Sorting the lint from the clean clothes in the scandalous mutual fund dryer is not as easy as some would lead us to believe. After all, the money attached to enforcement of reforms will come from the jeans pockets of middle-class fund investors.

The Wall Street Journal reports that in addition to fines and restitution, the Eliot Spitzer- led investigation will produce enforcement-driven insurance, legal and administrative costs in excess of $1 billion per year. Fund assets, and thus investors, will handle those costs.

"Even fund companies that had nothing to do with this, and their shareholders, are going to pay the prices for the sins of others," Guinness Atkinson Funds President Jim Atkinson told the Journal. His firm has not been touched by the scandal.

Insurance costs are soaring, sometimes over 300%, because insurers are realizing how much money they will have to pay if settlements and penalties occur. Business Week just reported that many fund complexes are having trouble obtaining insurance for their top officials and directors.

Obviously, legal fees stand to rise, too, especially in a multi-pronged investigation such as Spitzer’s and the Securities and Exchange Commission’s.

Spitzer will try to take settlement money and give it back to wronged investors, but the question remains: Will it be enough?

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