Noreen Harrington is a reluctant hero. She never wanted to be identified as a whistle-blower. She never sought media attention. She just wanted to help her sister and the millions of other 401(k)plan investors who count on mutual funds to help them accumulate enough money to retire.

With that in mind, Harrington went to New York Attorney General Eliot Spitzer in June, offering information about trading irregularities at Canary Capital Partners, a hedge fund managed by her former employer, Stern Asset Management. She believed that institutional investors at hedge funds such as Canary Capital were capitalizing on special deals that penalized small investors.

Harrington’s action sparked a mutual fund trading scandal that has rocked the industry and mushroomed beyond anything she ever imagined.

Since her first phone call to Spitzer’s office, fraud charges have been filed against several firms and executives. Two traders have pleaded guilty, several CEOs have resigned and one company has been shut down. Mutual fund companies are re-examining their practices, and the Securities and Exchange Commission has proposed new regulations for overhauling the industry, which manages $7 trillion in assets for investors.

Harrington, 47, has watched all this unfold from the sidelines. But recently, she started to get calls from the press and knew it was only a matter of time before her name got out. She decided to come forward.

But Harrington doesn’t believe the story should be about her or her former employer. ”It should be about all the people in 401(k) plans,” she says. ”I felt this trading was affecting them.”

<B>The small investor

</B>Concern for one 401(k) plan investor in particular prompted her to go to Spitzer. ”I came forward because my older sister, who is one of the hardest-working people I know, told me that she may never be able to retire.”

Harrington looked at her sister’s 401(k) plan statement and thought about what she had seen when she worked for Stern. ”I couldn’t live with the fact that people were stealing money from investors, and they didn’t even know it,” Harrington said during a phone interview Monday.

The trading irregularities that Harrington helped Spitzer’s office uncover included late trading and market timing. Late trading is the illegal practice of buying and selling funds after the 4 p.m. market close but still getting the 4 p.m. price. Market timing involves frequent trading, often in international funds, to exploit ”stale” prices due to time zone differences. It is legal but might violate a fund’s rules, and typically gives market timers a profit at the expense of long-term shareholders.

The ongoing investigations have exposed how some fund companies enforced market-timing prohibitions for everyone except special investors who brought in lucrative management fees.

On Sept. 3, Spitzer announced that he and Canary had settled charges that it had engaged in illegal trading with several fund companies.

Though Harrington, a 20-year Wall Street veteran, triggered the investigation, she never worked for Canary. She joined Stern Asset Management in April 2001, working for a division that managed a pool of assets invested in hedge funds. She left in summer 2002.

While working at Stern, she heard about questionable trading at Canary. Harrington says she asked her boss, Edward Stern, to do something about it, but he rebuffed her. A lawyer for Stern did not return calls for comment. Canary is cooperating with Spitzer.

Harrington says she also ran up against Canary’s special relationship with some mutual fund companies when co-workers came to her to complain about an underperforming mutual fund in their 401(k) plan.

Stern initially declined to dump the fund, responding that the fund company allowed him to market time its funds, Harrington says. Eventually, as complaints swelled, he switched it.

Harrington couldn’t provide Spitzer with a lot of details about how Canary operated. ”I didn’t understand all of what they were doing,” she says. ”But I understood some of it. When I went to the attorney general’s office, all I wanted to do was say, ‘You guys should look at this, and this is why.’ ”

Armed with her information, Spitzer’s office started investigating. His staff learned about James Nesfield, a hedge fund consultant who was hired by Canary to recruit mutual fund companies that would let the hedge fund market time their funds. After Spitzer’s office sent him a subpoena, he agreed to cooperate, a source with direct knowledge of the investigation says. That source says the office got even more information after it subpoenaed Andrew Goodwin, a trader at Canary Capital, and he agreed to help the investigators. Nesfield and Goodwin could not be reached for comment.

<B>A good Samaritan

</B>After Harrington left Stern, she spoke to more people in the industry and learned that trading irregularities were not limited to Canary. But she wasn’t prepared for the barrage of revelations since then.

”I’m astounded,” she says.

Harrington, who has worked for Goldman Sachs and Barclays Bank, plans to start a hedge fund. ”Hopefully, I’ll do the right thing by investors.”

For months, she didn’t tell anyone about her part in the investigation. Now she’s fielding calls from friends and reporters.

She hates being called a whistle-blower. ”If you stop on the side of the road and you help somebody that’s in trouble, you’re a good Samaritan,” she says. ”But if I try to reach out to help small investors I’m a whistle-blower.”

That’s a small price to pay, she says. ”I believe that the regulators will fix this problem,” Harrington says. ”And we will all be better served.”