Casinos Look Cleaner Than Mutual Funds

"I've worked at a casino, I know a racket when I see it."

That's Peter Scannell, the call center employee who blew the whistle on Putnam, in an interview with The Wall Street Journal yesterday.

I think what Scannell left out is that gambling is a much more honest, more heavily regulated game than mutual funds.

What a sad commentary, and one that always gets giggles when I say it out loud. But I like to gamble. One of the reasons I like it is that it isn't rigged. The casino business is tightly regulated. If you skim from a casino, I think you will get caught.

But now that this mutual fund fraud scandal has broken out, it looks like skimming was legal at some outfits. Six of Putnam's "dealers" skimmed $700,000 from their own customers, which the company has acknowledged.

Oh, of course, it's not called skimming in the mutual fund business. It is called market timing. But believe me, if this happened in a casino, the casino would lose its license. Not so in the mutual fund business. All that happens is that you get civil charges, a couple of fines and then you have to spend more money on advertising to show that you are good guys. Instead of spending a couple of million on advertising, maybe you have to have five times the ad budget and hire an ad firm that says "Putnam places you first, you are always first with Putnam," or some other disingenuous hooey that every entity will run because of the right of advertising free speech.

It's funny; if you place a legal or illegal bet on the Giants this weekend and you win, you know you are going to get paid in full -- yes, even on illegal bets. But if you put your retirement money with Putnam or Janus or Bank of America's funds, you didn't get paid what you are owed.

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail]. Listen to Cramer's RealMoney Radio show on your computer; just click here. Click here to buy Cramer's latest book, "You Got Screwed!" Click here to order Cramer's autobiography, "Confessions of a Street Addict."