This Time, Quattrone Is Guilty
Former investment-banker Frank Quattrone didn't have to wait long for a verdict in his second trial on federal obstruction-of-justice charges. The jury found him guilty on all counts at about 2 p.m. on May 3, after deliberating for about five hours over two days. Deliberations in his first trial had dragged on for more than a week before ending with a hung jury and a mistrial.
Quattrone, once a Silicon Valley powerbroker as head of Credit Suisse First Boston's (CSR ) tech investment-banking unit, was convicted on two counts of obstructing justice and one count of witness tampering. In a Dec. 5, 2000, e-mail, he had encouraged his employees to clean up their files and get rid of documents -- at a time when he knew that CSFB's initial public offering process was being investigated by both a grand jury and the Securities & Exchange Commission. Quattrone faces up to 25 years in jail, though legal experts say he's mostly likely to get one or two years. Sentencing is scheduled for Sept. 8.
Quattrone's lead attorney, John Keker, said after the verdict that his client is innocent and will appeal. Keker said Judge Richard Owen didn't permit the defense to present a lot of evidence, and perhaps if all of it had been presented, the outcome would have been different.
The verdict won't likely have a dramatic effect on the tech banking business. Much-needed reforms have already taken place. For instance, regulators have by now banned the practice called "spinning" -- where investment bankers gave officers of tech startups stock in IPOs with the goal of landing additional banking business from them. And Google's highly anticipated IPO is planned as a so-called Dutch auction, where investment bankers don't have the opportunity to dole out shares to potential customers.
Still, the verdict sent a clear message to corporations: Make sure you have strong document-retention policies -- and enforce them. CSFB attorneys hadn't notified employees of the need to retain a large number of documents related to dozens of tech IPOs that investigators were interested in. Companies "have to be crystal clear that you can't do what Quattrone did," says Brad Simon, a partner with the law firm of Simon & Partners in New York and a former federal prosecutor.
What did come as a surprise was how quickly the jury reached its verdict. While a majority of the jurors in the previous trial had been in favor of convicting Quattrone, he and his defense had performed better in the second trial. During the first trial, Quattrone was combative on the witness stand. This time, he made no such gaffes. Yet the facts in the case remained the same.
"HE HAD A CHOICE."
For the most part, both trials followed similar paths, with many of the same witnesses answering the same questions. Prosecutors made the case that, starting in the spring of 2000, Quattrone was told no fewer than 19 times by CSFB attorneys about investigations by the National Association of Securities Dealers, the Justice Dept., and the SEC into the bank's process for stock allocations in IPOs.
The warnings culminated on Dec. 3, 4, and 5, 2000, with Quattrone being told that charges might be filed against CSFB and that he should get a personal attorney, since he might be called as a witness. One of Quattrone's subordinates -- who didn't know of the investigations -- sent an e-mail to CSFB's technology-investment banking staff on Dec. 4 urging them to clean out records of IPO deals. Quattrone, who ran tech-investment banking, read the e-mail that evening, began to reply, set it aside, and the next day urged employees to comply with the request.
The prosecution charged that Quattrone sent the e-mail because he wanted to destroy evidence that could have harmed the company and his lucrative banking business. "He had a choice," David Anders, an assistant U.S. Attorney, told jurors in closing arguments. "He chose to tell people in his tech group to clean out their files and destroy documents. He committed a crime."
"MAKES NO SENSE"?
The defense insisted that Quattrone did no such thing, contending that he didn't believe the investigations were aimed at him or his group, and he didn't mentally connect the warnings about the investigations with the e-mail. "He sent an e-mail as part of his regular job, with an innocent state of mind," Quattrone lead attorney Keker, said in his closing argument. "They're trying to turn this 22-word snippet into a crime. It makes no sense."
Keker spent most of his time focusing on the circumstantial nature of the prosecution's case, arguing that Quattrone's guilt hadn't been proven beyond a reasonable doubt.
During the first trial, the banker initially claimed that he had nothing to do with the allocations of IPO stock to money managers and important individual investors -- only to later admit that he was involved. He also claimed in testimony in the first trial that he didn't know what a grand jury was. This time around, he made no such claims. But even so, prosecutors made sure the jury knew how he conducted himself in the first trial by reading sections of testimony aloud.
Jurors at this trial gave all indications of being a serious, analytical, and thorough bunch. After meeting for less than two hours on Apr. 30, they sent a note to Judge Owen asking for transcripts of testimony by Quattrone and two other witnesses, all e-mails in evidence that Quattrone received and sent, as well as the defense briefing book involving the three crucial days in December at the heart of the case. Apparently, once they had a chance to examine the pile of evidence, it wasn't difficult to reach a decision.
By Steve Hamm in New York
Edited by Douglas Harbrecht