NEW YORK (CNNfn) - Massachusetts Treasurer Tim Cahill will recommend that the state's pension board withdraw the $1.7 billion it has in Putnam Investments, which state and federal officials have charged with fraud, Cahill told CNNfn late Wednesday.

Cahill will make the recommendation at a special meeting of the Massachusetts Pension Reserves Investment Management (PRIM) board for Thursday morning to discuss its investments with Putnam. PRIM is considering withdrawing completely from Putnam Investments.

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Massachusetts has $1 billion in a Putnam international fund and $700,000 in Putnam domestic small capital funds. Massachusetts's money represents less than 1 percent of the $272 billion under Putnam's management, but it would be a blow to the company if the state pulled its money.

Putnam has been accused by Massachusetts Secretary of State William Galvin and the Securities and Exchange Commission of "market timing," a practice in which fund managers or investors make rapid trades in mutual funds to take advantage of global market price fluctuations. Such transactions are not illegal, but allowing only a select group of managers or investors to engage in them would be a problem.

One of the managers of the international fund in which Massachusetts was invested, Omid Kamshad, was one of two managers formally charged by the SEC and secretary of state.

Before the news of market timing surfaced, PRIM had Putnam on an internal watch list because of its funds' poor performance as well as some internal structural problems having to do with personnel changes.

PRIM had received a letter in mid-September stating that PRIM's money was not involved in any market timing activity. But Cahill said that more important than whether that was incorrect is the message sent by PRIM's continued association with Putnam Investments, a company with admitted ethical problems.

The Massachusetts pension fund has assets of just over $29 billion spread across various investments.

Separately, the treasurer of Connecticut said the state has put Putnam on a "watch list" for possible termination as a manager of state funds.

"I have placed Putnam on watch," Denise Nappier said at a news conference with other state officials, Reuters reported. "We do have them on our watch list right now. It means there is a possibility they could be terminated."