U.S. District Judge Nathaniel M. Gorton of the U.S. District Court for the District of Massachusetts allowed the fraud charges to stand regarding three other former PFTC executives, according to a Wall Street Journal report.
Cleared of the allegations Tuesday were:
- Virginia Papa, a former managing director and director of defined contribution servicing.
- Kevin Crain, a managing director who had responsibility for PFTC’s plan administration unit.
- Sandra Childs, a former managing director who had overall responsibility for PFTC’s compliance department.
Gorton ruled that the SEC’s complaint “makes only vague allusions regarding the involvement of these defendants.”
Remaining in the case as defendants are:
- Karnig Durgarian, 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, a former managing director and head of global operations services for PFTC.
- Ronald Hogan, a former vice-president who had responsibility for new business implementation at PFTC.
The SEC charged in December 2005 (See SEC Charges Six Ex-Putnam Execs in Retirement Plan Fraud ) in U.S. District Court in Boston that the defendants’ misconduct arose out of PFTC’s one-day delay in investing certain assets of a defined contribution client, Cardinal Health, Inc., in January 2001 (See Putnam: Employees Ran Afoul of Plan Expense Policies ).
The markets rose steeply on the missed day, causing Cardinal Health’s defined contribution plan to miss out on nearly $4 million of market gains, the charges asserted.
According to the complaint, rather than inform Cardinal Health of the delay or compensate their client for the missed trading gain, the defendants improperly moved $3 million of the costs of the delay to shareholders of Putnam mutual funds through deception, illegal trade reversals, and accounting machinations.
The SEC complaint also alleged that the defendants improperly allowed Cardinal Health’s defined contribution plan to bear approximately $1 million of the loss without disclosing the move to Cardinal Heath and that Durgarian, Papa, Childs, and Crain covered up the wrongful conduct
Putnam is being sold to Power Financial Corp. of Canada (See It’s Official – Great-West Picks Up Putnam ).
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