Frank Quattrone, the former head of the technology-banking unit at the Credit Suisse First Boston unit of Credit Suisse Group, was indicted yesterday by a grand jury for obstructing a federal investigation into how the bank doled out new stock offerings.
Prosecutors say Mr. Quattrone forwarded a subordinate’s memo encouraging employees to “catch up on file cleaning” and added his own endorsement. The original memo, reminding employees of the company’s document retention policy, was meant as a directive to destroy evidence, prosecutors allege. The charges in the indictment echo those in a criminal complaint issued last month, when Mr. Quattrone was arrested.
“Frank Quattrone is innocent,” his attorney, John Keker, said in a statement. “He is charged with a crime that he did not commit. We will request a speedy trial.”
“The teaching of the Arthur Andersen case is that jurors are prepared to believe that there are ulterior motives for these type of memos for following document retention policies,” said Seth Taube, a former Securities and Exchange Commission attorney now with McCarter & English in Newark, N.J.
Andersen collapsed after the accounting firm was convicted of destroying documents in the federal probe of Enron Corp.
The three-count indictment charges Mr. Quattrone with obstruction of justice, obstruction of agency proceedings and witness tampering. The obstruction of agency proceedings count relates to Mr. Quattrone’s alleged attempt to impede an SEC investigation.
“The facts turn on what was going on in his head, which is always a challenge for the prosecution,” said St. John’s University Law School Professor Michael Simons, a former federal prosecutor in New York. A CSFB spokeswoman declined to comment.
Authorities arrested Mr. Quattrone on April 23 on a criminal complaint issued by the U.S. attorney’s office in Manhattan. Defence lawyers had said an indictment was expected. Mr. Quattrone was accused of interfering with an investigation into whether he channelled shares in initial public offerings to favoured clients.
CSFB in January discovered a Dec. 3, 2000, e-mail in which then-general counsel David Brodsky informed Mr. Quattrone that the firm was under investigation by securities regulators and federal prosecutors. The e-mail contradicted Mr. Quattrone’s earlier statement that he was unaware of the probe when he told employees on Dec. 4, 2000, to dispose of documents related to IPOs.
Credit Suisse had agreed to pay $100-million in January, 2002, to settle charges related to claims it distributed shares in IPOs in exchange for kickbacks. The SEC said the firm charged commissions of as much $3.15 (U.S.) a share, compared with a typical rate of six cents.
Mr. Quattrone, who resigned from CSFB in March, is the first Wall Street executive to be charged with a crime growing out of the IPO probes that began in 2000. His Silicon Valley unit managed the most computer-related stock sales at the height of the Internet boom, generating as much as 15 per cent of CSFB revenue. Mr. Quattrone, who’s denied the charges, was released from custody after his arrest. He faces a maximum of 10 years in prison, if convicted.
The case was originally assigned to U.S. District Judge Naomi Reice Buchwald, though she subsequently recused herself without providing a reason, a spokesman for U.S. Attorney James Comey said. A new judge has yet to be named. In a letter to Mr. Comey last month, Mr. Quattrone’s lawyers say the former banker didn’t know that prosecutors were seeking the documents he later allegedly urged to be discarded.
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