Prison Stripes for Quattrone?

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By Tom Jacobs (TMF Tom9)
April 23, 2003

Federal prosecutors reportedly arrested and charged former investment banker Frank Quattrone with obstruction of justice and witness tampering in connection with his alleged orders to destroy documents in the fall of 2000.

Quattrone was the star banker whose IPO work in the bull market's heyday brought in as much as 15% of annual revenue for the Credit Suisse First Boston (CSFB) arm of Credit Suisse Group (NYSE: CSR).

The feds have been investigating CSFB's practices of allocating shares in initial public offerings and requiring that recipients share profits with the firm. CSFB settled in January 2002 with the SEC and the National Association of Securities Dealers (NASD) for $100 million, but cooperated in a continuing investigation of Quattrone and released emails it had previously withheld under the attorney-client privilege. The firm put Quattrone on administrative leave this February, and he resigned a month later.

According to reports, these emails are the basis for the criminal charges. In December 2000, a colleague sent an email alerting those in Quattrone's technology group that it was "time to purge those files," allegedly referring to document-retention policies and anticipating investors' class-action lawsuits. The next day, Quattrone forwarded the same email to others.

This might not seem altogether problematic were it not for one tiny, but relevant, fact: These emails came one and two days after a CSFB lawyer alerted Quattrone that he had received federal grand jury subpoenas from the IPO-allocation investigation. Apparently, ol' Frank didn't get the Nixon memo that it's the coverup that kills ya. 

While it doesn't look good for the fallen star, a criminal case is always tougher to prove than one for civil penalties alone. Criminal obstruction of justice cases require prosecutors to prove not only that you did an evil deed, but also did it with intention. Quattrone has denied knowledge of the investigations and will argue he was simply following and endorsing existing policies, while the prosecutors will point to the coincidental timing.

However, because Quattrone already faces civil penalties from the NASD and more, as part of forthcoming charges against analysts for alleged improper influence during the bull market's height, the combined pressure will be intense to plea bargain on the criminal side and settle on the civil.  

So far, the feds haven't indicted any of the Wall Street analysts and bankers from the boom's heyday, though civil actions abound. Those who want to see some liberty -- not just property -- taken will be smacking their lips... as well as handicapping the legal race on our Eyes on the Wise discussion board!

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