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NASD Official Says He Believed Quattrone Knew About Broad Probe

Oct 2, 2003 | AP

A regulator testified Wednesday that he believed technology banker Frank Quattrone reviewed some records central to an investigation into how Credit Suisse First Boston doled out shares of hot stock offerings.

On the first full day of testimony in Quattrone's closely watched trial, National Association of Securities Dealers enforcement director Roger Sherman said he thought Quattrone had access to records that showed how the bank allocated the shares.

"I believe Mr. Quattrone did review some of those records," he said.

Quattrone's attorney, John W. Keker, insisted that his client's division was separate from the one allocating shares and that Quattrone had no control over the files. He asked U.S. District Judge Richard Owen to strike Sherman's testimony, contending that Quattrone could not have inside knowledge of who saw which documents.

Owen denied the request.

The NASD and other agencies were looking into whether CSFB arranged for kickbacks in exchange for letting clients buy shares of hot stocks in the dot-com boom.

Whether Quattrone was aware that the NASD and other agencies had made broad requests for IPO-related papers requests that meant CSFB employees should have preserved their documents is central to the case.

Prosecutors say Quattrone, who headed the CSFB office in Palo Alton, Calif., deliberately blocked the investigation when he urged employees to destroy files in late 2000. He is charged with obstruction of justice and witness tampering.

Quattrone contends he was just following company policy, which required employees to get rid of old papers, when he sent an e-mail on Dec. 5, 2000, urging workers to clean up their files.

Much of the day was spent with lawyers directing witnesses to instruct the jury on how grand jury proceedings work and on the basics of e-mail, including how CSFB stores its employees' messages each night.

Prosecutors called witnesses from the NASD and the Securities and Exchange Commission to describe the breadth of their 2000 probe into CSFB.

Keker pressed the officials to say they never sent requests for documents to Quattrone himself, only to lawyers for the bank.

"Did the SEC ever contact Frank Quattrone?" he asked Caren Pennington, an assistant regional director for the SEC.

"No," she replied.

Quattrone was paid tens of millions of dollars a year at CSFB to help the bank take companies like Netscape Communications Corp. and public. The charges against him carry penalties of up to 25 years in prison, but he would likely get a far lighter sentence under federal guidelines if convicted.

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