Putnam parent steps into fray

To date, Greenberg and Marsh officials have said nothing publicly about the case, in which Putnam and two of its money managers have been charged with civil securities fraud by federal and state regulators for engaging in or allowing rapid trading in and out of mutual funds that the employees supervised. Putnam also has received a subpoena from the US attorney's office in New York City, which legal specialists said is a sign that the firm is the target of a criminal investigation as well.

Greenberg's trip to Boston demonstrates the parent company is taking an active role in sorting out the mess at Putnam, and raises further questions about the status of Putnam chief executive Lawrence J. Lasser, who is also a board member of Marsh & McLennan.

In another development involving the burgeoning investigations of abusive practices in the mutual fund industry, Massachusetts regulators are expected to charge as many as a half-dozen former brokers from Prudential Securities' Boston office on Monday for civil securities fraud related to their market-timing trading of mutual funds, a person involved in the investigation said.

Massachusetts Treasurer Timothy P. Cahill discussed Putnam with Greenberg by telephone yesterday, and plans to meet with the executive Monday, Cahill's spokeswoman, Karen Sharma, said.

This week the Massachusetts state pension board fired Putnam as manager of more than $1.7 billion in retirement funds.

Sharma said that Greenberg called Cahill for insight on the situation at Putnam. Cahill told Greenberg the pension fund's decision to fire Putnam "was not entered into lightly, and he thinks these are very serious charges," Sharma said. "He's concerned about the future of Putnam because it's an important Massachusetts company, and he would like to see them take a few steps in the right direction to rebuild confidence in Putnam."

Lasser's status did not come up during the phone conversation, Sharma said. Marsh officials and board members have not returned repeated calls seeking comment. Lasser has declined to comment, as did Putnam's spokeswoman, Nancy Fisher.

Meanwhile, pressure continued to mount on Putnam and Marsh, as public pension funds in four states, including Rhode Island and New York, fired the Boston firm as their money manager yesterday because of the cloud hanging over it. Private retirement plans, such as corporate and union pension funds, have also quit Putnam, industry consultants said.

"Man, the speed. It's really moving," said Russ Kinnel, director of fund analysis at mutual fund-watcher Morningstar. Kinnel said that so far Putnam should be able to manage the withdrawals, because of its size. At the end of September Putnam had $272 billion in assets under management, making it the fifth-largest investment firm in the United States.

But Kinnel said Putnam may have trouble liquidating the portfolios of some of the departing clients, particularly large stock positions in a company or small-cap stocks that aren't traded frequently.

"People are going to be reluctant to buy that stock if they know you're going to be selling some more," Kinnel said, which could depress the prices of the stocks Putnam is trying to unload.

Putnam has declined to say how much business it has lost this week, but the public pension funds alone represent over $4 billion.

In the case involving the former Prudential employees, Massachusetts is expected to charge that the brokers set up fictitious investment accounts, changed numbers on some accounts, or used other brokers' or customers' accounts, in order to disguise repeated trades in and out of other firms' mutual funds.

Daniel M. Rabinovitz, an attorney at Dwyer & and Collora who represents the brokers, who have not been named, said, "I'm disappointed and shocked that these individuals who truly believe they have acted appropriately and that everything they did was known to their employers' upper management, and in many cases, known to employees of the mutual funds, could be accused of trying to deceive anyone."

A spokesman for Prudential did not return calls seeking comment.

Andrew Caffrey can be reached at caffrey@globe.com.