Thursday Massachusett's State Attorney General Thomas Reilly said that he should have authority to look into malfeasance by fund companies. That may be the last battle the industry needs as William Galvin, the Massachusetts Secretary of State has already opened multiple investigations into funds' activity.

The battle of the Bay State officials over who gets to lead the investigations into fund firm fraud also points to the political magnetism created by the fund scandals.

Local newspapers in Boston suggest that politics may play a role in Reilly's call for additional powers. Both Reilly and Galvin are thought to be preparing runs at the state governorship in 2006.

That pattern can be found across the nation. New York State Attorney General Eliot Spitzer has held a number of fund raisers that are widely seen as a prelude to a 2006 campaign for the top job in Albany. In California Attorney General Bill Lockyer is using a new law to probe Franklin Resources, Pimco and Capital Group. Lockyer is thought to be readying a campaign to take on Governor Arnold Schwarzenegger in 2006.

In Colorado Ken Salazar, that state's attorney general, has investigated allegations that Janus Capital entered into market timing agreements with hedge funds and other investors.

Both Reilly and Galvin are Democrats and would have to face off in the primaries if they both choose to run for governor. Meanwhile, the fund scandals are generating almost daily headlines across the nation for Galvin. Those headlines may be making Reilly fell left out.

Reilly told members of the Greater Boston Chamber of Commerce yesterday that the current setup in Massachusetts makes it harder to successfully bring criminal cases over securities frauds. The current system requires that the Securities Division which reports to Galvin's office first file civil charges in a matter. Reilly does have authority to bring criminal charges without a referral form Galvin's office, but without the referral he is operating in the dark.

"It makes it more problematic from a law enforcement perspective in developing cases, because you're not as involved early on in developing cases," Reilly told the Boston Globe after the speech to the Chamber of Commerce. He suggested that it would be more efficient for the two offices to be allowed to work together from the outset of a case.

That would require a change of state law and Galvin sees no need for the legislature to take that step.

"He's entitled to his opinion," Galvin told the Boston Herald. "But I think the current system has worked very well for Massachusetts' consumers (and) is working effectively." Reilly told reporters that Galvin's office has yet to refer any cases to his office even though civil charges have been filed against Prudential Securities Inc., Putnam Investments, and Morgan Stanley.

"I'm assuming from that, that there has been no criminal behavior that has been uncovered," Reilly told the Globe. He added that his office has offered to assist Galvin's investigators.

Meanwhile Galvin told the paper that Reilly's office has not asked for information about the current investigations and pointed out that he is free to start his own investigation.  

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