Qui tam lawsuit filed against Massachusetts, attorney general

By Erik Ricasa

Published on July 22, 2005

Peter Scannell provided information to the Commonwealth of Massachusetts and the Securities and Exchange Commission that halted market-timing practices at Putnam Investments. Disclosure of the scheme resulted in $193.5 million in restitution and fines for the firm. The state received $50 million in damages.

Scannell is now seeking compensation through the state's False Claims Act. The statutes were designed to provide whistleblower protection and financial awards to individuals who expose fraudulent actions against the government.

A declaration of Scannell's rights under the Act, as well as a portion of the damages paid to the state, is included in the lawsuit. Originally, Scannell had asked for the maximum amount allowed by the statute, 30 percent of Putnam's payment to Massachusetts. Scannell's attorney, Robert Autieri says that amount may be adjusted.

Scannell caught on to the rapid trading scheme in 2000 and was told by supervisors to keep it quiet. After making it clear that he wouldn't participate in the firm's illegal activities, he says was threatened and later beaten.

Following the attack, Scannell contacted the state attorney general's office and the SEC, who reached a settlement with Putnam Investments. The state attorney general denied Scannell's claim for compensation.