When the news first surfaced that accusations of fraud and market timing were being leveled against Putnam Investments, attention immediately turned towards the firm's largest clients in anticipation of a backlash.

And in the first week of this month alone, $14 billion walked out the firm's door.

As anticipated, Putnam continues to suffer the consequences of the scandal, watching billions of dollars fall from its books at the jumbo pension plans of states such as New York, Massachusetts and Vermont. Each recently pulled its assets away from Putnam, mainly for breech of investor trust.

But while the exodus of some of Putnam's largest clients received most of the early attention, it has by no means been limited to a select group of mega plans. Many smaller pension plans have been just as resolute in taking action against Putnam.

On the first Monday after the Putnam scandal broke, the board of the relatively bantamweight Brookline Retirement System convened for a vote that terminated Putnam from the manager ranks of the $160 million system, Brookline Director of Retirement Frank Zecha said.

The loss to Putnam was more than just Brookline's liquidation of $8 million from an international core equity account. Putnam had irreversibly lost the faith of the Brookline plan and its members, Zecha said. The $8 million will be transitioned to Fidelity Management Trust Co., he said.

One quarter the size of the Brookline plan, the $44 million Belmont Contributory Retirement System also moved quickly to terminate Putnam as manager of a $4 million international core equity account, Belmont Retirement Senior Fund Officer Marion Cote said.

Mirroring larger plans, not every small Putnam client immediately sent the manager to pasture. Engineering and architectural services company CH2M Hill, based in Denver, has adopted a wait-and-see attitude toward how the charges against Putnam will ultimately affect the manager. Within its nearly $600 million retirement portfolio, CH2M Hill has a modest $8 million international core equity account managed by Putnam, and is sticking by the manager.

And the director of Massachusetts' pension plan said he might consider rehiring Putnam.

Other smaller Putnam investors, such as the Ace Hardware Corp., which has an $11 million stake in Putnam's international equity fund, are withholding judgment of the manager at this early juncture, Ace spokeswoman Natalie Danaher said.

The choice by some of Putnam's smaller investors not to take immediate action against the manager may serve to do little more than delay decisions that ultimately cost Putnam more and more clients if the current posture of the Port Authority of Allegheny County serves as an example.

James Shearer, benefits administration for the Port Authority, said that the Port Authority's contract with Putnam does indeed call for certain actions to be taken against the manager if events such as the trading scandal begin to unfold.

Copyright 2003 Thomson Media Inc. All Rights Reserved.

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