Quattrone Gets 18-Month Term
Frank Quattrone, the high-powered Silicon Valley investment banker who once made $120 million in a single year, was sentenced to 18 months in prison Wednesday for obstructing government probes of hot stock offerings at the height of the bull market.
U.S. District Judge Richard Owen brushed aside a plea for leniency, imposing a term exceeding federal sentencing guidelines. Quattrone told the judge that he had to care for his sick wife and daughter. But Owen ruled that Quattrone should serve additional time, siding with prosecutors who asserted that he had lied on the witness stand.
“The judge really came down with a hammer,” said Mark Zauderer, a lawyer with Piper Rudnick in New York.
Sentencing guidelines call for a prison stay of 10 to 16 months, and probation officials had recommended five months in prison and five months of home detainment. That was the sentence meted out July 16 to lifestyle entrepreneur Martha Stewart, who also was convicted in federal court of obstruction of justice.
Quattrone’s lawyers said that his wife, Denise, was seriously ill with an undisclosed ailment that struck her 11 years ago. Lead defense lawyer John Keker said Quattrone’s 15-year-old daughter has had “significant psychological deep depression” since his conviction and was suffering from an eating disorder.
“This family needs him around,” Keker said. “He’s the only functioning parent.”
But Owen said Quattrone, 48, could afford top-notch care for his family during his absence.
“There’s $50 million of assets out there to take care of Mrs. Quattrone and $26 million to take care of [his daughter] in some trust fund,” Owen said.
The daughter’s problems are not unusual, the judge added, saying: “She sounds like a perfectly normal girl.”
Owen denied Quattrone bail pending his appeal. The judge initially wanted the former investment banker to surrender in two weeks but extended that to 50 days at the defense’s request. He also fined Quattrone $90,000, the maximum penalty of $30,000 for each of the three counts -- two of obstruction of justice and one of witness tampering -- on which he was convicted.
The judge granted Quattrone’s request that he serve his time at the federal prison in Lompoc, Calif.
Quattrone, once Silicon Valley’s most powerful financier, was found guilty May 3 in a case that stemmed from a brief e-mail he forwarded to his staff 3 1/2 years earlier at Credit Suisse First Boston’s technology group in Palo Alto. A previous trial had ended in a hung jury.
The e-mail reminded workers to clean out old files. Prosecutors said Quattrone endorsed the message to coax his team into destroying documents sought in an investigation into whether the firm forced customers to pay kickbacks for shares of hugely profitable initial public stock offerings.
Quattrone contended that he simply dashed off the e-mail as he rushed home for the day.
After his sentencing Wednesday, Quattrone again proclaimed his innocence.
“To my family in California, Dad’s coming home soon, and I’m OK and I love you,” he declared before a bank of TV cameras outside the Manhattan courthouse. “I can hold my head high because I know that I’m innocent.”
Quattrone is the best-known Wall Street figure to face prison since junk bond king Michael Milken. Starting in the 1980s, Quattrone built a career backing technology start-ups at a time when his Wall Street cohorts dismissed the volatile industry as a corporate backwater.
He earned the trust of the insular tech world and became a sensation when the industry soared in the 1990s, playing key roles in the public stock offerings of companies including Cisco Systems Inc., Amazon.com Inc. and Netscape Communications Corp.
As they did at both trials, Quattrone’s lawyers clashed bitterly with Owen throughout the three-hour, 15-minute hearing Wednesday, and they pledged afterward to appeal the verdict, citing what they said was a pattern of rulings unfair to Quattrone.
“We have a very, very strong appeal and believe that Frank Quattrone will never have to serve a day of the prison sentence that was imposed on him today,” defense lawyer Mark Pomerantz said.
In Silicon Valley, where Quattrone made his reputation among entrepreneurs as the surest guide to riches, several friends and peers said they were shocked by the severity of the punishment.
“I believe the sentence was excessive and unfair and hope he prevails on the appeal,” said Ron Conway, founder of Angel Investors, one of the best-known early-stage investment firms. “The cards were stacked against Frank, and the jury was given misinformation.”
Sandy Robertson, founder of now-defunct San Francisco investment bank Robertson Stephens Inc., called the sentence “a tragedy.”
“I don’t think he was guilty of what they were investigating. It wasn’t illegal at the time,” said Robertson, who wrote to Owen and vouched for Quattrone’s character.
Friends and acquaintances say a discouraged Quattrone has been keeping a low profile lately. Still, he has found time for the golf he loves. Since June, he has played at least 19 rounds of golf, many at his home course at the Los Altos Golf & Country Club, according to handicap records posted on the Internet.
Many in Silicon Valley consider Quattrone a victim of a changing national mood, penalized more for his success than for any improper actions.
“Regulation is a part of capital enterprise; it has to constantly change and reform,” said a longtime venture capitalist who asked not to be named. “Sometimes that process is painful or can end up making individuals pay high prices personally for what did not seem wrong at the time. This is just another reminder to understand the rules and play by them.”
Conway and others said the prison term would hasten a trend toward greater caution around regulatory and other legal matters.
But in Silicon Valley, an obsessively forward-looking place, Quattrone is no longer the frequent topic of conversation he once was.
Investors and executives there are talking more about the successful Google Inc. IPO and what technology might come in the next wave -- not those companies or people that failed to survive the last one.
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Hamilton reported from New York and Menn from San Francisco. Bloomberg News was used in compiling this report.
