Frank Quattrone's Higher Calling
In May, 2004, the same week that Frank P. Quattrone was convicted of obstruction of justice, the former Credit Suisse (CSR) technology banker read a newspaper story about John Stoll. The 61-year-old man from Bakersfield, Calif., had just been exonerated for a child-molestation crime he did not commit, after spending 20 years in prison.
Moved by the story, Quattrone contacted the Northern California Innocence Project (NCIP), a nonprofit organization in Santa Clara, Calif. that defends wrongfully convicted people and had helped overturn Stoll's conviction.
A PERSONAL ISSUE.
Quattrone wasn't seeking help for himself. Rather, he wanted to know how he could support the NCIP, which was facing a funding shortfall. "He's a very religious man and was struggling for a long time to find meaning in what had happened to him," says Kathleen "Cookie" Ridolfi, executive director at NCIP and a law professor at Santa Clara University. "He believes that basically it was God directing his attention and saying, 'I want you to notice this issue.'" Quattrone joined NCIP's advisory board shortly after his initial call and has since helped the organization raise money.
Now Quattrone, 50, has had his own personal experience with reversals in judgment. On Mar. 20, the 2nd U.S. Circuit Court of Appeals threw out Quattrone's obstruction-of-justice conviction because of faulty instructions to the jury, and granted him a new trial with a different judge. Four days later, the Securities & Exchange Commission reversed a ruling by the National Association of Securities Dealers that had banned him from the securities industry for life.
Neither decision clears Quattrone of wrongdoing. The Justice Dept. is deciding whether to pursue another trial, and the NASD could hold further hearings on whether its ban was proper. Quattrone declined to comment for this story.
In April, 2003, the Justice Dept. charged Quattrone, one of the most influential bankers in Silicon Valley during the 1990s, with obstruction and witness tampering. At the heart of the case is his endorsement of a subordinate's e-mail message that urged Credit Suisse employees to "clean up" their files.
A key issue is whether Quattrone knew that because of ongoing investigations, destroying the files was illegal. At the time, the SEC and a federal grand jury were probing whether 12 investment banks, including Credit Suisse, had accepted kickbacks for allocating shares of hot initial public offerings to clients. The NASD imposed its ban against Quattrone after he refused to testify before the association, citing his Fifth Amendment right to avoid self-incrimination.
A first trial of Quattrone ended in a hung jury in October, 2003. A second trial the following year led to a conviction, after which Quattrone was sentenced to 18 months in prison, but remained free pending appeal.
JUDGING THE CRIMES.
To many people, Quattrone came to symbolize the greed and excess of the 1990s bull market. Shares of several companies taken public by his group at Credit Suisse, such as VA Software (LNUX) and Transmeta (TMTA), had huge early run-ups that made insiders wealthy. But many of those stocks eventually fell below their offering prices, and some companies went out of business, igniting the ire of small individual investors.
Whether Quattrone committed crimes is still an open question. In its opinion, the Circuit Court wrote that the government's evidence was "sufficient to support Quattrone's conviction on each count," and to lead a jury to conclude that Quattrone acted with "intent to obstruct the grand jury's administration of justice."
The conviction was overturned because the court found that the judge overseeing the trial had incorrectly instructed the jury on how to determine guilt or innocence. "The opinion was focused on the jury problems," says Henry T.C. Hu, a corporate and securities law professor at the University of Texas Law School. "The Circuit Court did not find that Frank Quattrone was an angel."
QUATTRONE'S GOOD SIDE.
Supporters say Quattrone was a scapegoat. "The [government's] case was really about trying to find some way to punish Frank for a mania that had millions of participants," says Roger McNamee, a managing director at private equity firm Elevation Partners in Menlo Park, Calif. "As seems to be the case in so many high-profile prosecutions, corners were cut, and things were done to speed the outcome."
With his lifetime ban lifted, Quattrone could return to the securities industry immediately. But it's not clear that he fought the ban because he wanted to restart his former career.
"I think Frank would have done this even if he was sure he didn't want to practice [in the securities industry] again," says Jerome B. Falk, a partner at the San Francisco law firm Howard, Rice, Nemerovski, Canady, Falk and Rabkin, who represented Quattrone against the NASD. "He's a very interesting man with a very strong sense of right and wrong. He doesn't want anyone to ever have to go through what he has gone through."
INCREASE IN EMPATHY.
Before his conviction, Quattrone would not have believed that such problems as official misconduct, mistaken identity, and poor legal representation cause wrongful convictions, says Ridolfi at NCIP. Since 1989, 172 people in the U.S., including 14 on death row, have been exonerated based on DNA evidence, according to the Innocence Project at the Benjamin N. Cardozo School of Law in New York. (The New York organization is the original nonprofit, and the one on which the NCIP and others have modeled their efforts.)
"[Quattrone's] own experience made him think, 'If this can happen to somebody with all my resources, I can only imagine what happens to people who are poor,'" Ridolfi says. "When the system goes awry, they are helpless."
Whatever Quattrone chooses for his next act, the Innocence Project will likely be part of it. Whether technology or finance will play a role is uncertain. "It would be understandable if he looked at the investment world and said, 'To heck with you guys,'" says McNamee at Elevation Partners. "I hope for the Valley's sake he finds a way to get involved again."
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.