Long before securities regulators began looking into improper trading in the mutual fund industry, Bear Stearns' ( BSC) legal department was addressing the issue of late trading. A Bear Stearns attorney, in a January 2001 letter to a brokerage customer, acknowledged that "every day" the Wall Street firm's stock-clearing desk received orders to buy and sell shares of mutual funds a few minutes after the 4 p.m. trading deadline, and many of the trades were processed as if they had come in prior to the close of the trading day. In the letter, a copy of which was obtained by TheStreet.com, the Bear Stearns attorney disputed that the Wall Street firm was doing anything improper in processing these trades for its many small brokerage customers. "Provided that the order was received by the correspondent from its customer before 4 p.m., Bear Stearns can accept tickets minutes after 4 p.m.," wrote Patrick Maloney, a Bear Stearns in-house attorney and a managing director. ("Correspondent" refers to a brokerage customer of Bear.) He went on to say, "Events such as these happen almost daily." The letter to Fred Dietrich of Pentad Securities, a former Bear Stearns clearing customer, is by no means a smoking gun for the regulators and federal prosecutors investigating Bear Stearns' role in the mutual fund trading scandal. Maloney sent the letter after Dietrich accused the firm of allowing a former Pentad broker to make several unauthorized late trades shortly after the 4 p.m. deadline. Indeed, the two-page letter could be seen as the basis for a defense strategy for Bear Stearns. Maloney stresses that Bear Stearns' policy requires clearing customers to submit all mutual fund trades before 4 p.m. The policy, however, often falls short because the clearing operation's mutual fund order desk is frequently inundated with a "volume of faxes being received at the end of the day."