Quattrone Makes Comeback, Flings Expletives in CSFB Saga: Books

Frank Quattrone
Former Credit Suisse Group investment banker Frank Quattrone leaves federal court in Manhattan on Aug. 22, 2006. Photographer: Emile Wamsteker/Bloomberg

Frank Quattrone, the “it” banker of the 1990s high-tech boom, is back in the headlines -- as a player, not a defendant.

His merchant-banking boutique, Qatalyst Group, worked with Goldman Sachs Group Inc. as an advisor on the sale of smartphone maker Palm Inc. to Hewlett-Packard Co. for $1.2 billion.

Quattrone would presumably like to forget his successful courtroom battles against charges that he obstructed justice during probes into the initial-public offering practices of his former employer, Credit Suisse First Boston.

Yet here comes Randall Smith with “The Prince of Silicon Valley,” a book recounting Quattrone’s fight to clear his name of a 2004 conviction, which an appeals court overturned.

Smith, a senior Wall Street Journal staffer whose reporting raised so many questions about the banker, describes two Quattrones.

One is a powerful micromanager who once demanded, and got, everything from a personal publicist to the power to fire research analysts. This is the man who put together some of the era’s hottest deals, including offerings of Cisco Systems Inc. and Amazon.com Inc.

The other Quattrone is a self-professed innocent bystander who during the CSFB inquiries initially asserted that he didn’t decide who got IPO shares.

It’s the first Quattrone who comes across most indelibly in this detailed -- sometimes too detailed -- account. What emerges is a portrait of a man who threw his weight around with a surfeit of arrogance even by Wall Street’s standards.

Mr. Franchise

During a conference call in 2001, for example, some CSFB officials were grappling with the implications of the IPO probe. One staffer said they should consider risks to the firm’s franchise, only to hear Quattrone bark back that he WAS the -- expletive deleted -- franchise, says Smith, arguing that Quattrone’s clout became a liability.

“Quattrone became so confident, and had such economic power within his organization, that he became exempt from some of the routine checks and balances, rickety as they might have been at CSFB, that had been designed to promote compliance with the rules,” Smith writes.

At the heart of the investigations by securities regulators and federal prosecutors was “spinning,” a practice usually defined as doling out coveted IPO shares to executives to win their investment-banking business. Smith expands on the definition, presenting evidence that spinning also involved brokers demanding paybacks for their customers’ IPO gains.

Conviction Overturned

Quattrone faced two trials on charges of obstructing justice in the probes into CSFB’s share allocations in IPOs. Smith gives us much information about the infamous e-mail in which Quattrone forwarded a colleague’s instructions to “clean up those files” even as company lawyers were getting document requests from the Securities and Exchange Commission and other authorities. At the top of the message, he wrote, “i strongly advise you to follow these procedures.”

The first trial ended with a hung jury in 2003; the second resulted in a conviction in 2004 for obstruction of justice and witness tampering. He was sentenced to 18 months in prison before a federal appeals court overturned the conviction, saying the jury had received flawed instructions. His lifetime ban from the securities industry was reversed.

Quattrone declined to be interviewed by Smith for the book. His spokesman, Robert Chlopak, told this reviewer in an e-mail that the only wrongdoing evident in the book “is that Mr. Smith’s own coverage of Mr. Quattrone in the Wall Street Journal, on which the book is based, has been slanted and inaccurate for the past 10 years.”

Missed Opportunity

Smith’s editor at St. Martin’s Press, Phil Revzin, said in an e-mail that the publisher has “full confidence in Mr. Smith’s reporting in the book.”

Unfortunately, Smith fails to paint the big picture and draw broad conclusions. He includes too many players, shares too many verbatim e-mails, and sometimes left me wishing for a cheat sheet to keep tabs on names and dates.

Quattrone comes across here as a mixture of P.T. Barnum and TV game-show host Monty Hall. In making a pitch for the banking business of Latitude Communications Inc., he exclaimed that his team had “an attitude” about Latitude. A year later, as prosecutors were gathering evidence against his group, Quattrone held court at his annual conference at the Phoenician luxury resort in Scottsdale, Arizona, offering the crowd appearances by Lance Armstrong and Sheryl Crow.

A Barron’s reporter at the event asked Quattrone what kept him getting up each morning to work so hard. His answer: a desire to stick it to Morgan Stanley.

Another Wall Street biography, another shining moment for U.S. financiers.

“The Prince of Silicon Valley: Frank Quattrone and the Dot-Com Bubble” is from St. Martin’s Press (368 pages, $30).

(Susan Antilla is a Bloomberg News columnist. The opinions expressed are her own.)

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