U.S. May Push to Retry Quattrone

Times Staff Writer

Absent a plea bargain, federal prosecutors in Manhattan may have little choice but to retry Frank Quattrone despite the less-than-promising odds of a conviction, legal observers said after the former star investment banker’s trial ended with a hung jury last week.

Jurors were sent home Friday, unable to reach a verdict in the case against Quattrone, the former Credit Suisse First Boston banker who dominated the market for initial public stock offerings in Silicon Valley during the 1990s. Jurors said the final tally was an 8-3 vote to find Quattrone guilty of obstructing a grand jury probe of CSFB’s IPO practices, and 8 to 3 to convict him of witness tampering. The panel split 6 to 5 in favor of acquittal on a charge of obstructing a Securities and Exchange Commission investigation.

“I would have a hard time walking away from a case where I had eight people willing to convict him on at least two counts,” said Robert S. Bennett, a former federal prosecutor in Washington who later defended President Clinton in the Paula Corbin Jones sexual harassment case and Enron Corp. after the energy company collapsed.

“My gut is that the government will have to try it again,” said former Los Angeles federal prosecutor David W. Wiechert, now a defense specialist who has represented such clients as Robert L. Citron, the former Orange County treasurer who lost $1.6 billion on risky investments in 1994, plunging the county into bankruptcy protection. “They want to send a message to other people facing white-collar criminal charges that these are viable cases.”


But other legal experts said the jury’s failure to convict Quattrone cast some doubt on how easily prosecutors may be able to tap public resentment against Wall Street and corporate America when putting white-collar defendants on trial. L.A. attorney George B. Newhouse noted Friday that lawyers for lifestyle entrepreneur Martha Stewart, who faces a January trial on obstruction and other charges, probably drew encouragement from the Quattrone mistrial.

Prosecutors said during the trial that they probably would retry Quattrone in the event of a hung jury but declined to comment on the subject after the jury was dismissed Friday. Prosecutors will meet Nov. 5 with the trial judge, U.S. District Judge Richard Owen, to discuss whether they will seek a second trial.

The basis of the government’s case was simple, slender and well known: a two-line e-mail that Quattrone sent in December 2000 that encouraged subordinates to comply with another banker’s e-mail, which urged them to “clean up those files.”

At the time, a grand jury and the Securities and Exchange Commission were investigating whether CSFB handed out shares of stock offerings in exchange for kickbacks.


Attorneys said both sides learned much about each other’s weaknesses during the trial -- especially because Quattrone took the witness stand to testify in his own defense.

Among the revelations: Quattrone was a bad defense witness who appeared evasive, said juror Mayo Villalona, who works for banking giant HSBC Holdings.

On the other hand, said Villalona, who voted for acquittal on all counts, jurors would have acquitted Quattrone if he had exercised his right to remain silent, because the e-mail wasn’t persuasive evidence on its own.

The mistrial occurred despite deep public resentment against financial wrongdoing by highly placed executives.


A study completed last month by Vinson & Co., a jury consulting firm, found that although half the jurors believed most people were honest and trustworthy, only about a quarter said the same about corporate executives. And more than two-thirds believe that executives are overpaid, the study said.

Given those attitudes -- and the fact that Owen had given the jury the so-called Allen charge, instructing them to work harder to reach a verdict even though they said they were deadlocked -- the mistrial was surprising, said Donald E. Vinson, head of the consulting firm.

In fact, Vinson cautioned against reading too much into what the hung jury may mean for other white-collar defendants such as Stewart.

“This wouldn’t give me solace or comfort,” he said. “Remember, you’re dealing with a pretty small sample size -- 11 or 12 people out of the potential jury pool of New York. We’re looking at three people in that sample who were holdouts.”


Even so, the mistrial “probably emboldened Frank Quattrone,” said Alejandro Mayorkas, a former U.S. attorney for Los Angeles, noting that Owen “did not at any stage of the proceedings rule in ways that helped the defense, and in fact created what must have appeared to be a hostile environment for them.”

If Quattrone went to trial a second time and decided not to testify, prosecutors could read portions of his testimony during the first trial back to the jury. That presumably would include damaging testimony in which Quattrone first distanced himself from CSFB’s IPO-allocation practices, and then admitted under cross-examination to playing some role in them.

Juror Villalona said the defendant also gave a bad impression during exchanges in which he debated the meaning of words with prosecutors and asked to have questions repeated.

On the other hand, the defense could smooth out some of the bumps in Quattrone’s performance the second time around, avoiding the appearance of giving contradictory testimony by acknowledging up front that the defendant had at least some involvement in the distribution of IPO shares at CSFB.


Because prosecutors now know their case was weak and Quattrone’s attorney, John Keker, learned that his client had problems as a witness, “neither the government nor the defense can ... come away saying, ‘I’m confident about a retrial,’ ” Bennett said.

That situation “is tailor-made for a negotiated resolution” through plea bargaining, said L.A. defense attorney Jan Handzlik, an expert in how federal sentencing guidelines are applied.

If such negotiations occur, Keker probably would seek to have his client plead guilty to just one of the counts. Under federal sentencing guidelines, that would be punishable by a 10-to-16-month jail sentence, which could be cut to six months to a year in a halfway house or home confinement if Quattrone received credit for accepting responsibility, Handzlik said.

Even if such a plea resulted in the SEC’s barring Quattrone from working in the securities business or becoming an officer or director of a public company -- a distinct possibility if he admitted committing a felony -- that might be acceptable if it meant avoiding jail time or serving only a short period, Handzlik said.


Mayorkas, the former U.S. attorney for L.A., said prosecutors would have wide latitude to accept such a plea agreement on grounds that the first trial revealed significant risk of losing their case. He said, however, that as part of its crackdown on white-collar crime, the Justice Department probably would insist that Quattrone spend some time behind bars.