(Dow Jones) The case of a former Merrill Lynch broker who is accused of stealing a $780,000 signing bonus highlights how little brokerages and other investment firms may know about certain job candidates they're recruiting.

On Wednesday, a New York state court judge scoffed at a possible plea deal that would require Steven Mandala, the former broker, to serve one to three years for the offense. The Manhattan District Attorney has accused Mandala of allegedly lying about his prior employment and production when applying for a job at Merrill Lynch. Prosecutors recommended a two to six year sentence. The parties had appeared in court Wednesday for a scheduling proceeding.

Mandala was indicted on felony charges in February, including grand larceny, money laundering and falsifying business records. Prosecutors allege that Mandala, who was employed as a broker for Maxim Group LLC in New York from 2004-2009, falsely told Merrill Lynch that he was a partner with Maxim, managied $300 million in assets, produced $1.5 million in revenue, and that he received $765,000 in compensation. He also allegedly provided false pay stubs, tax returns and other documents, say prosecutors.

Bill Halldin, a spokesman for Merrill Lynch, said, "We are working closely with the authorities on this matter and are pursuing recovery of the funds in other forums as well." The company obtained a court order last year that froze about $300,000 of Mandala's assets.

Brokerages and other investment firms often have little first-hand knowledge about a brokers' production at a previous firm, says George Brunelle, a New York-based securities lawyer. "No firm will tell a competitor how much money their traders made, or didn't make, because it's a component of how much money the firm made," he said.

The revenue that brokers generate through fees and commissions during the previous 12 months is known in the industry as their "trailing 12." Brokers receive a percentage of their trailing 12, often as much as 200%, as a signing bonus when joining a new firm.

"It's common practice for brokers to provide production runs," which are monthly reports sent internally to the brokers showing production and other data, said Toby Richey, a broker recruiter with Toby Richey & Associates. But brokers from small firms, like Maxim Group, can argue that their firms don't produce production runs, even if they do.

Brokers whose firms participate in the protocol for broker recruitment--an agreement among most major brokerages that outlines recruiting standards--are allowed to exchange certain production information, says Joseph Gehring, a New York lawyer who handles brokerage employment cases.

But that only provides a broad view of the brokers' business, without disclosing sensitive client information.

"To some extent, you have to take the broker's word," Gehring said.

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