The first criminal charges were brought yesterday against a Wall Street banker for actions during the stock market bubble when Frank Quattrone, formerly of Credit Suisse First Boston, was arrested for obstruction of justice.
Mr Quattrone surrendered to the FBI in New York and appeared before a judge in a Manhattan court. The one-time Wall Street star was accused of hindering federal investigations into the allocation of shares in hotly demanded initial public offerings during the boom of the late 1990s.
The charge will cause anxiety Wall Street, which has come under intense scrutiny for what is now viewed as reckless disregard of rules during the boom years. At the peak, Mr Quattrone was said to earn almost $100m a year. He presided over themarket debuts of companies that went on to become household names, including Amazon.com and Netscape Communications.
In a 22-page complaint, prosecutors alleged that Mr Quattrone, 47, obstructed investigations into CSFB by a federal grand jury and the securities and exchange commission, the US financial regulator. It said he “unlawfully, wilfully and knowingly corruptly influenced, obstructed and impeded the due administration of justice”.
Mr Quattrone was required to give up his passport and released. A preliminary hearing date has been set for May 13.
The obstruction of justice charge turns on an email sent by Mr Quattrone on December 5 2000 in which he instructed colleagues to “clean up those files”. A lawyer for CSFB, David Brodksy, is alleged to have notified Mr Quattrone of an investigation into the allocation of shares two days earlier.
Mr Quattrone has maintained that he was simply adhering to company policy on document retention and destruction. The legal department sent more emails on December 6 and 7, telling employees not to destroy IPO-related material.
“Frank Quattrone is innocent,” said his lawyer, John Keker. “He never obstructed justice. The only way we can prove that is to try this case, which is why we will ask that the jury trial occur at the earliest possible moment.
“Only prosecutors who see the world through dirty windows would try to make a one-sentence email supporting company policy into a federal criminal case.”
Mr Keker has also acted as lawyer for Andrew Fastow, the former chief financial officer of Enron.
The dotcom boom made celebrities of formerly anonymous bankers. Mr Quattrone ran CSFB’s California-based global technology group and appeared to be astonishingly successful, helping turn the bank into one of Wall Street’s biggest money-spinners.
The investigations into the allocation of shares in “hot” IPOs are one of several, parallel inquiries into the Wall Street practices of the 1990s.
In some cases, banks have been accused of handing the shares to favoured chief executives who in return sent investment banking fees their way.
CSFB paid $100m in late 2001 to settle allegations brought by the SEC and the national Association of Securities Dealers that it had taken kickbacks – charging inflated commissions to some clients in exchange for access to IPO shares. During the boom, IPOs commonly showed massive first-day gains, allowing holders of the shares to make a fast profit.
Settlement terms of separate $1.4bn conflict of interest issues within the research departments of investment banks are expected to be announced next week. CSFB’s share is $200m. The bank yesterday had no comment.
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