A former Bank of America broker lost his pretrial bid to have New York Attorney General Eliot Spitzer’s charges against him dismissed for allegedly facilitating a hedge fund’s mutual fund timing trades. As a result, Theodore Sihpol will have to stand trial April 26 on 40 allegations of destroying evidence, grand larceny in the first degree, and scheme to defraud. He was indicted last April and if convicted, faces up to 25 years in prison.

Mr. Sihpol, 37, was the first arrest in the Canary Capital case, as the attorney general began a crackdown on what has been a wide-ranging series of investigations into the trading patterns of mutual fund shares across the $7.6 trillion mutual fund industry.

Canary – a disbanded hedge fund run by Edward Stern, son of the billionaire pet food and publishing executive Leonard Stern – was the most prominent hedge fund in Mr. Spitzer’s wide-ranging 2003 investigation into after-hours mutual fund trading abuses, which so far has resulted in $2.1 billion in fines and restitution.

Mr. Stern and his associate, Canary head trader Noah Lerner, agreed to $40 million in fines and restitution in April, and, in return for not being indicted, are cooperating with Mr. Spitzer.

Mr. Spitzer charged that the hundreds of mutual fund timing trades Canary Capital did with Bank of America constitute grand larceny, as Mr. Sihpol helped deprive the bank’s Nations Funds mutual fund shareowners of $1.25 billion in value. In November, his defense team filed a motion to dismiss, arguing that there was no way that Mr. Sihpol could have stolen the entire outstanding value of the mutual fund family. The defense team also claimed that Mr. Spitzer was wrong to claim that securities law prohibited the execution of mutual fund orders after 4 p.m. Instead, the defense argued that the law simply mandated that once a fund’s daily net asset value had been set, all purchase orders received after that time must wait until the following day to be executed.

New York State Supreme Court Judge James Yates ruled that the prosecution’s claim was legally sufficient to support the indictment. Moreover, he upheld all of the 40 counts, including the valuation and false entry charges considered the most spurious by Mr. Sihpol’s defense team at Brown, Raysman Millstein Felder & Steiner.

A spokesman for the attorney general, Brad Maione, declined to comment.

Mr. Sihpol’s lead attorney, Brown, Raysman’s C. Evan Stewart, said Judge Yates’s ruling clearly acknowledged their argument that many mutual funds accepted orders after 4 p.m. Also, he said that the opinion made clear that the court did not agree with the attorney general that trading a mutual fund after 4 p.m. constitutes an attempt to “steal” the entire value of the mutual fund. Judge Yates wrote, “The court agrees that the amount ‘wrongfully obtained’ is the net value of the wrongful taking.” In other words, if Canary was able to make a half-dollar profit on a 200,000-share trade, Mr. Sihpol should be liable for only $100,000 in illegal profits, not the entire value of the mutual fund that the trade was done in.

“We will have all sorts of evidence at trial building upon the Judge’s opinion, designed to show that Mr. Sihpol stole nothing and broke no rules,” said Mr. Stewart.

Mr. Stewart said that he had had talks in the past with the attorney general’s office about a possible settlement, but for now, he said he is planning on going to trial.