Regulators Query Two More Bear Stearns Clearing Execs

The NYSE demands statements from Callanan and Zuckerman.
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Two more top executives in

Bear Stearns'


giant clearing operation were drawn into the long-running investigation of the firm's role in the mutual fund trading scandal.

John Callanan, a senior managing director, and Leslie Zuckerman, a managing director, disclosed last week that regulators at the

New York Stock Exchange

have demanded statements from them in conjunction with the Big Board's investigation. The Wall Street executives disclosed the development on their broker registration statements.

The NYSE's regulatory division is working in tandem with the

Securities and Exchange Commission

, which last summer notified Bear that it could face civil charges for its role in processing and financing abusive mutual fund trades by a number of wealthy hedge funds.

has reported that the SEC also said at least

eight current and former Bear executives and brokers also are facing possible civil charges in the investigation. Several of those executives had earlier received a demand from the NYSE to provide a statement.

Regulators believe Bear played an important role in processing and financing abusive mutual fund trades for dozens of hedge funds and small brokerages that have been implicated in the far-reaching scandal. Bear's stock-clearing and prime brokerage hedge fund business accounts for 13% of the firm's net revenue.

Both Callanan and Zuckerman work in the prime brokerage side of Bear's clearing operation, which provides back-office services and financing to hedge funds.

Callanan, a supervisor in Bear's margin lending operation, could not be reached for comment. Callanan works out of the clearing division's main office in New York.

Zuckerman, who works in Bear Stearns' Chicago office, also could not be reached for comment. She works in prime brokerage sales.

Regulators from the SEC and NYSE are moving ahead with their investigations, even as there are some tentative signs that Bear Stearns may be trying to settle the matter.

Last month, the regulatory case against Bear Stearns was briefly scheduled for a hearing before the full SEC commission, a step that's often a precursor to the filing of formal charges, people familiar with the inquiry say. But the matter was removed from the SEC calendar shortly after it was scheduled for formal action.

It's not uncommon for the commission to delay voting on a case if the company under investigation signals that it's serious about trying to settle. A Bear Stearns spokesman declined to comment on the possibility of settlement negotiations.

Late last year, the firm increased its litigation reserve by about $100 million to cover the cost of a potential settlement with securities regulators.