Frank Quattrone, a former senior executive at Credit Suisse First Boston, was charged yesterday with obstructing justice by ordering subordinates to destroy evidence sought by the Securities and Exchange Commission and a federal grand jury.
Quattrone, 47, former head of CSFB’s Global Technology Group, surrendered to the FBI early yesterday morning after Manhattan U.S. Attorney James Comey unsealed a three-count complaint charging him with obstruction of justice, destroying evidence and witness tampering.
The charges were brought against one of the most prominent investment bankers from the dot-com era. In the late 1990s, Quattrone’s team of Silicon Valley technology bankers raked in tens of millions of dollars in fees for taking public companies such as Amazon.com and VA Linux Systems Inc.
Quattrone resigned from CSFB under intense pressure last month.
According to the complaint, Quattrone committed the crimes in December 2000, after knowing for months that CSFB was the subject of probes by the NASD, the SEC and a Manhattan federal grand jury, who were all investigating CSFB’s practice of allocating hot initial public offering shares to friends or clients of the firm.
Quattrone declined to speak to reporters as he left the Lower Manhattan Courthouse. However, his lawyer, John Keker, asserted prosecutors had overreached. “Frank Quattrone is innocent,” said Keker, reading a statement to the media. “He never obstructed justice. Only prosecutors who see their world through dirty windows would take a one-sentence e-mail supporting company policy and try to turn it into a federal criminal case.”
At a news conference, Comey said that he wanted the charges to warn other executives to take subpoenas seriously and not destroy evidence. “In the privacy of your office you may think that no one will ever know,” he said. “If you do that, you’re playing with fire.”
Quattrone was brought before U.S. Magistrate Theodore Katz who released him on his own recognizance. Katz also ordered him to surrender travel documents and restricted his travel to the United States.
An affidavit drafted by FBI Special Agent Kathleen Queally and filed yesterday offers a chronology of the alleged crimes. In July 2000, Quattrone was advised that the SEC had begun an investigation of CSFB’s entire equity underwriting process. On Dec. 3, 2000, CSFB’s senior legal officers advised Quattrone CSFB had received subpoenas from a federal grand jury and the SEC. Quattrone was instructed not to discuss the matter.
But on Dec. 4, 2000, the complaint charges, a Quattrone subordinate suggested a memo be sent out reminding CSFB officers to “clean up” their IPO-related files. On Dec. 5, Quattrone e-mailed several hundred CSFB employees, writing, “before you leave for the holidays, you should catch up on file cleaning.”
He also added, “[H]aving been a key witness in a securities litigation case in south texas i strongly advise you to follow these procedures.”
If convicted of obstruction, Quattrone faces up to 10 years imprisonment.
Comey noted his office’s IPO investigation into CSFB closed in November 2001. CSFB agreed to pay $200 million as part of an industry-wide settlement into conflicts of interest between stock research and investment banking.
Comey said his investigation into other individuals is continuing.