In the Canary Capital case, the first of the market-timing scandals involving mutual funds, New York State Attorney General Eliot Spitzer brought criminal charges against only one individual.

It wasn’t the man who ran Canary, Edward Stern, son of a billionaire pet food and publishing executive, Leonard Stern.

It wasn’t a top executive of the Bank of America, though the firm paid more than half a billion dollars to put the market-timing case behind it.

Rather, the single criminal defendant, whose trial is scheduled for March, is a broker at Bank of America, Theodore Sihpol III, who Mr. Spitzer alleges was at the “epicenter” of the scheme.

Mr. Sihpol, however, is fighting back, arguing in court filings that not only were his actions legal, but that he acted on the orders of bank executives.

Winning acquittal in a case brought by the popular Mr. Spitzer will not be easy, and proving Mr. Sihpol had no idea about the legally questionable nature of Canary’s fund timing will be even harder, but the attorney general’s case is “far from airtight,” a defense lawyer involved in a separate mutual fund-timing case, who asked not to be identified, said.

Mr. Spitzer’s exclusive focus on Mr. Sihpol – the indictment does not even refer to any other bank employees – means the prosecution will have to prove that the illegal trades could not have happened without Mr. Sihpol and that he had a “clear criminal intent to deceive, by developing and directing a conspiracy to that end,” a veteran New York criminal defense attorney, Benjamin Brafman, said.

Another lawyer familiar with the case focused instead on the attorney general’s allegation that Mr. Sihpol “stole” the entire value of the $1.25 billion in mutual funds that benefited from timed trading. That lawyer, a former dean of the George Mason University Law School, Henry Manne, said: “It will not be easy to demonstrate how Mr. Sihpol created any real economic loss to anyone – forget about $1 billion worth.”

Indicted in April on 40 felony counts, Mr. Sihpol is accused of aiding Canary in mutual fund timing by helping the hedge fund buy and sell mutual fund shares after the close of trading, when individual investors were forbidden by law to do so. Central to that activity, according to the attorney general’s amended indictment of August 4, were a series of “conditional” trade orders written up by Mr. Sihpol on behalf of Canary.

After 4 p.m., Canary would call Mr. Sihpol and either “confirm” or “cancel” the fund orders the firm wished to be placed, according to the indictment. That allowed Canary to make millions, either by buying funds at a cheaper net asset value before the price rose the next day, or by selling at a higher NAV before it dropped the next day.

Charged with crimes ranging from grand larceny in the first degree to first-degree scheme to defraud, Mr. Sihpol could face a sentence of up to 25 years in prison if convicted. Mr. Sihpol did not return a call from The New York Sun, and his lawyer, C. Evan Stewart of the firm Brown Raysman Millstein Felder & Steiner, declined repeated requests to make him available for an interview. A spokesman for the attorney general, Brad Maione, declined to comment.

Mr. Stewart declined to speculate as to why Mr. Spitzer chose to prosecute only Mr. Sihpol. The defendant is fighting back, Mr. Stewart said, “because he did not do anything criminal and we can prove it.”

Slugging his cases out in court is not something Mr. Spitzer has had to do during his high-profile strikes at Wall Street and the insurance industry. Afraid of the powers he wields under the anti-fraud statutes of the1921 Martin Act to shut businesses down, Merrill Lynch was quick to negotiate with Mr. Spitzer’s office and pay fines and restitution of $200 million, for example, and Citigroup agreed to pay $400 million.

In the investigation of Canary’s trading, Bank of America settled last March for $675 million, and Canary settled the day a civil complaint against it was filed in June 2003, paying $40 million in fines and restitution. No criminal charges were filed against either Mr. Stern or Canary’s head trader, Noah Lerner. Canary Capital was disbanded.

More than a year later, Mr. Sihpol, now 37 and unemployed, spends his time caring for his 3-year-old and preparing for trial, his lawyer said. Property deed records indicate Mr. Sihpol and his wife, Rhonda – who also worked at Bank of America’s Private Client Services group – sold their $1.7 million house in New Canaan at a $51,000 loss, less than eight months after buying it. The family now lives in a condominium in the Connecticut suburb.

