Quattrone Case Will Hinge on E-Mail
When the trial of Frank Quattrone begins in a Manhattan courtroom Monday, the biggest criminal case against a Wall Street figure in some 15 years will hinge on a two-line e-mail.
The government has charged the once-powerful Silicon Valley investment banker with obstruction of justice and witness tampering, alleging that Quattrone wrote the brief electronic message to prod his staff to destroy incriminating documents.
The trial will be closely watched, in part because it’s the highest-profile criminal case to hit Wall Street since the insider-trading probes of Ivan Boesky and others in the late 1980s.
The outcome also will be viewed as a gauge of the government’s progress in today’s broader crackdown on corporate fraud. Though the trial of former Tyco International Ltd. Chairman L. Dennis Kozlowski also will start Monday, the expected two-week Quattrone proceedings probably will be the first of the current crop of white-collar cases to be decided by a jury.
Moreover, the trial is likely to cast a harsh light on the ethos of Silicon Valley in the 1990s, when the founders of upstart technology outfits scored huge profits in the run-and-gun market for initial public stock offerings. Many of those companies later caused huge losses for investors when they disintegrated during the bear market.
“This is about more than Frank Quattrone,” said George B. Newhouse Jr., a white-collar criminal specialist at Thelen Reid & Priest in Los Angeles. “This is about greed and excess in the ‘90s, both in Silicon Valley and on Wall Street.”
Quattrone was one of the most powerful men in the securities industry in the last decade when he was the Palo Alto-based head of technology investment banking for Credit Suisse First Boston. His success came because Quattrone courted tech entrepreneurs years before Internet mania struck and they later turned to him for financing.
By 2000, however, securities regulators were looking into how CSFB allocated shares of hot IPOs to clients. Quattrone is charged with trying to impede probes by the Securities and Exchange Commission and by a federal grand jury.
CSFB eventually paid $100 million to settle probes by the NASD, which regulates securities dealers, and the SEC that it received kickbacks by charging excessive commissions for certain IPOs. The grand jury brought no charges. Quattrone resigned from CSFB in March.
Jury selection in the Quattrone case will begin Monday morning. If convicted, experts say, Quattrone probably would face one to two years in prison -- and the dubious distinction of becoming the only prominent Wall Street figure sent to jail so far as a result of the industry’s recent spate of scandals.
The criminal case is being brought by James Comey, the U.S. attorney in Manhattan. Quattrone’s lawyer is John Keker, a highly regarded San Francisco defense attorney who also represents disgraced Enron Corp. executive Andrew S. Fastow. Comey and Keker both declined to comment.
For all its sweeping implications, the government case is likely to hang on Quattrone’s brief e-mail.
That may be a boon to the defense, experts say, because the e-mail, on its own, may not be enough to show that Quattrone tried to hamper the probes.
“Even assuming the government can prove everything alleged in the indictment, this will still be a tough case for the prosecution,” said Jeffrey Eglash, a partner at Howrey Simon Arnold & White in Los Angeles. “Proving that Quattrone sent that message with the corrupt intent to obstruct justice will not be easy.”
The prosecution is expected to argue that Quattrone was told several times about the investigations and knew he shouldn’t destroy documents.
On Dec. 3, 2000, according to court filings, Quattrone was notified about the grand jury investigation in an e-mail from David Brodsky, a CSFB lawyer.
The next day, Richard Char, an investment banker in Quattrone’s group, proposed sending out an e-mail to tech bankers urging them to “catch up on file cleaning.” Quattrone authorized Char to send the e-mail, according to the indictment.
On Dec. 5, Brodsky advised Quattrone to hire a lawyer. That night, Quattrone sent his staff the e-mail: “having been a key witness in a securities litigation case in south texas (miniscribe) I strongly advise you to follow these procedures.”
After receiving the e-mails, prosecutors alleged, many people working for Quattrone purged documents relating to the investigation.
Quattrone’s lawyers have countered that he “had no intent to obstruct anything.” Keker is expected to argue that Quattrone was a time-strapped banker who received scores of e-mail messages every day and spent mere seconds composing his Dec. 5 missive.
Quattrone’s defense is going to be “that this [e-mail] was a trivial, irrelevant event and that he had much bigger things to worry about,” said Christopher Bebel, a white-collar defense attorney in Houston.
The defense also is expected to claim that Quattrone thought the probes centered on CSFB’s equities division, which handled IPO allocations, rather than his investment banking unit, which put the deals together.
Quattrone “knew virtually nothing about the nature of the investigation,” his defense team said in a court filing.
The government response, experts said, is likely to be that Quattrone was a bright guy who understood the significance of the government probes, especially the criminal investigation.
“The government is going to try to prove that he was ‘doing an ostrich,’ and sticking his head in the sand,” said Stephen Ryan, a former prosecutor who is now a partner at Manatt, Phelps & Phillips in Washington.
Prosecutors will try to prove that Quattrone put a lot of thought into his brief e-mail. They have pointed out in filings that Quattrone began writing the e-mail on Dec. 4, but did not finish it. He came back to it the following evening and sent it to his staff at 9:28 p.m.
Going in the government’s favor, experts said, is the disdain among a scandal-weary public for corporate America in general and Wall Street in particular.
“It’s a horrible time for a corporate white-collar defendant to go to trial,” Ryan said.
