Mark Hurant, a former broker at Bear Stearns who was fired for his alleged role in the bank's mutual fund market timing trades, has filed a $30 million lawsuit against the bank.
Hurant has filed an arbitration claim with securities regulator the NASD last week seeking $15 million in compensatory damages and $15 million in punitive damages, according to a report in The Wall Street Journal.
Earlier this year Bear Stearns paid $250 million to settle improper mutual fund trading charges. Hurant and eight other employees were fired in 2003 after New York State Attorney General Eliot Spitzer began an investigation of the market timing scandal in the mutual fund industry. He was also notified by the Securities and Exchange Commission that it may bring an action against him in connection with its market timing investigation.
Bear Stearns had said Hurant was fired for his role in the bank's market timing trades. Hurant said in his arbitration claim that he made the trades "with Bear Stearns's full knowledge, consent, support and assistance."
According to the Journal's report, Hurant, who joined Bear Stearns in 1995, and his team landed its first market-timing customer in 1998. He said he had at least 10 such clients, and Bear Stearns supported his efforts.
Bear Stearns is not the only bank to see former employees fired in the wake of the market timing scandal file lawsuits. In December, a New York Stock Exchange arbitration panel ordered Merrill Lynch to pay three former brokers $15 million for defamation. The brokers had accused the bank of using them as scapegoats in the market timing investigations.
Hurant's suit comes just as the financial services industry had hoped to draw a line under the market timing scandal when Prudential agreed to pay $600 million to settle market timing charges last month. Bank of America paid $675 million in 2004 and AllianceBernstein paid $600 million in 2003 to settle similar charges.
In July, Stephen Treadway, the former chairman of Pimco stock funds, was found guilty of violating securities laws for his role in helping a hedge fund improperly trade mutual-fund shares. Treadway was found liable for defrauding Pimco equity fund investors through an undisclosed market timing arrangement with now-defunct hedge fund Canary Capital Partners.
Last year, Spitzer dropped criminal charges against Theodore Sihpol, after the former Bank of America broker settled a separate civil suit with the SEC in relation to allegations of improper trading. Spitzer had accused Sihpol of arranging systems to allow Canary to trade mutual funds as late as 6:30 p.m., allowing Canary to make profits and avoid losses by incorporating late-breaking news into its investment decisions.
Sihpol agreed to a $200,000 fine and five-year ban from the securities industry to resolve fraud charges brought by the SEC in connection with charges related to improper trading of mutual funds.