Frank Quattrone, the former head of Credit Suisse First Boston’s technology banking unit, surrendered to federal authorities in New York to face criminal charges he obstructed justice and destroyed evidence during a probe into initial share sales.
Quattrone would be the first Wall Street executive charged with committing a crime since investigations into securities industry misconduct amid the Internet boom began in 2000.
His lawyer, John Keter, said the 47-year-old banker “self- surrendered” after flying in from California. In a statement, Keter called the accusations “wrong and unfair.”
The U.S. charges, unsealed and filed today, stemmed from Quattrone’s advice to colleagues in late 2000 to destroy documents as investigators examined whether clients of CSFB were awarded sought-after shares from IPOs ahead of other investors. He quit the Swiss-owned firm in March.
U.S. regulators, including New York Attorney General Eliot Spitzer and the Securities and Exchange Commission, have spent more than a year probing Wall Street practices during the Internet boom of the late 1990s.
“The crackdown is long overdue,” said Anthony Hourihan, professor of financial-institutions management at University College, Dublin. “It’s time the message came loud and clear to Wall Street: ethical management or jail.”
Marvin Smilon, a spokesman for James Comey, the U.S. attorney in Manhattan, declined comment. Earlier today, the Wall Street Journal reported the pending criminal charge.
$1.4 Billion Settlement
Regulators are completing this week a $1.4 billion settlement with 10 securities firms, including CSFB, accused of producing biased stock research. Some analysts, such as former Citigroup Inc. analyst Jack Grubman, face civil litigation.
Quattrone, who supervised both technology research and technology IPOs, resigned on March 4. Two days later, the securities industry association NASD filed a lawsuit seeking to bar Quattrone, and asking for the return of $200 million it said Quattrone was paid from August 1998 to the end of 2001.
Gavin Sullivan, a spokeswoman for CSFB, a unit of Credit Suisse Group, declined to comment.
“He didn’t do anything illegal,” Quattrone spokesman Dan Hill said last month of the criminal investigation. “He didn’t destroy any of his own documents, and there was no intent to impede an investigation.”
Quattrone’s Silicon Valley-based business generated as much as 15 percent of CSFB’s revenue in 1999 and 2000, the height of the Internet boom.
Between 1998, the year Quattrone joined CSFB from Deutsche Bank, and the end of 2000, CSFB led 79 technology IPOs worth $8.7 billion, or 74 percent of the bank’s 107 deals, according to Irv DeGraw, an IPO analyst at Falcon Capital. The average first-day trading gain for the IPOs was 93. 4 percent.
CSFB, Goldman Sachs Group Inc. and other investment banks may have to pay as much as $3.5 billion to settle lawsuits accusing them of rigging initial public offerings, according to a report this week by Sanford C. Bernstein & Co. analyst Brad Hintz. More than 50 investment banks are being sued by shareholders of 309 technology companies.
CSFB in January discovered a Dec. 3, 2000 e-mail in which then-General Counsel David Brodsky informed Quattrone that the firm was under investigation by securities regulators and federal prosecutors. The e-mail contradicted Quattrone’s earlier statement that he was unaware of the probe when he told employees on Dec. 4, 2000 to dispose of documents related to IPOs.