Credit Suisse First Boston Corp. put star investment banker Frank Quattrone on administrative leave yesterday after discovering e-mails that suggest he knew about ongoing criminal and regulatory probes when he and a subordinate advised employees to "clean up those files," sources familiar with the matter said.
The U.S. attorney's office in Manhattan opened a probe into the e-mails after receiving copies of the information from CSFB on Friday, other sources said.
Quattrone, whose close ties to Silicon Valley technology executives brought him many high-profile deals, said in a statement yesterday: "I did nothing wrong. I am confident the investigation will show that."
Last week, Quattrone assured CSFB's lawyers that he knew nothing about any probes when he and a subordinate sent e-mails on Dec. 4 and 5, 2000, about document retention to the firm's technology-banking employees. They warned employees to delete notes, drafts and internal memos because "the securities litigation bar is expected to [launch] an all out assault."
Then on Friday, CSFB officials found a Dec. 3, 2000, e-mail exchange in which David Brodsky, then-general counsel, told Quattrone of inquiries by the Securities and Exchange Commission and the NASD, the securities industry's main self-regulatory body, and a grand jury subpoena, the sources said.
After discovering the Brodsky e-mails, the firm put Quattrone on leave and opened an investigation.
The firm said in a statement that "the information discovered Friday raised questions about Mr. Quattrone's response to an inquiry last week by the firm about whether he was aware of pending investigations in 2000 when he sent an e-mail to employees regarding document retention issues. Second, the new information raised questions about whether Mr. Quattrone acted appropriately in December 2000 when he sent that e-mail."
The suspension of Quattrone, 47, comes shortly after the NASD informed him that it plans to file civil charges against him for allegedly failing to police the conflicts between banking and research and improperly assigning initial-public-offering shares to executives at CSFB client companies. In a statement last week, Quattrone denied wrongdoing.
The new information on document retention could turn out to be far more damaging to Quattrone than the IPO and conflict issues, outside lawyers said. It can be a crime to destroy documents that are being sought by government regulators or a grand jury.
"Most securities law violations [are] dealt with civilly. . . . But issues relating to destruction of documents substantially . . . increase the likelihood of criminal indictment," said Howard Schiffman, a former SEC lawyer. "Because of CSFB's problems, they're simply going to have to behave with the highest ethical standards and take a stringent view of any violation."
CSFB, a division of Credit Suisse Group of Switzerland, was one of 11 investment-banking firms to participate in a $1.4 billion working settlement of conflict-of-interest claims late last year. It paid $200 million, second only to Citigroup. It also paid $100 million in 2002 to settle civil charges alleging that the firm forced customers to pay higher commissions for access to IPO stock.
A spokesman for the U.S. attorney's office in Manhattan declined to comment on Quattrone. But sources said the office, which at one point looked into IPO allocation, is now looking to see whether further investigation is warranted. Quattrone was not the focus of the earlier probe, sources familiar with the matter said.
Last summer, the accounting firm Arthur Andersen LLP disintegrated after being convicted of one count of obstruction of justice in connection with the firm's handling of Enron Corp. paperwork.
New York-based CSFB declined to comment in detail on Quattrone's suspension. But its statement said "that following these December 2000 e-mails regarding document retention, the Firm's legal department acted promptly to ensure that all relevant documents would be preserved and provided to authorities."
Quattrone, a key figure in the 1990s Internet boom, and his team of technology bankers leapt from one investment-banking firm to another, winning deals from high-profile firms including Netscape Communications Corp. and Amazon.com Inc. Quattrone joined CSFB in 1998.
NASD has informed him in a "Wells notice" that one of the grounds for its complaint will likely be his unusual role as the supervisor of both research and banking in the technology sector. Regulators say the analysts, who are supposed to be independent, often wrote positive reports on troubled companies to help the bankers win business.
Quattrone, who still has an opportunity to submit new information and change the regulators' minds, is also facing civil charges based on the recently banned practice of "spinning," or giving shares in IPOs to executives at companies that were banking clients.