In the days before a probe of its initial public offering dealings became public, senior bankers at Credit Suisse First Boston’s technology practice reminded employees to clear out their files, according to a memo obtained by The Post.
Under the subject line “Time to clean up those files,” CSFB exec Richard Char urged employees “in the spirit of the end of the year (and the slowdown in corporate finance work)” to look at the documents they had on file and take out those considered unnecessary.
The message was sent on the evening of Dec. 4, 2000, three days before CSFB confirmed it was under investigation by the Securities and Exchange Commission and Justice Department.
Char, a lawyer who was head of the tech banking practices research execution division, made no mention of an investigation but focused employee’s attentions on potential shareholder lawsuits.
“With the recent tumble in stock prices and many deals now trading below issue price, the securities litigation bar is expected to [launch] an all-out assault on broken tech IPOs,”‘ the memo began.
In addition to Char, corporate finance head Bill Brady, second in command at the tech banking division after Frank Quattrone, and John Hodge, head of banking for the West Coast region, were listed as authors of the directive.
The e-mail message is very clear about what should be tossed. “No notes, no drafts, no valuation analysis, no copies of the road show, no selling memos, no IBC [Investment Banking Committee] memos, no EVC [Equity Valuation Committee] memos, no internal memos” should remain, Char wrote, telling employees he was “reminding you of the CSFB document retention policy.”
Those instructions were revised two days later. On Dec. 6, 2000 a message with the subject line “Please Stop Editing Public Offering Files Until Further Notice,” was sent by CSFB’s Vice President and General Counsel Adrian Dollard.
In this and in two, more formally worded and exhaustive memos, Dollard and other lawyers reminded employees to keep a long list of documents related to IPOs.
“Nothing like that had ever gone out before,”‘ said one former CSFB employee who remembers the initial warning note and subsequent discussions between employees about what was and wasn’t covered. “I’d never seen anything like it before.”
Char’s bank department was responsible for a variety of issues, many legal, that followed an IPO.
His warning was given an extra push by Quattrone, who circulated his comments under the same “clean up those files” subject line on Dec. 5, two days before news of the probe made headlines.
The former employee described Quattrone’s comments – and the timing of the e-mail as stern messages to “take this stuff seriously” and make sure the bank’s records were in order. “If a lawsuit is instituted,” Char wrote “our normal document retention policy is suspended and any cleaning of files is prohibited under the CSFB guidelines.”
Char’s understanding of CSFB’s policy, as outlined in the memo, was standard policy but, with investigations pending, was considered too restrictive, according to CSFB.
“The e-mails sent by Richard Char and Frank Quattrone on Dec. 4, 2000 and Dec. 5, 2000, respectively regarding CSFB’s document retention policy should not be followed,” another CSFB attorney wrote on Dec. 7, the day news of the investigations broke.
“CSFB’s document policies comply with all applicable laws and regulations and are consistent with industry standards,” the bank said in a formal statement. “In this instance, CSFB took appropriate steps to ensure that all relevant documents would be preserved and provided to regulators. We strongly believe that CSFB’s employees acted appropriately in this matter.”
The initial probe into CSFB’s IPO allocations was settled by the bank in late 2001 with CSFB agreeing to pay a $100 million fine to the SEC, and it was recently part of a $1.4 billion global settlement with the New York Attorney General.
But that doesn’t mean CSFB’s troubles are over.
“The global settlement does not cover cases against individuals at CSFB,” said Darren Dopp, spokesman for Attorney General Eliot Spitzer, who added that the office will be reviewing those issues to determine whether it will proceed with civil or criminal charges against CSFB. “It’s under review.”
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