Former Credit Suisse First Boston high-tech banker Frank Quattrone is vowing to fight charges leveled against him Thursday that he violated securities laws during a five-year reign as the most powerful dealmaker of the Internet era.
”He firmly believes he did nothing wrong,” says Quattrone spokesman Bob Chlopak, reacting to a 20-page civil complaint from the National Association of Securities Dealers (NASD) detailing charges that the Silicon Valley kingmaker pressured his stock analysts to issue positive research reports and allocate shares of initial public offerings to ”Friends of Frank” in exchange for investment-banking business.
In a separate complaint, the securities regulator also accuses Quattrone, 47, of failing to cooperate with its investigation. Quattrone resigned from CSFB on Tuesday, a humiliating end to an action-packed career that saw him earn more than $200 million taking companies such as Cisco and Amazon public.
”In too many cases in the past, investors’ interests were compromised for greater investment-banking revenues,” says Mary Schapiro, NASD’s president of regulatory policy and oversight.
Quattrone’s lawyer, Howard Heiss, says the charges are an ”unprecedented attempt” to blame his client for activities that were legal at the time and for which CSFB approved. ”The organizational structure for research and brokerage was designed and approved by CSFB’s top management and legal counsel, and conformed to all laws and regulations,” Heiss says. ”CSFB’s legal and compliance department thoroughly reviewed and approved the allocation practices that are the subject of the NASD complaint.”
CSFB, which agreed to pay $100 million last year to settle charges that it distributed shares in hot IPOs for kickbacks, declined to comment. If found guilty in an NASD administrative hearing, Quattrone could face fines, censure, suspension or a lifetime ban from the securities industry. He also could lose gains associated with the violations and have to pay restitution.
Quattrone is the latest high-profile casualty in a cleanup campaign by securities regulators that has lasted more than two years and has cast a pall over the industry. Former Salomon Smith Barney telecom analyst Jack Grubman was fined $25 million and barred from the industry for producing tainted research. Former Merrill Lynch Internet dealmaker Henry Blodget has been notified that the NASD intends to bring conflict-of-interest charges.
More bankers could soon come under fire.
Barry Goldsmith, NASD executive vice president of enforcement, says, ”Regulators are still looking at the roles of other individuals.”