Regulators charged Credit Suisse First Boston with fraudulent behavior in Monday’s global settlement with investment firms. CSFB will pay $200 million in fines for allowing investment banking goals to undermine the integrity of its stock research.
But the CSFB portion of the agreement makes no mention of the firm’s most famous former executive, Frank Quattrone. Quattrone, a once-powerful investment banker at CSFB, is facing criminal charges in New York stemming from an alleged attempt to impede a Securities and Exchange Commission investigation into his activities in 2000.
According to civil charges filed Monday against the firm, CSFB allegedly encouraged its analysts to issue misleading research reports on two firms, Digital Impact and Synopsys.
After taking Digital Impact public, and earning $5 million, CSFB maintained a ”buy” or ”strong buy” rating on the stock even as its price sank to $2 a share from $50. Starting in May 2001, a new CSFB analyst wanted to downgrade the stock but was overruled by investment bankers, regulators charge.
Internal CSFB e-mails show that a research analyst who thought little of Synopsys was allegedly informed of two ”unwritten rules.” The first, which came to the analyst from his superiors in the investment banking division, was: ”If you can’t say something positive, don’t say anything at all.” The second: ”Why can’t you just go with the flow of the other analysts, rather than try to be a contrarian?”
Regulators also charged CSFB with issuing faulty research on Numerical Technologies, Agilent Technologies, New Power Holdings and Winstar Communications.
Like Salomon Smith Barney, CSFB was accused of giving hot IPO shares to top executives at clients and potential clients. Because these IPO shares came out of Quattrone’s group, the list of recipients have been referred to as ”friends of Frank.”