Quattrone Might Face Fee Questions
Prosecutors may have a new basis for cross-examining former Credit Suisse First Boston investment banker Frank Quattrone at his upcoming retrial: allegations that research coverage by CSFB was linked to investment banking fees.
The former Silicon Valley investment banking luminary, whose first trial on obstruction-of-justice and witness-tampering charges ended in October with a federal jury deadlocked 8 to 3 for conviction, is set to be back in court in Manhattan on Tuesday.
Quattrone lost a bid to have the case transferred to California and to have a new judge preside over the retrial.
Defense attorney John Keker last week urged U.S. District Judge Richard Owen to bar prosecutors from asking Quattrone about a 2001 fee dispute with Research In Motion Ltd., maker of BlackBerry e-mail pagers. Massachusetts regulators later cited e-mails that, they said, showed Quattrone was told the company paid the fees and a CSFB analyst would resume coverage.
Prosecutors are seeking new ways to attack his credibility should he take the witness stand again. They may offer evidence about the relationship between analyst coverage and banking fees stemming from the Research In Motion dispute.
“It speaks to his honesty,” said Seth Taube, a former Securities and Exchange Commission lawyer, now in private practice with McCarter & English, in Newark, N.J. Taube is not involved in the case. “If he arranged for false statements to be made about a company, then that speaks to his truthfulness.”
Owen did not decide whether he would allow questioning on the matter, which a defense lawyer called “totally irrelevant” to the charges Quattrone now faces. On Wednesday, the judge denied a defense request for an anonymous jury.
The top securities regulator for Massachusetts, William Galvin, said in October 2002 that e-mails and documents he uncovered revealed conflicts of interest involving the firm’s stock analysts and Quattrone, who was then CSFB’s technology banking chief.
In a lawsuit Galvin brought against the bank, he said CSFB produced “biased, subjective, and compromised research” that favored investment banking clients. Quattrone “exercised enormous control” over the technology analysts, who were in his department, and thus he was responsible for the information they disseminated, Galvin said.
Regarding Research In Motion, Galvin said a technology group analyst sent Quattrone an e-mail noting that the Waterloo, Canada-based company had paid $1.8 million in fees. “Now that the fee issue is behind us, I would ask that we return them to ‘most favored nation status,’ ” the analyst said in the e-mail, according to Galvin.
The message to Quattrone was evidence that CSFB required firms “to pay for positive research coverage,” Galvin said.
Credit Suisse resumed coverage of Research In Motion with a “buy” recommendation in December 2001.
CSFB spokeswoman Victoria Harmon and Research In Motion spokeswoman Sarah Williams declined to comment.
