Quattrone Reopens Wall Street WoundsApr 23, 2003 | FT.COM The decision to charge Frank Quattrone, Credit Suisse First Boston's former head technology banker, with obstruction of justice shows federal regulators are not finished taking their pound of flesh from Wall Street.
Regulators have not forgotten its role in the stock bubble preceding the past three years of bear markets. Prosecutors, especially Eliot Spitzer, New York State attorney general, have said they would fix the system first, go after investment banks second and then individuals.
The criminal charges against Mr Quattrone, who maintains his innocence, are the first since investigations began in 2000. The charges come in advance of a final settlement with 10 Wall Street banks regarding the relationship between researchers and investment bankers expected next week - and could serve to stave off critics unimpressed by the lack of a crackdown on individuals.
Michael Bachner, New York Securities lawyer, said federal regulators were using Mr Quattrone, who earned as much as $200m dollars between 1998 and 2000, as an example: "The whole environment we're in is one of sending messages to people that this behaviour will not be tolerated."
One Wall Street banker on Wednesday called Mr Quattrone "the ace of spades", a reference to decks of cards US forces have distributed in Iraq with pictures of its most wanted Ba'ath party officials.
Wall Street denizens say the charges bring back memories of the insider trading scandals of the late 1980s that resulted in imprisonment for Drexel Burnham Lambert's Michael Milken, who became an icon for the excesses of that decade. The first "poster boy" of the recent scandal was Merrill Lynch analyst Henry Blodget, whose e-mails showed him denigrating stocks in private that he touted publicly. Jack Grubman, Citigroup's telecommunications analyst, quickly superseded him with messages that included language such as "we support pigs".
Mr Quattrone has now supplanted them both and, again, e-mails are the prosecutors' best weapon. Mr Quattrone claims not to have known that he wasn't supposed to tell underlings not to destroy e-mails and other ephemera related to transactions. The practice is common and usually legal, unless a company is under investigation.
But the 23-page complaint, written by FBI agent Kathleen Queally, uses his e-mail traffic to show why regulators think he knew of several ongoing investigations when he advised his staff to clean-up files.
James Comey, the US attorney for the Southern District of New York, where Mr Quattrone was charged, said: "This is the kind of case I believe has to be brought," adding it "goes to the heart of the integrity of our investigative system".