"I think you should investigate mutual funds," said a clearly nervous female voice. The anonymous phone message, left with a staff lawyer for New York Attorney General Eliot L. Spitzer, touched off an intense investigation of the mutual fund industry in the summer of 2003. 2

“I think you should investigate mutual funds,” said a clearly nervous female voice. The anonymous phone message, left with a staff lawyer for New York Attorney General Eliot L. Spitzer, touched off an intense investigation of the mutual fund industry in the summer of 2003.

Spitzer, the ambitious prosecutor who had just nailed Wall Street investment banks for sending out biased stock research to investors, was looking for a new target. The $7 trillion mutual fund industry, which had been largely scandal-free for decades, was ripe for exploration, especially given the fees they charge investors for handling their money.

Doesn’t this woman ever answer her phone?” Noreen Harrington thought to herself in early June 2003 as she tried once again to reach a live person at Spitzer’s shop. This was positively the last time she was going to call. She had already left one cryptic message about mutual funds, and if the office couldn’t follow it, that was Spitzer’s problem. Harrington wanted to clear her conscience, but not enough to leave her number. Surely, five or six attempts to get through were enough.

Surprised when lawyer Lydie Pierre-Louis actually picked up the line, Harrington blurted out, “I’m that woman who was calling you about mutual funds.”

“Oh, I’m so glad you called,” Harrington remembered Pierre-Louis saying. “We really want to look into this, but we don’t understand it. We want you to come in.”

No way, Harrington thought. “I can explain it on the phone,” she said and started talking in rapid-fire Wall Street fashion about “capacity,” “market timing” and after-hours trading. Pierre-Louis was encouraging but sounded confused. Here Harrington was, reporting what she thought was a crime — that small investors were being ripped off by hedge funds making improper mutual fund trades — and the lawyer on the other end of the line didn’t seem to get it. Eventually, Harrington was persuaded that she was going to have to do more, so she agreed to come into the office.

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