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Monday, November 03, 2003

Heads Roll

by: Nicole Halsey

Investigators from New York Attorney General Eliot Spitzerís office have now found a new face for corporate corruption in Dick Strong.

The 61-year-old founder of Strong Capital Management has announced that he will be stepping down as chairman of the companyís board only three days after the Attorney Generalís office accused him of making more than $600,000 by engaging in market timing of Strong funds over several years.

Last week, Strong apologized and said that he would personally reimburse investors for any losses his trading might have incurred.

However, according to the Wall Street Journal, a statement issued by the company on Sunday said Strongís resignation will not diminish his role with the company.

The last of Lasser

As anticipated, Putnamís Lawrence Lasser has also announced his resignation in the wake of the fund scandal that has the left the companyís reputation in shreds.

The Wall Street Journal reports that Putnamís parent company, Marsh and McLennan has begun cleaning house by replacing Lasser with Charles "Ed" Haldeman, senior managing director and co-head of investments at Putnam.

The companyís other attempts at damage control include three new appointments to key executive positions. Steven Spiegel,, senior managing director and chief of global distribution, was named vice chairman of Putnam, a new position. Meanwhile, A.J.C. "Ian" Smith, formerly chairman and chief executive of MMC, was appointed to the new post of chairman.

The company also announced that it was hiring Barry P. Barbash, a partner in Shearman & Sterling LLP and a former SEC official, to review the company's policies, reporting directly to Jeffrey Greenberg, chairman and chief executive of MMC.

"MMC and Putnam are committed to seeing that the interests of Putnam's clients and investors are well served," said Greenberg in a statement. "We are taking actions today to address the issues that are confronting Putnam. The kind of conduct that occurred has no place at Putnam. We are taking measures to see that this does not happen again."

Perhaps Lasserís undoing had to do with his reputation for running Putnam with an iron fist and his compensation. Lasser has been with Putnam for 33 years, 18 of those as ceo. For an executive to have a reputation as a stickler for order to allow trading abuses to take place on his watch is indication for some that he apparently wasnít doing his job.

And, since the trend on Wall Street these days seems to be to fire executives who make a lot of money once scandal breaks out, Lasserís compensation didnít help. According to the Wall Street Journal and New York Times, Lasser was one of the highest paid mutual fund executives on Wall Street. He made $1 million last year in base pay. In March, MMC filed revisions to its shareholder proxy statements indicating that Lasser received a $7 million bonus last year, down from a $17 million bonus in 2001.

He also received restricted stock last year valued at $1 million and $400,000 in other compensation, including $200,000 for his service as a trustee of the Putnam funds. Topping this, Lasser made $33 million during the bull market of 2000.  

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