- The Washington Times - Monday, May 3, 2004

NEW YORK (AP) — Frank Quattrone, a star investment banker during the Internet stock bubble, was convicted yesterday of obstructing justice by sending a 22-word e-mail message encouraging colleagues to destroy files while a criminal probe of the bank was under way.

A federal jury in Manhattan, deliberating for the second day, returned guilty verdicts on all three counts against Quattrone — obstructing a grand jury, obstructing federal regulators and witness tampering.

The verdict means that Quattrone is likely to go to prison, perhaps for more than a year.

He was tried in the fall on the same charges, but the judge declared a mistrial after jurors repeatedly said they were deadlocked.

Quattrone, 48, showed no reaction when the verdict was read, but afterward hugged and kissed his weeping mother and sister. Sentencing was scheduled for Sept. 8.



“I feel like we failed Frank. He’s innocent,” said his attorney, John W. Keker, adding that an appeal was planned. “There’s an awful lot of evidence that the jury didn’t hear.”

The case was the second consecutive big win for Manhattan federal prosecutors in their pursuit of white-collar crime, coming just two months after homemaking guru Martha Stewart was found guilty of lying about a stock sale. Both Stewart and Quattrone were charged with obstructing investigations in which they were not charged with the underlying crime.

“When we learn of efforts to obstruct or interfere with those investigations, we must, and we will, prosecute those cases to the fullest extent permitted by the law,” U.S. Attorney David Kelley said.

The decision was difficult for jurors.

“We wanted to do what we felt was the right thing. It wasn’t easy at all,” said juror Sheldon Silver, 58, a receptionist for a public relations firm. He said jurors found it difficult to gauge Quattrone’s state of mind when he sent the e-mail.

The case turned on a brief message Quattrone sent to subordinates at Credit Suisse First Boston on Dec. 5, 2000, reminding them to “clean up” their files.

Another CSFB employee had drawn up the note and sent it out Dec. 4, encouraging bankers to comply with CSFB’s document-retention policy, which required routine destruction of some documents from completed deals.

Quattrone gave the note a short personal endorsement a day later, concluding, “I strongly advise you to follow these procedures.”

Prosecutors contended that was obstruction because Quattrone had been told on Dec. 3 by a high-ranking CSFB lawyer that the bank was the subject of a criminal investigation.

Quattrone rose to stardom in the banking industry in the late 1990s, while dot-com stocks boomed. He took technology companies such as Amazon.com and Netscape Communications Corp. public and made $120 million at CSFB in 2000.

By late 2000, the government was looking into whether some CSFB clients had paid excessive commissions — essentially kickbacks — in exchange for getting a piece of hot initial public offerings of stock.

But Quattrone insisted, at both trials, that the investigation had not been on his mind when he sent the document-destruction e-mail to his investment bankers because IPO allocations were handled by a different part of the bank.

Exactly what role he played in those stock allocations became a central issue at the trial — particularly when Quattrone took the gamble of testifying in his own defense.

Under questioning from Mr. Keker, Quattrone said he had some input into who received IPO shares but insisted that he made no final decisions on allocation.

“What I thought the investigation was about was hedge funds paying excessively high commissions to get IPO allocations,” Quattrone testified.

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