Frank Quattrone faces up to 25 years behind bars if convicted on all charges filed against him yesterday by the feds.
The former CSFB tech banking czar is the first banker to face criminal charges since a wave of investigations began in 2000 into securities-industry practices during the ill-fated tech boom.
A federal complaint includes one count of obstructing a grand jury investigation, one count of obstructing a Securities and Exchange Commission investigation and one count of destruction of evidence.
Quattrone turned himself in to the feds here at 8 a.m.
He plans to fight the charges, filed by U.S. Attorney James Comey. He appeared briefly in Manhattan Federal Court, where his lawyer John Keker asked for a trial to be scheduled as quickly as possible.
“These accusations are wrong and unfair,” he said outside court. “Only prosecutors who see the world through dirty windows would take a one-sentence e-mail supporting company policy and try to turn it into a federal criminal case.”
Quattrone faces other problems as well. Crusading New York Attorney General Eliot Spitzer is also going after him, possibly with charges of his own.
Spitzer will continue his own investigation, initiated almost eight months ago.
That probe focuses on possible fraud and could include charges relating to alleged conflicted research and IPO practices, say sources close to the investigation.
The feds charged Quattrone with obstruction in connection with his December 2000 directive to employees to destroy documents subpoenaed by a federal grand jury and the SEC. At the time, the bank was under investigation by the SEC, the NASD and a federal grand jury into its IPO allocation processes.
Quattrone, quiet during his three-minute appearance, was released but was forced to surrender his passport. He faces maximum sentences of up to 10 years each on the two obstruction of justice charges and five years on the destruction of evidence charge if convicted. Keker said he expects Quattrone to be indicted within 20 days.
Securities industry watchers say it’s significant that Quattrone is being charged with obstruction rather than any kind of securities fraud.
“It’s just like Arthur Andersen,” said Roy Smith, a professor of finance at New York University and a former Goldman Sachs executive. “The ultimate penalty is obstruction of justice, not securities fraud.”
Quattrone was placed on administrative leave from CSFB on Feb. 3 when the firm learned he might have known about investigations into the firm when he instructed employees to destroy documents.
On March 6, two days after he resigned from the firm, the NASD charged Quattrone with “spinning” violations as well as creating and overseeing a flawed organizational structure that undermined objectivity of research analysts.
It is trying to recoup some portion of the $200 million he earned between 1998 and 2001. The NASD investigation began in March 2000.
Spitzer’s investigation will follow the much-anticipated global research settlement, expected to be released Monday.
The $1.5 billion settlement focuses on industry practices and not individuals. Spitzer’s case against Quattrone could result in a settlement similar to that of Citigroup analyst Jack Grubman. He was barred from the securities industry and fined $15 million.
A spokeswoman for the attorney general’s office declined to comment beyond saying “the investigating is continuing.”
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