Frank Quattrone, the high-tech investment banking chief of Credit Suisse First Boston, resigned yesterday, yielding to mounting pressure from regulators and the firm where he was once a star.
Quattrone, 47, has been on paid leave since early February, as investigators probe his alleged role in the corrupting of stock research abuses that came to light in an inquiry led by the Massachusetts Securities Division and improper distribution of IPO shares during the Internet bubble.
Quattrone is also the subject of a criminal obstruction-of-justice investigation in New York, related to the destruction of company documents. He has denied any wrongdoing. His departure came a week after he failed to appear at a hearing held by the National Association of Securities Dealers, the brokerage industry’s self-regulatory arm. In dodging the hearing, Quattrone ran afoul of Credit Suisse company policy, which requires employees to cooperate with regulators. In a prepared statement, New York-based CSFB yesterday said that ”the firm and Mr. Quattrone have agreed that it was in their respective best interests for Mr. Quattrone to separate from the firm at this time.”
Dan Hill, a spokesman for Quattrone, said the former investment banker had ”elected to resign,” noting that ”he did so with sadness, because of the many friends and professional colleagues he will leave behind.”
Quattrone has been in the crosshairs since last year, when state and federal securities watchdogs conducted a national crackdown on suspected abuses in the research departments of Wall Street’s investment banking giants. A series of e-mails uncovered by the Massachusetts Securities Division revealed that Quattrone routinely urged stock analysts to hold back praise for corporate clients who had not sent enough business to the firm, or persuaded analysts not to speak their minds about a company’s problems, in order to win that company’s favor.
Credit Suisse had stood by Quattrone until last month, when an e-mail exchange surfaced from Dec. 3, 2000, that showed Quattrone was warned by the company’s general counsel that Credit Suisse was the subject of a regulatory probe. Two days later, Quattrone sent an e-mail to employees, urging them to follow company policy and empty out old files. Destroying files is illegal once an investigation is underway.
The US Attorney’s Office in Manhattan and New York Attorney General Eliot Spitzer, who launched the industrywide research probe that ended in a $1.4 billion settlement in December, are looking into whether Quattrone obstructed justice.
”Mr. Quattrone is innocent,” Hill said. ”At the time he sent his e-mail in December 2000, he was following the document-retention policies in force for his technology banking group at CSFB. He did not destroy any documents, nor improperly direct others to do so.” Credit Suisse said it will continue to pay Quattrone’s legal bills. But the company has reserved the right to recoup the fees if Quattrone is found guilty of criminal obstruction of justice. His exit compensation deal, negotiated by him and his lawyers, is on hold until the matter is resolved.
Massachusetts Secretary of State William F. Galvin declined to comment on Quattrone’s resignation, citing the state’s ongoing investigation of Credit Suisse’s research practices.
NASD also declined to comment, but people briefed on the hearing that Quattrone missed said the regulatory body is pressing ahead with its investigtion.