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NASD Files Charges Against Ex-CSFB Banker

Mar 6, 2003 | FT,COM

Frank Quattrone, the former Credit Suisse First Boston banker, signalled he would try to put his old employer on trial in his fight against civil charges filed against him on Thursday by US securities regulators.

The civil complaints filed by the National Association of Securities Dealers (NASD), the industry's self-regulatory group, represent the first charges against Mr Quattrone, the most prominent banker of the technology boom.

The NASD alleged that the enormous revenues he generated were based on crooked stock research and improper initial public offering practices. It also accused him for failing to appear at an NASD hearing last week.

Mr Quattrone's attorney, Howard Heiss, said: "The NASD charges are completely without merit and represent an unprecedented attempt to take punitive action against an individual for conduct that was legal at the time and widespread throughout the industry."

In some cases, Mr Heiss said Mr Quattrone is being charged for practices that were approved by CSFB lawyers.

"Mr Quattrone will vigorously contest these unfair and unfounded charges," he added. The claims against Mr Quattrone could carry millions of dollars in fines, and a lifetime ban from the securities industry.

Mr Quattrone, according to the NASD complaint, personally earned more than $200m from July 1998 until 2001.

The complaint said Mr Quattrone created a "firm within a firm" in which analysts, bankers and brokers reported to him despite conflicts of interest.

It alleged that Mr Quattrone's tech group relied on IPO "spinning" to win investment banking work, steering lucrative IPOs to executives in the hope they would return favour with their companies' banking assignments.

The NASD said such allocations violated its rules against gifts and gratuities worth more than $100.

CSFB, it said, identified more than 300 "strategic" tech executives it dubbed "Friends of Frank" and awarded hot shares. The bank would send them monthly performance statements to show their gains. In one case, the gains over a 19-month period totalled nearly 58,000 per cent.

"Spinning took a uniquely aggressive form in the tech group," the NASD said.

The tech group, the complaint said, also used the promise of biased stock research to drum up business. CSFB would cite favourable research it had written about its clients when it presented pitch books for new accounts, the NASD said.

Mr Quattrone resigned from CSFB under pressure on Tuesday. In addition to the NASD probe, he faces criminal investigations by Eliot Spitzer, the New York state attorney general, and the US attorney's office.

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