I recently wrote about how the wheels of justice were slowly, but understandably, catching up with the corporate criminals at Enron and WorldCom. Those wheels are now picking up speed, as evidenced by today's announcement that the Securities and Exchange Commission (SEC) and New York Attorney General Eliot Spitzer have both filed criminal and civil and charges against former employees of Bank of America Corporation, which runs several mutual funds. The charges relate to illegal "after hours" trading of mutual fund shares, and other trading violations.

Most Americans holding mutual funds have assumed that the funds are safer the individual stocks. This is largely true, as a mutual fund is a diversified pool of a number of stocks. So if one stock hurts the portfolio, others will (hopefully) balance the overall value of the fund. But the SEC and Spitzer have now revealled that some mutual fund companies have been using stock trading techniques not in the best interest of their shareholders. Some funds are doing things that the small investor has no chance of doing. Case in point: Bank of America:

Bank of America faces the most serious charges to date. Spitzer said the bank allowed Canary to buy some of its funds after the markets closed at that day's closing price instead of the following day's. This practice of "late trading," which is illegal, gave Canary an unfair edge over regular investors by letting the firm take advantage of after-hours announcements that would move the market the next day.

"Market timing," on the other hand, is not illegal, though it has been a problem within the mutual fund industry for years. Many funds say in their prospectuses that they discourage market timing - which can cause volatility that hurts other investors in the fund - and they try to prevent it through short-term trading fees and other methods.

In market timing, traders move large amounts of money in and out of funds to take advantage of "stale" fund prices. This often occurs in international funds, since the trading of foreign stocks ends hours before the U.S. markets close.

Consider what could happen if a U.S. rally will likely cause the Japanese market to rise the next day. A market timer could scoop up shares of an international fund and be fairly confident that the shares would rise later that night, allowing him to sell them the next day for a profit.

Market timing and late trading, however, hurt regular investors. The practices drive up commission and trading costs for all shareholders because large amounts of money are flowing in and out of the fund. Also, in order to cover big withdrawals, the managers may hold extra cash, which reduces a fund's return when the market is going up, or sell positions they normally would have held, which can generate unwanted capital gains.

"Since mutual funds are mutual, it ends up coming out of the pockets of other mutual fund investors,"saidGary Gensler, co-author of "The Great Mutual Fund Trap. "

The funds so far implicated in such practices are Bank One, Bank of America, Strong Financial, and Janus Capital Group. The funds claim to be cooperating with investigators at the SEC and NY Attorney General's office. If you're a mutual fund investor -- and there's a good chance you are if your company has a 401K or pension plan -- you need to be an informed investor.

There's a huge amount of information available on mutual funds. If you own shares outside a 401K or pension plan, you probably know which funds you own (you should). If you are invested in your company's 401K or pension plan, ask your benefits department to provide you with documentation about your investments -- they have to by law. You can get all sorts of info about your funds from the fund companies themselves, like prospecti and quarterly/annual reports. You can get in-depth, independent analysis of your funds at Morningstar and Standard & Poor's. For example, Morningstar analyst Brian Portnoy "said Friday that investors should avoid Janus mutual funds." Janus is one of the fund companies being investigated.

Here are things to look for when doing your own investigating of mutual funds:

• How has the fund performed over the long-term, through both bull and bear markets?;
• How much of your investments are being eatten up by fund fees (you can always find a cheaper alternative)?;
• Is the fund diversified, or concentrated in one very risky sector (tech stocks, utilities, junk bonks, etc.)?;
• Who's the fund manager, what track record does he/she have, and how long has she/he served with the fund?;
• Has the fund changed its charter (to something different than when you originally invested)?;
• Has the fund manager changed a lot?; and,
• Does the fund trade a lot ("turn-over")? -- more trading means higher fees for you.

Get involved. When the fund asks you to vote regarding issues related to how the fund is managed, vote. Read your fund's prospectus, read the quarterly and annual reports, and add more money or get out of the fund if you feel uncomfortable with its investing practices and "style."