CalPERS Examines Franklin Relationship

February 13, 2004 ( The California Public Employee Retirement System (CalPERS) said it will review its relationship with Franklin, who manages $780 million for the pension fund, and consider whether to end its contract with Franklin later this month.

CalPERS, the nation’s largest public pension fund,   previously   placed AllianceBernstein on its watch list until its finishes an internal probe of the fund company and until federal and state regulators wrap up their inquiries (see  CalPERS Puts AllianceBernstein on Watch List ).    Last year, CalPERS fired Putnam Investments, saying Putnam’s senior management team breached its general fiduciary duty by not acting when the Putnam compliance office first reported improper trading activities years earlier.

Also this week, a proposed class action suit was filed in US District Court in San Francisco by class action law firm Milberg Weiss Bershad Hynes & Lerach representing investors who invested in Franklin and Templeton funds between February 6, 1999 and February 4, 2004.   The lawsuit names numerous Franklin funds as well as portfolio manager William Post, Security Brokerage, Calugar, and another Calugar corporation called DCIP.   The suit claims that fund managers at Franklin did not disclose that they were favoring a select group of clients and allowing them to market time in their funds.   The firm has also brought suits on behalf of investors who purchased Janus, Strong, One Group, Nations, and Alliance mutual funds (see  Fund Trading Scandal Still Looking for Pension Plan Plaintiffs ).

Franklin Resources and two of its senior officers apparently face US Securities and Exchange Commission (SEC) civil charges over alleged market timing, the fund company said in a regulatory filing. The federal probe of improper market-timing at Franklin Resources has found that the company’s alleged misdeeds were more widespread than the arrangement with a single Las Vegas broker highlighted this week.  An unnamed US Securities and Exchange Commission (SEC) official wouldn’t give details of the evidence his agency has uncovered, but sad the SEC’s investigation was “much broader” than that of Massachusetts Secretary of State William Galvin’s (see  Franklin: SEC Civil Charges Pending ).