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Michael Sassano is no ordinary stockbroker.


Oppenheimer & Co.

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broker might not rank as one of Wall Street's best-known wheeler-dealers, but in the shadowy world of mutual fund market-timing, he is a legend -- one who has caught the attention of investigators. (Oppenheimer & Co. is not related to



People who know Sassano, as well as sources familiar with the fast-expanding mutual fund investigation by federal and state regulators, used similarly strong language to describe the 33-year-old broker: "a big player," "a significant force," and a "major-league market-timer."

Some of these people said that before the mutual fund scandal broke in September, Sassano had one of the biggest books of market-timing clients on Wall Street.

They describe a man who carved out a niche of putting fast money together with funds that could be market-timed, the term for a legal but strongly discouraged strategy of making rapid-fire trades in mutual fund shares to capitalize on price discrepancies in different markets. In some cases, Sassano referred business to friends and associates who later became central players in the mutual fund scandal.

All of this has piqued the interest of New York Attorney General Eliot Spitzer.

has learned that Spitzer's office has subpoenaed records from Oppenheimer to learn more about Sassano's activities, although prosecutors don't appear to be close to filing any charges against him.

Spitzer's office wouldn't comment on its investigation. Officials at Oppenheimer & Co. did not return telephone calls.

Sassano's name already has publicly surfaced in conjunction with the mutual fund investigation. He's identified, but not charged, in a civil fraud complaint filed last month by securities regulators in Massachusetts against a group of former

Prudential Securities

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brokers. The brokers are accused of helping a group of hedge funds, some of which were referred to them by Sassano, to make rapid-fire trades in mutual fund shares.

Additionally, Sassano, in the mid-1990s, worked at the same firm as three former brokers who have been either charged or implicated in the mutual fund scandal -- a coincidence that intrigues investigators.

Sassano, who lives in Manhattan, couldn't be reached for comment. But he has hired noted New York white-collar defense lawyer Ira Lee Sorkin to represent him. Sorkin, who also represents two small brokerages that have been implicated in the mutual fund scandal, said his client has done nothing wrong.

Sassano "has not been charged with any wrongdoing and he is cooperating fully with internal inquiries being conducted by his employer," said Sorkin.

At this point, there's no indication that Sassano helped any of his clients, most of them hedge funds, engage in late trading of mutual fund shares -- a practice that is illegal.

Regulators consider late trading the more serious offense because it permits favored customers to buy -- or cancel an order to buy -- shares of mutual funds after the close of the trading day. The late trades enable customers to take advantage of late-breaking news because orders are processed at an old price, rather than the next day's closing price reflecting individual stocks' movement.

Market-timing, by contrast, is a legal trading strategy in which traders game the pricing system by moving quickly in and out of shares of international mutual funds, trying to anticipate the impact that late-breaking news will have on the stocks held.

Such rapid-fire trading, however, is harmful for the vast majority of mutual fund investors, because it can dilute the value of a fund by driving up trading and administrative costs. As a result, most fund companies disclose in their prospectuses that they engage in various protective activities designed to ferret out and stop market-timers.

To date, most of the prosecutions over market-timing have been aimed at fund managers who violated their company's policies and their fiduciary obligation to their investors by permitting big clients to engage in abusive trading. The only brokers who have run into trouble with regulators over market-timing is the group from Prudential, which allegedly used a deceptive scheme to help its customers place market-timing trades.

Legal experts say it's difficult for regulators to bring charges against a broker without some evidence of deception, because there's nothing illegal about helping a hedge fund engage in market-timing. Still, more broker prosecutions could be in the offing, with

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Merrill Lynch

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collectively firing dozens of brokers the past few weeks.

In the Prudential case, Sassano emerged as a key figure even though Massachusetts securities regulators haven't charged him with any wrongdoing. Authorities allege that Sassano, while working at

CIBC World Markets

in 1998, referred a hedge fund interested in market-timing shares of mutual funds to Martin Druffner, a former broker in Prudential's Boston office.

Druffner is one of five brokers charged by Massachusetts Secretary of the Commonwealth William Galvin with securities fraud. State regulators allege Druffner and the other brokers took advantage of the mutual funds by misrepresenting their identities and the identities of their brokerage customers. (Prudential is jointly owned by


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Prudential Financial

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The Massachusetts complaint describes Sassano's referral of the

Chronos Asset Management

hedge fund, for which CIBC provided financing, as "unsolicited." But neither did it come out of the blue. Druffner and Sassano were college friends and both briefly worked for

Lehman Brothers

( LEH) at the same time in the mid-1990s.

That wasn't the only hedge fund Sassano referred to Druffner as a potential customer. The following year, Massachusetts officials contend, Sassano referred

Head Start Advisors

, a $760 million British hedge fund, to Druffner for another market-timing relationship.

The Massachusetts complaint doesn't offer an explanation for the referrals. But several people familiar with the investigation said Sassano wasn't averse to farming some of his market-timing business out to friends and colleagues.

Massachusetts officials declined to comment on the matter, as did Druffner's attorney, Michael Collora.

Officials at CIBC, the parent company of CIBC World Markets, also declined to comment. Earlier this year, CIBC sold its Oppenheimer brokerage business to Fahnestock, now operating under the Oppenheimer name.

Sassano, meanwhile, also worked at the same company as at least two other brokers caught up in the mutual fund scandal: He worked at Lehman at the same time as Theodore Sihpol and Frederick O'Meally, according to broker records.

O'Meally was recently fired from Prudential's office in Garden City, N.Y., and is the subject of a separate investigation by Spitzer and the

Securities and Exchange Commission

into allegations of market-timing. Sources said that Sassano and O'Meally are close friends. But O'Meally's attorney, Peter Fleming, said Sassano's name has never come up in any conversations he's had about his client.

Sihpol, a former

Bank of America

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broker, was one of the first individuals to be criminally charged in the mutual fund investigation. Spitzer's office claims the former broker helped place illegal late trades for Canary Capital Partners, the New Jersey hedge fund that has been at the center of the mutual fund trading investigation.

Sihpol, before joining Bank of America in December 2000, also worked at CIBC World Markets for two years, during the same period Sassano was there. Sihpol's lawyer, John Gallagher, declined to comment.

Some people who know Sassano said these connections to other brokers embroiled in the scandal are pure coincidence. Perhaps they are, but investigators aren't so sure.

Staff Reporter Gregg Greenberg contributed to this story