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CSFB Places Banker On Administrative Leave Amid NASD Investigation

Feb 4, 2003 | AP

Credit Suisse First Boston saidit has placed the head of its global technology group on leave based on new information uncovered in an internal investigation.

The decision to place Frank Quattrone on leave was based on information CSFB learned Friday, the investment bank said in a statement. That is the same day pending civil charges against him by securities regulators were first reported in The Wall Street Journal.

The firm said this new information raised questions about Quattrone's response to an internal inquiry last week about e-mails sent to employees in December 2000 regarding document retention issues and whether he was aware of pending investigations at that time.

In its statement, CSFB said it had questions about whether Quattrone had acted appropriately when he sent the e-mail and permitted a subordinate to send out a similar e-mail.

The investment bank would not be more specific about the contents of the e-mail, but said the firm's legal department acted to ensure all relevant documents were preserved and provided to authorities.

CSFB said it has notified authorities about the new information and is cooperating with them.

Calls to Quattrone's lawyer were not immediately returned Monday. In a statement released by a Quattrone spokesman Monday, Quattrone said, ''I did nothing wrong. I am confident the investigation will show that.''

Quattrone, 47, has been notified that the National Association of Securities Dealers is considering action against him, a source close to the situation said Friday, confirming the Journal report. The notice gives Quattrone a chance to rebut the claims before the NASD takes action.

As an investment banker, Quattrone had the unusual position of head of CSFB's team of technology stock analysts. He is accused of failing to prevent conflicts of interest that occurred when analysts issued favorable research reports on companies that were investment-banking clients of CSFB.

The NASD also is alleging that Quattrone was involved in distributing initial public offering shares to Silicon Valley executives whose companies did investment-banking business with CSFB.

The practice, known as ''spinning,'' recently was outlawed by federal regulators. Critics have said it gave corporate executives an unfair advantage in the IPO market while shutting out small investors. Quattrone is said to have personally directed some IPO shares to so-called ''Friends of Frank'' accounts.

Sanctions by the NASD can include civil fines and even exclusion from the securities industry.

Regulators have taken several moves against firms and individuals for alleged violations in distribution of IPO shares during the tech boom in 1999 and 2000. CSFB agreed in December 2001 to pay $100 million to resolve charges of abuses in its distribution of IPOs.

CSFB was also among nearly a dozen Wall Street firms that agreed last month to pay a total of $1.4 billion to settle claims they misled customers with biased stock research. CSFB's portion is $200 million.

The NASD, the Securities and Exchange Commission and New York Attorney General Eliot Spitzer have been targeting Wall Street firm abuses and conflicts of interest that have rattled investors' confidence.

Spitzer, who negotiated the industrywide settlement, also is investigating Quattrone for possible stock-research conflicts.


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