diff --git a/pandas/core/common.py b/pandas/core/common.py
index d63029b447705..b16c4d445a256 100644
--- a/pandas/core/common.py
+++ b/pandas/core/common.py
@@ -1066,6 +1066,8 @@ def load(path):
         f.close()
 
 
+
+
 class UTF8Recoder:
     """
     Iterator that reads an encoded stream and reencodes the input to UTF-8
@@ -1076,6 +1078,12 @@ def __init__(self, f, encoding):
     def __iter__(self):
         return self
 
+    def read(self, bytes=-1):
+        return self.reader.read(bytes).encode('utf-8')
+
+    def readline(self):
+        return self.reader.readline().encode('utf-8')
+
     def next(self):
         return self.reader.next().encode("utf-8")
 
@@ -1088,6 +1096,8 @@ def _get_handle(path, mode, encoding=None):
             f = open(path, mode, errors='replace')
     else:
         f = open(path, mode)
+        if encoding is not None and 'r' in mode:
+            f = UTF8Recoder(f, encoding)
     return f
 
 if py3compat.PY3:  # pragma: no cover
@@ -1108,7 +1118,7 @@ class UnicodeReader:
         """
 
         def __init__(self, f, dialect=csv.excel, encoding="utf-8", **kwds):
-            f = UTF8Recoder(f, encoding)
+            # f = UTF8Recoder(f, encoding)
             self.reader = csv.reader(f, dialect=dialect, **kwds)
 
         def next(self):
diff --git a/pandas/io/parsers.py b/pandas/io/parsers.py
index 44c7be853b6a0..4fd2dca2e4843 100644
--- a/pandas/io/parsers.py
+++ b/pandas/io/parsers.py
@@ -841,6 +841,12 @@ def __init__(self, src, **kwds):
 
         ParserBase.__init__(self, kwds)
 
+        if 'utf-16' in (kwds.get('encoding') or ''):
+            if isinstance(src, basestring):
+                src = open(src, 'rb')
+            src = com.UTF8Recoder(src, kwds['encoding'])
+            kwds['encoding'] = 'utf-8'
+
         self._reader = _parser.TextReader(src, **kwds)
 
         # XXX
@@ -1078,11 +1084,11 @@ def __init__(self, f, **kwds):
 
 
         if isinstance(f, basestring):
-            try:
+            if self.encoding is None:
                 # universal newline mode
-                f = com._get_handle(f, 'U', encoding=self.encoding)
-            except Exception: # pragma: no cover
-                f = com._get_handle(f, 'r', encoding=self.encoding)
+                f = com._get_handle(f, 'U')
+            else:
+                f = com._get_handle(f, 'rb', encoding=self.encoding)
 
         if hasattr(f, 'readline'):
             self._make_reader(f)
@@ -1150,6 +1156,7 @@ class MyDialect(csv.Dialect):
             else:
                 reader = csv.reader(f, dialect=dia,
                                     strict=True)
+
         else:
             reader = (re.split(sep, line.strip()) for line in f)
 
diff --git a/pandas/io/tests/test_parsers.py b/pandas/io/tests/test_parsers.py
index d3fc6049b02c6..f48b561ff56e8 100644
--- a/pandas/io/tests/test_parsers.py
+++ b/pandas/io/tests/test_parsers.py
@@ -1633,6 +1633,12 @@ def test_utf16_bom_skiprows(self):
         except os.error:
             pass
 
+    def test_utf16_example(self):
+        path = os.path.join(self.dirpath, 'utf16_ex.txt')
+
+        # it works! and is the right length
+        result = self.read_table(path, encoding='utf-16')
+        self.assertEquals(len(result), 50)
 
 class TestCParserHighMemory(ParserTests, unittest.TestCase):
 
diff --git a/pandas/io/tests/utf16_ex.txt b/pandas/io/tests/utf16_ex.txt
new file mode 100644
index 0000000000000..f0b452a2bd5ff
Binary files /dev/null and b/pandas/io/tests/utf16_ex.txt differ
diff --git a/pandas/src/parser.pyx b/pandas/src/parser.pyx
index b6518701eae68..420d5f4033e0f 100644
--- a/pandas/src/parser.pyx
+++ b/pandas/src/parser.pyx
@@ -30,6 +30,7 @@ cimport util
 import pandas.lib as lib
 
 import time
+import os
 
 cnp.import_array()
 
@@ -485,6 +486,8 @@ cdef class TextReader:
                 self.parser.cb_cleanup = &del_file_source
 
             if ptr == NULL:
+                if not os.path.exists(source):
+                    raise Exception('File %s does not exist' % source)
                 raise Exception('Initializing from file failed')
 
             self.parser.source = ptr