Court Rules Putnam Whistleblower Not Entitled to Share of $193.5 Million Settlement

By Aaron Poehler

Published on September 04, 2007

Scannell, who worked as a broker for Putnam, reported abuses in market timing to his superiors at the company, who dismissed his claims and instructed him to continue making market-timed trades. Market timing refers to the controversial practice of buying and selling securities in order to take advantage of anticipated changes in market conditions.

Two days after Scannell informed his superiors he would no longer accept trades from known market timers, he was attacked by a man wearing a sweatshirt emblazoned with the name of an organization that had engaged in market timing. Scannell’s injuries from the attack subsequently prevented him from returning to work at Putnam.

Scannell next reported the securities abuses to the Securities and Exchange Commission, but the agency failed to follow up on his tip. Finally, Scannell convinced Massachusetts Secretary of the Commonwealth William Galvin to investigate his claims, which eventually led to state civil fraud charges against Putnam and the recovery of $193.5 million in settlements.

However, because Scannell did not himself file suit against Putnam, as required under the state whistleblower law, the Massachusetts Appeals Court said Putnam is not entitled to a portion of the funds recovered.

Scannell is reportedly considering appealing the ruling to the state Supreme Judicial Court.

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