A Bear Stearns Cos. employee caught in one of the first sweeps of Eliot Spitzer's net is fighting back. Mark Hurant, a former broker with Bear Stearns has filed an arbitration case against the broker-dealer in which he seeks $30 million in damages, including $15 million in compensatory damages and $15 million in punitive damages.

The case, which was first reported in the Wall Street Journal, has the potential to drag brokerage firms deeper into the fund trading scandals. Up until now, it has been the fund firms that have been blamed by the media and regulators for allowing the market-timing and late-trading practices. However, fund industry insiders have long pointed the finger at brokerage firms and other third parties for allowing timers to take advantage of funds and in some cases helping clients in circumventing funds' rules. Brokerage firms did that by hiding clients' identities and intentions, say some fund executives.

In response, those fund executives say that they entered into formal arrangements with some timers in order to at least be able to track and account for the activity that was happening anyway.

Hurant was fired by Bear Stearns in October 2003 along with a number of other brokers and executives in the firm's clearing unit. Hurant later took another job with Keane Securities Co. which he left last August. Hurant is now employed by GLB Trading in Chicago, according to NASD records.

Since his firing Hurant has consistently claimed that all of his actions were made with the knowledge of his superiors.

"As a supervisor, I had a small staff (three people) faxing mutual fund trades to the Bear Stearns & Co., Inc. mutual fund department every day before 4 p.m.," Hurant said in a filing with the NASD. "All account forms and trades were approved by compliance, accounting and legal at Bear, Stearns & Co., Inc."

Hurant joined Bear Stearns in 1995 and has said that his first market-timing client signed on in 1998. Eventually, ten clients were timing funds through the Bear Stearns group headed by Hurant. Those trades were facilitated by the firm and made with its knowledge, he claims. Indeed, though market timing violated some funds' rules, it was not in itself an illegal activity. Even Eliot Spitzer has only claimed that fund firms willfully disregarded to following market timing rules in order to gain large accounts that amounted to fraud, and not the trading itself.

Bear Stearns officials said in an SEC filing that they terminated Hurant for "his activities related to mutual-fund trading including the timing of mutual-fund trading and market-timing related conduct."

Meanwhile, the SEC may still bring action against the nine Bear Stearns employees fired in the wake of Spitzer's allegations. 

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