Allegations that Dartmouth Board of Trustees Chairman Ed Haldeman ’70 was aware of improper trading at Putnam Investments during his time in senior management, as printed in The Dartmouth Review, are false, according to interviews and statements from officials inside and outside of the company.
In 2003, Putnam found that several of its portfolio managers and 401(k) participants had engaged in a market timing scheme in which some investors were allowed to trade more often than others. Following federal and state investigations, Putnam eventually settled with the Securities and Exchange Commission and Massachusetts securities authorities for $110 million in penalties and restitution.
The Review alleges, based on interviews with Peter Scannell, a former Putnam employee and whistle-blower in the government’s investigation, that “Haldeman was aware or should have been aware of the market timing by mutual fund managers which, for a space of time, occurred under his command as the company’s [Chief Investment Officer].”
In a letter to The Review’s editor-in-chief obtained by The Dartmouth, Jim Carroll, a partner at Skadden Arps, the law firm that served as Putnam’s outside counsel during the investigations, denied that Haldeman knew about the scandal before it went public.
“There has never been any indication that Ed Haldeman was aware of alleged market timing improprieties before they came to light in the fall of 2003,” the letter reads.
The editor-in-chief of The Review, Emily Esfahani-Smith ’09, who authored the article, refused to comment.
The article contends that former Putnam CEO Lawrence Lesser “exposed” Haldeman to the improper trading practices because Lesser was “not pleased with the prospect of being ousted.”
In addition, the article includes Scannell’s charge that Haldeman oversaw the renaming of several of Putnam’s funds to hide improprieties pending the federal and state investigations.
Renaming is a common practice associated with the marketing of funds, according to several individuals interviewed by The Dartmouth.
“A fund changing its name is a not a novel event ,” Carroll said in an interview. “The name change mentioned in the article had nothing to do with market timing.”
Scannell is the only source in The Review article implicating Haldeman in Putnam’s scandal.
Scannell, a former Putnam call center employee, has received extensive attention in the media for his involvement in the investigation. Scannell was allegedly beaten with a brick in response to his role in the investigation, The Review reported.
When contacted by The Dartmouth, Scannell refused to comment, saying, “my life is at stake here.”
The Dartmouth has been unable to confirm how Scannell knew of Haldeman’s interactions with other members of senior management, as Haldeman worked out of Putnam’s headquarters in Boston while Scannell worked from the satellite call center in Norwood, Mass. Scannell has been profiled in USA Today and Reader’s Digest for his involvement in the government investigations. Scannell has also sued the state of Massachusetts for a share of the penalties paid by Putnam as a reward for his involvement.
John Hill, chairman of Putnam’s independent board, reaffirmed that Haldeman had no connection to the market timing problems in a letter to The Review, also obtained by The Dartmouth.
“First, there were only a very few people among Putnam’s senior management who were aware of the market timing by a handful of Putnam employees in 2000 and 2001 and by a small percentage of 401(K) participants before it became public in September 2003,” Hill said. “Ed Haldeman clearly was not one of them.”
Carroll asserted that Scannell, in an interview during the investigation, never said Haldeman knew about the market timing issues.
“No action was ever taken against Mr. Haldeman, nor could any action have been taken,” Carroll said in an interview.
Haldeman said he did not learn of the market timing problems until the company began collecting files at the request of state and local officials.
“I first learned of market timing at Putnam in September 2003,” Haldeman said in a statement. “When I became CEO shortly thereafter, I moved swiftly to do everything in my power to correct the problem; settle with regulators, including the SEC; to see that the mutual fund shareholders were reimbursed; and to instill in all Putnam employees that they have been entrusted with investors’ money.”
Haldeman joined Putnam in 2002 as its Chief Investment Officer. He was appointed Chief Executive Officer after the former CEO and several other senior employees stepped down following the market timing scandal. Haldeman was widely praised in the national media for his handling of the scandal, with Business Week describing him as “widely admired in the industry for his commitment to investors and high ethical standards.”
The Review published the allegations on Monday, one week before the Association of Alumni election voting period begins. The winners of the election will determine whether the Association’s lawsuit against the Board of Trustees will continue.
“It seems pretty clear that this is one more arrow in the quiver of the opposition of petition candidates running for the Association executive committee,” Alumni Council President Rick Silverman ’81 said.