The first part of Mr. Sihpol’s defense is the argument that he was so junior at Bank of America – he was in the end of his first month when he managed to snag a meeting with Canary Capital – that everything he did was closely monitored and observed by numerous supervisory and compliance executives. He had been hired as a junior broker in December 2000 after holding a series of retail brokerage jobs at Lehman Brothers and CIBC. Private Client Services is a brokerage within the bank focused on managing money for the ultra-wealthy. His job, according to Mr. Stewart, was to cold-call lists of potential clients. Any promising leads were then turned over to his boss, Michael Tierney. Three days after Mr. Sihpol cold-called Mr. Stern, Mr. Stern returned the call and expressed interest in investing with the bank, said Mr. Stewart.

Despite his luck at landing such a prospect, “Ted was so junior at the bank that he was not allowed to go on a sales call without his boss coming with him,” Mr. Stewart said.

The indictment places the Canary relationship solely at the feet of Mr. Sihpol. Defense exhibits, including e-mail messages and memorandums, produced as evidence in support of a November 12 motion to dismiss, present a different picture, argued Mr. Stewart.

From the start of the Canary relationship, the defense maintains, Mr. Sihpol was a low-ranking component of a large, multi-department team intimately involved in “the daily servicing of this important client,” in the words of the motion.

One piece of evidence likely to be presented as evidence to rebut Mr. Spitzer’s argument that Mr. Sihpol was at “the epicenter” of the fund-trading scandal is a purported May 3, 2001, e-mail to from the head of the Nations Funds – Bank of America’s primary family of mutual funds – to nine colleagues. In it, the executive, Robert Gordon, appears to be explaining his willingness to lift bank restriction on fund timing. “I’ve spoken to a number of you about this day trading exception,” the message says. “The account is the Stern family, a significant and growing GCIB/Bank relationship.”

The “GCIB” was the formal designation of the global corporate and investment bank, better known as Bank of America Securities. Mr. Gordon was a major figure in the mutual-fund industry’s establishment, sitting on the board of governors of its trade group, the Investment Company Institute. He was dismissed in April, after the bank settled charges, and he was unavailable to comment for this article.

The Canary relationship, according to Mr. Sihpol’s defense, was also directed by a senior executive at the Bank of America’s Private Bank, and was monitored by at least three Bank of America compliance executives.

The defense team is claiming that one of those compliance officers received approval for post-4 p.m. mutual fund trading in an opinion from an outside law firm, Lehman & Eilen of Uniondale, N.Y. Entering mutual-fund orders after 4 p.m. was “consistent with the NASD rules,” the purported opinion from May 2001 says. The opinion was purportedly signed by Philip Becker, who, according to Lehman & Eilen’s Web site, had been general counsel at the Philadelphia Stock Exchange. Mr. Becker did not return repeated calls from the Sun.

Another component of Mr. Sihpol’s defense strategy will be to argue that he did not violate any rules involving NAV computation, as Mr. Spitzer alleged he did. In the felony complaint, Mr. Spitzer argued that all late trading is prohibited, making any late order an attempt to receive a “stale” NAV. The defense team will counter that all trading in mutual funds is governed by the “forward pricing” rule, formally known as Rule 22c-1. It states that any order to buy or sell mutual-fund shares must be placed before the daily computation of NAVs. An order that misses that deadline is to be assigned the next day’s NAV. The rule mentions no specific cut-off time, according to Mr. Stewart, the defense lawyer.

A Yale Law School professor assisting in Mr. Sihpol’s defense, who has published textbooks on securities law, Jonathan Macey, said many funds do not compute NAVs until 5:30 p.m.

Along similar lines, Mr. Stewart said Mr. Sihpol was specifically instructed by a Bank of America executive to tell Canary that all orders had to be stamped before 4 p.m. and submitted before 5:30. Every trade ticket submitted by Mr. Sihpol complied with that order, Mr. Stewart said.