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Kissimmee River System Past and Present Thirty years ago, the Army Corps of Engineers in partnership with the State of Florida began construction of a massive flood control project on the Kissimmee River in south central Florida. The flood control solution was the channelization of the riv The ever widening mutual fund scandal took a troublesome turn yesterday when fund giant Putnam announced it would dismiss four money managers who were found to have engaged in short-term trading activity for personal gains in funds that they oversaw or were involved in.


In a statement, Boston-based Putnam said that some of this short-term trading, which took place in 000, appears to have been market timing. Market timing, defined as making rapid-fire trades in mutual fund shares to take advantage of short-term developments in the news or inefficiencies in fund pricing, isnt illegal. But many fund companies tell shareholders that they prohibit or restrict such behavior, as it ends up costing other shareholders in those funds.


Meanwhile, in a related but separate matter, Massachusetts securities regulators are reportedly on the verge of filing a civil complaint against Putnam, stemming from a different market-timing issue. This one involves allegedly improper trading by a handful of 401(k) participants in plans run by Putnam.


What makes this latest wrinkle in the fund scandal so worrisome isnt just that its Putnam, the nations fifth-largest fund company and one of the most recognizable brands in the industry. Its that fund managers are now being drawn into the scandal.


Up until recently, the vast majority of employees who have been fired or disciplined in this scandal have been brokers or fund executives, not portfolio managers. In fact, before this Putnam news, only one other fund manager was drawn into the scandal. Late last month, Alliance Capital, another large fund company, was forced to suspend a technology-fund manager because of internal investigations into improper trading practices.


In a strange way, this has insulated the industry from the growing scandal. After all, even if some employees were found to have been striking deals with fat-cat investors for special privileges, companies could at least claim that fund managers were still on the side of individual investors. But now, with the Putnam revelation, that argument gets thrown out the window. No longer is it a given that fund managers are looking out for shareholders interest first. If more fund managers are drawn into this scandal, this could be a bigger matter?and a bigger threat to investor trust?than was initially thought.


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