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Quattrone Reveals Role in IPO Allocation

Oct 10, 2003 | Wall Street Journal Frank Quattrone admitted at his trial Friday that he was at times involved in the process of allocating shares of initial public offerings to Credit Suisse First Boston Corp. clients.

In making the concession in the opening moments of questioning by the prosecution, Mr. Quattrone backpedaled from an assertion he had made repeatedly during direct examination since Thursday afternoon. The former top banker at CSFB downplayed his role, however, saying he was merely present during such discussions and didn't make decisions on how to dole out shares.

This is a key point because Mr. Quattrone said during the past day on the stand, defending himself in his criminal obstruction of justice trial, that he had no involvement and therefore he and his employees had no records on the allocation process. A federal grand jury and the Securities and Exchange Commission were investigating CSFB's IPO allocation practices at the time the government says Mr. Quattrone's obstruction took place.

To back the claim that Mr. Quattrone was involved, the lead prosecutor displayed two e-mail messages Mr. Quattrone sent in 2000 requesting he be kept in the loop on some instances of IPO stock allocation.

At issue in the trial is a December 2000 e-mail message Mr. Quattrone sent to subordinates backing a top deputy's instruction for them to throw out inessential files, in accordance with CSFB policy.

The prosecution contends this message was sent to block a government investigation into CSFB's IPO practices.

Prosecutors continued hammering away at Mr. Quattrone's claim of having only a sharply limited role in CSFB's IPO allocations by introducing a series of e- mails that appear to show him more deeply involved.

For instance, in a July 2000 e-mail exchange between Quattrone and Michael Dell, chairman and chief executive of Dell Inc., Mr. Quattrone discusses Mr. Dell's interest in getting a "meaningful allocation" of shares in Corvis Corp., an IPO that CSFB was underwriting at the time, for Dell Ventures in-house venture-capital unit. "We anticipate this will be a complete zoo," Mr. Quattrone said in the e-mail. Later on in the exchange, he referred to " allocation madness."

Mr. Dell responded that "I know there have been efforts on both sides to build the relationship and an offering like this would certainly help." Prosecutors have suggested that CSFB's strategy in making allocations of IPO shares to clients of its technology Private Client Services group the so-called " Friends of Frank" was to encourage the clients, mostly senior executives of public companies, to direct their investment-banking business to CSFB.

A Dell spokesman couldn't immediately be reached for comment.

In addition, a March 2000 e-mail sent to Mr. Quattrone and others in the group by Mike Grunwald, a PCS managing director, included a list of the clients of the Private Client Services group a number the message put at 193, with another 10 pending, complete with a "rank" of 1 to 4 gauging the value of each as a client. The message refers to the people on the list as "your clients" and says, "These people love you guys. This account reinforces it."

But Mr. Quattrone continued to deny that he had any significant role in making IPO allocations. "I might have participated in some discussions. I did not make any decisions," he said under questioning from lead prosecutor Steven Peikin.

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