new chief executive; and Putnam's relationship with its parent changed. Greenberg "had a very different style. He was entitled to it, and it was legitimate, but it was very different."

He says some executives at Marsh & McLennan appreciated that Putnam grew from a footnote in their annual report to eventually contribute more than half the company's earnings. Others, he says, resented that a subsidiary in Boston was eclipsing the New York insurance brokerage's main business.

At Putnam, Lasser had his own style, too. Some called it demanding, others would describe it as bruising. He describes it as "a strong, even unrelenting drive for excellence."

"There were some people who bought into that and there were others who felt the environment was too difficult, that it was excessively challenging every day," Lasser says. "There were people who surely wished things would relax at Putnam."

Things are different, but hardly relaxed, at Putnam today. The company is in a tough spot, and it's not obvious what will happen next. There are many opinions about what happened at Putnam and how it got to its current state. Larry Lasser is entitled to one, too.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.