Star Silicon Valley Banker Convicted of Obstruction

Frank Quattrone, the former Silicon Valley investment banker who brought some of the nation’s hottest technology companies to Wall Street, was convicted Monday of trying to obstruct government probes into new stock offerings.

Quattrone sat stone-faced as U.S. District Judge Richard Owen read the verdict pronouncing him guilty of two counts of obstruction of justice and one count of witness tampering in a case that stemmed from a brief e-mail he wrote to his staff 3 1/2 years ago.

His mother and sister broke down as the verdict was announced, and Quattrone grew teary-eyed as he consoled them.

The unanimous decision followed an 11-day trial and came after less than eight hours of jury deliberations. A trial on the same charges ended in a hung jury in October.

Quattrone, 48, faces 12 to 20 months in prison under federal sentencing guidelines when he is sentenced Sept. 8.

“We are obviously grossly disappointed,” said Quattrone’s lead defense counsel, John Keker, who promised an appeal. “I feel like we failed Frank. He’s innocent.”

The verdict is the second major trial victory for the government this year in its high-profile crackdown on corporate crime. Lifestyles entrepreneur Martha Stewart was convicted of obstruction in the same courtroom March 5.

The Quattrone case was about ensuring the government’s ability to conduct investigations, which is needed to maintain the credibility of the nation’s financial markets, said David Kelley, the U.S. attorney in Manhattan.

“When we learn of efforts to obstruct or interfere with those investigations, we must, and we will, prosecute those cases to the fullest extent permitted by law,” Kelley said in a statement.

The verdict seemed to stun Quattrone, who had appeared confident in recent days as he chatted up courtroom sketch artists and other trial observers.

Some in Silicon Valley also were taken aback by Monday’s conviction.

“Quattrone was clearly singled out because he was the highest-profile, most successful investment banker during the Internet boom era, and his conviction was worth a political feather in the hat for the prosecutors,” said online journalist Tony Perkins, former editor in chief of the defunct Red Herring print magazine that chronicled the Internet boom. “The politicians were looking for an example, which is by definition un-American.”

Randy Komisar, a longtime Silicon Valley entrepreneur and executive, said the conviction was likely to influence the way bankers conducted themselves. The verdict comes as the tech economy is heating up again with the public stock offerings of Google Inc. and other companies.

“It will make a lot of people think twice,” Komisar said. “The graduates of business schools don’t plan to be thieves. But they do plan to win. So the rules have to be very clearly delineated. That’s what cases like this are doing. They’re saying, ‘These are the rules, and if you break them, these are the consequences.’ ”

Quattrone, who took the witness stand in both trials, stumbled badly in October when prosecutors caught him in a contradiction. This time, he adjusted his story and held his ground under zealous cross-examination by prosecutor David Anders.

The case against Quattrone was largely circumstantial, and some experts said evidence that Quattrone had criminal intent to obstruct justice was thin.

The case revolved around an e-mail Quattrone wrote to his staff at Credit Suisse First Boston’s technology group in Palo Alto in December 2000. The two-line missive encouraged his subordinates to comply with an e-mail sent by another banker a day earlier to “clean up” their files.

Prosecutors said Quattrone was trying to coax his team to destroy documents sought in investigations by the Securities and Exchange Commission and a federal grand jury. The probes centered on whether Credit Suisse First Boston, a Wall Street powerhouse, forced customers to pay kickbacks for shares of hugely profitable initial public stock offerings in the bull-market frenzy of the late 1990s.

Quattrone sent the e-mail two days after being told about the grand jury probe and a few hours after being advised to hire his own lawyer to represent him. In his closing argument Friday, Anders walked jurors through the many warnings Quattrone had received about deepening investigations, and said the star banker was desperate to save his lucrative career.

Quattrone contended that he gave no thought to the probes and that the e-mail was something he had dashed off as he rushed home for the day.

When deliberations began late Friday afternoon, the jury on its first ballot was split 7-4 in favor of conviction, with one undecided vote, said juror Sheldon Silver, a Manhattan receptionist.

But jurors said the panel of six men and six women ultimately was swayed by the prosecutors’ claim that Quattrone was too smart and successful to believe the e-mail was proper.

Some of Quattrone’s explanations “just didn’t make sense after a while,” Silver said. “There was too much that went on that wasn’t coincidental.”

Silver said he was persuaded in part by a discrepancy in Quattrone’s statements at the two trials about his knowledge of grand jury proceedings -- an inconsistency highlighted by prosecutors.

At the first trial, Quattrone testified that he had almost no understanding of the significance of a grand jury investigation. At the second, he claimed a greater awareness.

The son of a Philadelphia garment worker, Quattrone grew up in a blue-collar neighborhood and made his way to California after graduating from the University of Pennsylvania. He later received an MBA from the Stanford Business School.

In the 1980s, at a time when East Coast bankers paid scant attention to Silicon Valley start-ups, Quattrone saw the potential of financing nascent tech companies. He became a confidante of many of the industry’s rising entrepreneurs.

Those relationships allowed Quattrone to play key roles in the initial public offerings of Cisco Systems Inc., Amazon.com Inc. and Netscape Communications Corp., among others. As an investment banker, Quattrone helped determine the value of these firms, and he lined up investors willing to buy their newly issued stock.

He already had been a star at Morgan Stanley and Deutsche Bank when he was hired in 1998 to head Credit Suisse First Boston’s Global Technology Group in Palo Alto, where he earned $120 million in 2000 alone. He resigned last year.

Quattrone’s expected appeal is likely to be based in part on the defense’s belief that Judge Owen was biased toward prosecutors.

Owen repeatedly sustained prosecution objections, but rarely did the same for the defense. At one point last week, Keker asked for a sidebar because a spectator had walked into the courtroom with his young daughter, whose loud hiccuping during Keker’s direct examination of Quattrone made it difficult to hear his answers. Owen ordered Keker to continue.

However, it is difficult to win an appeal on the grounds that a judge -- through his body language, comments or rulings -- favored the prosecution, said George B. Newhouse Jr., a criminal defense lawyer at Thelen Reid & Priest in Los Angeles.

He noted that Keker’s statements during the trial seemed calculated to lay groundwork for an appeal on those grounds.

“But that never works, and it particularly never works in the Second Circuit,” Newhouse said, referring to the federal appeals court that hears Manhattan cases such as Quattrone’s. “These trial judges are very smart about the rules.”

Another legal tact -- arguing that the evidence against Quattrone was too skimpy to convict -- also is unlikely to hold sway, experts said.

“Everything hinged on the question of Quattrone’s intent in sending that one e-mail,” said Kirby Behre, a criminal defense partner at Paul, Hastings, Janofsky & Walker in Washington. “Cases that depend on the intent of the defendant make it tough to convict because they’re so subjective. But for the same reason, it’s tough to win on appeal.”

Times staff writers Alex Pham in Los Angeles and Joe Menn in San Francisco contributed to this report.