Saturday, June 3, 2006

Quattrone Mounts Another Hurdle

Former technology investment banker Frank Quattrone ended 2005 as a convicted felon waiting for the Second Circuit to rule on the appeal of his conviction on three counts of obstruction of justice and witness tampering; he had also been barred by the NASD from the securities industry.  Things have gotten better since then.  First, the appellate court reversed the convictions due to faulty jury instructions.  Then, the SEC overturned the NASD's lifetime ban on Quattrone that was based on his assertion of the Fifth Amendment when required to testify before a hearing panel investigating his role in distributing shares in "hot" initial public offerings (IPO).  The Commission determined that a ban based solely on asserting the self-incrimination privilege was improper when Quattrone raised colorable claims whether that was constitutionally permissible.  Now, the NASD has dropped its regulatory complaint regarding the IPO distributions completely, according to an AP story (here). 

The SEC and grand jury investigations of the distribution of IPO shares triggered the underlying obstruction charges, but no criminal or SEC action was ever taken regarding that conduct.  With the NASD complaint now gone, it would seem that there is a good argument that the obstruction charges should not be retried.  The basis for those charges was always open to significant question as a potential securities fraud.  Quattrone used shares in IPOs brought to market by his firm, Credit Suisse First Boston (CSFB), to reward CEOs and executives at other firms with whom CSFB did business or hoped to do business in the future.  As the options-timing investigations that have emerged in the past month show, corporate executives are not shy about lining their pockets.  The issue in Quattrone's case, however, is whether there was anything fraudulent in what he did, as opposed to what the executives did in taking a personal reward for picking the corporation's investment bank.  In effect, Quattrone was the ice cream man handing out treats, while it was the executives who spent someone else's money who got the cones.  It's not clear what is wrong with selling your services to a willing, if personally greedy, buyer.

Quattrone's criminal case has been assigned to a new district judge, and he has retained new lawyers.  Along the same lines, the government has new attorneys on the case.  Will it all go away? (ph)

Civil Enforcement, Securities | Permalink

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I wonder if the national celebration of the Ken Lay conviction was premature and if he will be able to knock of much of his charges on appeal similar to Quattrone...

Posted by: michael | Jun 3, 2006 4:20:18 PM

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