Back-Office Figure Emerges in Bear Stearns Investigation

Securities regulators probing Bear Stearns'(BSC) role in the mutual fund trading scandal are increasingly interested in a back-office manager at the firm's clearing business in determining whether Bear should be the first major Wall Street brokerage to face enforcement action in the investigation.

Regulators are interested in James Delvecchio, the head of operations in Bear's mutual fund clearing unit, because of his intimate view into the trading activity of the hundreds of small brokerages that submitted and cleared their mutual fund trades through Bear, people familiar with the investigation say.

While Delvecchio himself isn't a target of the probe, investigators believe he may have information that could help them decide whether Bear was a bystander to -- or an enabler of -- clients trying to game the fund-pricing system.

Bear Stearns' stock-clearing and trade-processing operation -- one of the largest on Wall Street -- is drawing intense scrutiny from federal securities regulators and federal prosecutors because it was the conduit between scores of mutual fund families and dozens of small brokerages and hedge funds that have been implicated in the far-reaching trading scandal. Investigators are trying to determine whether Bear may have aided and abetted this abusive trading either by turning a blind eye to the activity, or actively assisting the rogue traders.

Over the past several months, lawyers from the Securities and Exchange Commission have interviewed a number of former and current Bear Stearns employees and continue to do so. Sources say that while Delvecchio is clearly a possible star witness for the SEC investigation, they would not detail how the SEC came to believe he has information that is valuable or the extent to which he has spoken to regulators. Delvecchio, an operations man with a high-powered New York lawyer representing him, did not answer repeated phone calls from TheStreet.com seeking comment.