U.S. District Judge Nathaniel M. Gorton of the U.S. District Court for the District of Massachusetts issued the ruling in a December 2005 case filed by the Securities and Exchange Commission (SEC), saying the SEC’s complaint did not allege sufficient conduct by three of the defendants to sustain the claims against them, according to an SEC announcement .
The SEC charged that the six defendants were involved in PFTC’s one-day delay in investing assets of a defined contribution client, Cardinal Health, Inc., in January 2001 (See SEC Charges Six Ex-Putnam Execs in Retirement Plan Fraud ). The regulators claimed the Cardinal Health DC plan lost almost $4 million because of substantial market gains during that trading session.
According to the allegations, the defendants improperly shifted approximately $3 million of the costs to shareholders of certain Putnam mutual funds through “deception, illegal trade reversals, and accounting machinations.” The SEC said the defendants improperly allowed the Cardinal Health plan to bear approximately $1 million of the loss without telling the client and then covered up their activities.
Gorton’s dismissal covered defendants:
- Virginia Papa, of Newton, Massachusetts, a former managing director and director of defined contribution servicing;
- Sandra Childs, of Duxbury, Massachusetts, a former managing director who had overall responsibility for PFTC’s compliance department; and
- Kevin Crain, of Princeton, New Jersey, a managing director who had responsibility for PFTC’s plan administration unit.
At the same time, however, Gorton declined to dismiss allegations against:
- Karnig Durgarian, of Hopkinton, Massachusetts, a former senior managing director and chief of operations for PFTC, as well as principal executive officer of certain Putnam mutual funds from 2002 through 2004;
- Donald McCracken, of Melrose, Massachusetts, a former managing director and head of global operations services for PFTC; and
- Ronald Hogan, of Saugus, Massachusetts, a former vice-president who had responsibility for new business implementation at PFTC.
More information about the case, SEC v. Durgarian, D. Mass., Civil Action No. 05-12618-NMG, 11/13/07, is here .
« XShares Teams with RPG to Offer ETFs in 401(k) Plans