New York Attorney General Eliot Spitzer’s investigation of Credit Suisse First Boston banker Frank Quattrone appears to be moving up the bank’s former hierarchy.
Spitzer’s office has talked with CSFB’s former general counsel for the Americas, David Brodsky, about a series of e-mails he exchanged with Quattrone in early December 2000 – days before Quattrone sent an e-mail encouraging his Palo Alto, Calif., employees to “clear out those files.”
Brodsky, now in private practice, declined to comment.
He left the bank in June 2002, after new CEO John Mack appointed Gary Lynch CSFB’s general counsel. Spitzer’s investigators have also been talking to past and current CSFB employees in the Palo Alto office.
On Dec. 7, 2000, the day after news that CSFB was the target of an investigation by the Securities and Exchange Commission and the U.S. Attorney’s office became public, Brodsky received an e-mail from Quattrone with the subject line “FW: Time to clean up those files.” An attorney in the Palo Alto office had originally sent the “clean out” memo to employees, and Quattrone had sent out a message underscoring that note’s importance.
In recent days, more e-mails sent between Brodsky and Quattrone on Dec. 3 and Dec. 4, 2000, discussing the extent of the SEC investigation including talk about criminal charges against individuals and leaks about the investigation have surfaced. The SEC was investigating the bank’s commission structure and allocation process and focused on the once-hot tech sector that Quattrone ran.
In the past, CSFB said Quattrone was not involved in allocating shares of hot tech IPOs, but bank officials have not repeated those statements, made by its former management, in some time. Wednesday, CSFB took a tougher stand toward its former star banker.
“The discovery of this [Dec. 3] e-mail exchange raised serious questions both about whether Mr. Quattrone acted appropriately in sending a Dec. 5, 2000, e-mail to employees regarding document retention and about Mr. Quattrone’s response to subsequent questions by the firm about that email,” the bank said in a formal statement.
Quattrone was put on administrative leave from CSFB earlier this month after the bank found the Dec. 3 e-mail Brodsky sent Quattrone. Quattrone has made no comment since, except to say through a spokesman that he had done nothing wrong and that an investigation would show that.
His spokesman had no immediate comment.
Quattrone faces a series of investigations. In addition to Spitzer’s office, NASD is looking at Quattrone’s supervision of his office and his “spinning” of stock to CEOs and other insiders who had so-called “friend of Frank” brokerage accounts. The U.S. Attorney’s office has also re-opened its own probe into Quattrone’s activity in late 2000.
This is the second round of investigations Quattrone has faced. CSFB settled the SEC investigation in late 2001, paying $100 million in fines and putting to rest allegations that it charged higher-than-normal commissions for shares of hot IPO stocks.
The bank also joined a large “global settlement” between Spitzer’s office and most major Wall Street firms, agreeing to pay another $250 million in fines over allegations that stock analysts might have been pressured to favor stocks sold by the banks where they worked.