The tiny, huge ripoff

San Jose Mercury News: They promised to watch out for your money as if it were their own. They were supposed to be the place where you could get a piece of the market action without being eaten by the sharks on Wall Street. They said you could invest for the long term and sleep soundly.
And so, over the last 15 years, mutual funds became the investment of choice for working Americans. Nearly 100 million families, or half the nation, put $7 trillion in mutual funds.
As it turns out, the mutual fund industry had the same kind of rotten apples that plagued brokerage houses, investment banks and some of America's most distinguished corporations. While you were sleeping, sharks were nibbling at your investments with techniques known as "late trading" and "market timing."
Mutual funds may still be among the safest places to invest. Sadly, Americans now know that even in this relatively safe haven, the game is rigged.
Illegal deals
The perpetrators involved in the improper or illegal deals this time around are not young hotshots dealing in IPOs or creative accounting. Rather, they are staid places such as Putnam Investments and Janus Capital. In some cases, mutual fund firms allowed the sharks to profit at the expense of other investors. In others, the fund managers themselves were the sharks, siphoning off fund profits at their customers' expense.
Richard Strong, already one of the nation's richest men, apparently managed to earn $600,000 from market timing trades in funds of the firm he founded 30 years ago.
The extent of the corruption is staggering. A survey by the Securities and Exchange Commission revealed that half of the 88 largest mutual fund companies had market timing deals with some favored investors.
The level of outrage among individual investors is fairly low. That's because no one lost their shirt. Each investor lost only small amounts. But millions of investors were taken. Overall, losses may amount to about $5 billion.