When it came to rainmakers during the Internet heydays, no one could open up the skies like former Credit Suisse First Boston analyst Frank Quattrone.
In both 1999 and 2000, no other investment bank on Wall Street advised more tech companies on how to become publicly traded than CSFB. Throughout the 1990s while working for various firms, Quattrone helped bring some of the stars of the Internet public, including Netscape Communications Corp. and Amazon.com.
During the dot-com gold rush, Quattrone, 47, whose compensation reportedly was nearly $100 million annually at its peak, was the go-to man if a company wanted to make a deal.
But now it’s 2003, three years after the burst of the tech bubble, and Quattrone stands as the first financial analyst facing criminal charges.
Much of Quattrone’s power, however, did not come from the hallowed halls of Wall Street brokerage firms but from the fast-moving culture of Silicon Valley.
Based out of CSFB’s offices in Palo Alto, Calif., Quattrone was head of the firm’s Technology Group right in the thick of all the hot new tech start-ups. Prior to CSFB, he had earned a master’s degree in business administration at Stanford University and worked in technology groups at Deutsche Bank for two years and Morgan Stanley for 17 years.
“Quattrone had been around for a long time and had gotten to know [the tech] community very well,” said Roy Smith, finance professor at New York University. “Many of these companies who wanted to go public were unknown to any of the investment bankers.”
In light of his success at bringing in business, Credit Suisse executives were said to have given Quattrone wide latitude in running his office.In that way, Smith compares Quattrone’s role to the distance that financier Michael Milken, who pleaded guilty to six felony counts of fraud in 1990, kept while in Los Angeles from the New York headquarters of his ex-employer, Drexel Burnham Lambert.
The business Quattrone’s group brought for CSFB was enormous. In 1999, the tech group advised companies on more than 250 transactions worth $121 billion in deals that included providing input on mergers, financing arrangements or initial public offerings, when the stocks are first traded on public exchanges. Even as times were getting tougher in 2000, the group had a record-breaking year, advising on $341 billion worth of deals.
In exchange for some of that business, state and federal investigators are looking at whether CSFB promised executives of tech firms that they would get in on the ground floor of lucrative initial offerings.
During the Internet boom, many of these “hot” IPOs doubled or tripled in value on the first days of trading, making handsome profits for those who got in at the initial asking price. According to one report first published in the Wall Street Journal last year, many in the industry began to refer to this group of executives as “Friends of Frank,” because Quattrone was instrumental in deciding how to dole such lucrative shares.
But toward the end of 2000 federal investigators began probing. In Jan. 2002, Credit Suisse agreed to pay $100 million to settle investigations by both the Securities and Exchange Commission and the National Association of Securities Dealers that accused the firm of charging inflated commissions to clients in exchange for access to IPOs.
CSFB put Quattrone on paid leave in early February this year after a media report detailed Quattrone’s role in sending the alleged e-mails to his colleagues.In early March, Quattrone resigned from the firm.
Yesterday prosecutors accused Quattrone of criminal conduct in destroying documents. Quattrone maintains his innocence.