Quattrone Avoids Prosecution

The case against former investment banker Frank P. Quattrone would be dismissed if he stays out of legal trouble.
The case against former investment banker Frank P. Quattrone would be dismissed if he stays out of legal trouble. (By Daniel Acker -- Bloomberg News)

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By Brooke A. Masters
Washington Post Staff Writer
Wednesday, August 23, 2006

NEW YORK, Aug. 22 -- A federal judge approved a deal Tuesday that allows star banker Frank P. Quattrone to avoid prosecution for obstruction of justice if he stays out of trouble for the next 12 months.

The 10-minute hearing ended the federal government's years-long quest to put Quattrone in prison for sending several hundred subordinates a December 2000 e-mail under the heading "time to clean up those files." Prosecutors alleged he was attempting to hinder a grand jury probe, but the banker, now 50, has steadfastly maintained his innocence since being indicted in May 2003.

"I am very pleased that the case will be concluded, and I look forward to the dismissal of all charges," a beaming Quattrone said outside the federal courthouse in Manhattan. Praising his attorneys, he said, "Thanks to all of you who stood by me during the past four years. God bless you all."

Quattrone, who had dressed simply for his two trials in blazers and flannel pants, was clad far more elegantly for Tuesday's hearing in a natty plaid suit and black Gucci loafers.

This resolution was essentially a victory for Quattrone, who did not admit any wrongdoing. The charges against him will be dismissed in a year as long as he does not break any laws and he reports any change of residence or international travel to a court supervisor. The terms approved by U.S. District Judge George B. Daniels are far more lenient than the deferred prosecution deals the federal government has offered in other recent white-collar cases.

He can return to work as an investment banker any time. A parallel effort by the industry regulator NASD to ban him from the industry has also been dropped. That effort sought to punish the former Credit Suisse First Boston LLC banker for his role in its handling of shares in hot initial public offerings. Twelve civil cases filed by investors have also been dismissed or withdrawn.

However, Quattrone has steered clear of banking since he left CSFB in early 2003, and some Wall Street banks are skittish about associating themselves with such a controversial figure. Others have already had him on their payroll and may not want him back. But he is unlikely to stay unemployed for long, banking analysts predicted. He is still popular in California's entrepreneurial community and is widely seen as an energetic and innovative salesman.

"I plan to resume my business career while continuing my board service at the Innocence Project and the Tech Museum of Innovation," he said Tuesday. Quattrone, who based his career in Silicon Valley, is a long-time supporter of the Tech Museum in San Jose. He became involved with the Innocence Project, a legal clinic that seeks to exonerate wrongly convicted prisoners, after being convicted of obstruction of justice in 2004, a conviction whose reversal led to Tuesday's federal court deal.

Quattrone, born in Philadelphia, was a key player in the technology boom of the 1990s. One of the first investment bankers to recognize Silicon Valley's potential, he moved there and built a team of West Coast bankers and research analysts that followed him to big-name investment banks. Along the way, he helped bring public some of the country's best known technology firms, including Amazon.com Inc., Cisco Systems Inc. and Netscape Communications Corp. Quattrone, who once made $100 million in a single year, also advised a host of less successful companies that went bust within a year or two of offering stock to the public. He was sometimes seen as an emblem of the 1990s stock market bubble because CSFB's organizational system encouraged the stock analysts who rated technology companies to work closely with Quattrone's bankers and compromised the independence of the firm's research reports.

As one of the first white-collar criminal cases to be tried after a wave of corporate scandals in 2001 and 2002, the Quattrone prosecution was initially seen as a key test of the government's effort to hold high-level business figures accountable for corporate malfeasance that cost small investors billions of dollars.

But the case, dependent on a two-line e-mail and circumstantial evidence about Quattrone's state of mind when he sent it, dragged on for years and proved difficult to win. A first trial ended when the jury was unable to reach a verdict. Quattrone was found guilty at a second proceeding, but the U.S Court of Appeals for the 2nd Circuit overturned his conviction, saying the trial judge, who had been critical of Quattrone and his lawyers, had given the jury incorrect instructions.

Meanwhile, the case's importance as a symbol diminished as prosecutors won convictions of executives at Enron Corp. and WorldCom Inc., as well as Martha Stewart. By the time the appeals court threw out Quattrone's conviction, many of the top prosecutors who had worked on the case had moved into private practice.

"A deferred prosecution of the case against Frank Quattrone is an appropriate resolution of the case in light of all the facts and circumstances and the posture of the case at this time," U.S. Attorney Michael Garcia said in a statement.


© 2006 The Washington Post Company

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