Credit Suisse Fires 3 in IPO Probe
Credit Suisse First Boston on Thursday said it fired three San Francisco brokers who had been put on leave in April amid a federal probe of Wall Street firms’ initial public offering sales practices.
The three are apparently the first individuals to lose their jobs as a result of the widening government investigation.
The brokers are John Schmidt, who was head of CSFB’s private-client services in San Francisco; and two others in that group, Michael Grunwald and Richard S. Bushley.
The three all reported to both star CSFB investment banker Frank Quattrone and to the firm’s New York office.
“After an extensive internal review we found these employees violated company policies,” said Jeanmarie McFadden, a spokeswoman for CSFB. “We continue to cooperate with the regulators, but we have not identified any other individuals who have engaged in that kind of conduct.”
However, lawyers for the men said they do not believe they broke company rules.
“CSFB has unfairly singled out the San Francisco brokers,” said Brad D. Brian, an attorney representing Grunwald, in a statement from his Los Angeles firm Munger Tolles & Olson.
“Mr. Grunwald joined the firm after the practices at issue were already in place. He does not believe he has violated any CSFB policies and the company has not said what policies he violated,” said attorney Michael Doyen, who also is representing Grunwald.
“We are extremely disappointed CSFB took the precipitous and ill-advised action it did today,” said Richard Marmaro, attorney for Schmidt. “Mr. Schmidt’s actions were always appropriate and within the firm’s rules and regulatory guidelines.”
Though CSFB isn’t detailing what policies the men violated, sources say they are likely to be related to allegedly aggressive solicitations of very high commissions on hot IPOs sold to CSFB clients.
The probe that began last year by the Securities and Exchange Commission and the U.S. Attorney’s office in Manhattan in part concerns whether CSFB and other big brokerages received inflated commissions in exchange for IPO shares that surged in value. If so, any such commissions could have amounted to illegal kickbacks.
CSFB, as a top underwriter of tech stocks in 1999 and 2000, has been at the center of the investigation. In a filing with the SEC on Thursday, the firm acknowledged that it is a target of the probe.
Securities-law attorneys said Thursday that, despite the risk that fired employees may provide regulators with information about a firm’s inner workings, CSFB is attempting to show that it can police itself--and will take tough steps to enforce company policy.
