Quattrone Convictions Overturned by Second Circuit

The obstruction of justice and witness tampering convictions of former Credit Suisse First Boston tech investment banker Frank Quattrone were overturned by the Second Circuit in an extensive opinion (link below).  The prosecution of Quattrone revolved around his forwarding an e-mail urging colleagues in his department to "catch up on file cleanup" when he knew that there were pending grand jury and SEC investigations of the IPO practices of the firm.  Quattrone included a message forwarding the "cleanup" e-mail stating "i strongly advise you to follow these procedures" related to CSFB's document retention policy.  Quattrone had been in touch with the firm's legal department about the pending investigations, although his defense at trial was that he did not know that documents from the tech group he headed were involved in the investigations.  The government charged Quattrone with violations of 18 U.S.C. Secs. 1503 and 1505, obstruction of grand jury and agency investigations, and witness tampering under 18 U.S.C. Sec. 1512. 

The Second Circuit reversed all three convictions because of faulty jury instructions.  In a partial victory for the government, the court held that there was sufficient evidence to convict Quattrone of all three charges, and that the jury's inferences from the evidence were sufficient to establish the requisite corrupt intent under the different provisions.  Where the prosecution failed, requiring reversal for a new trial (this will be the third one because the first trial ended in a hung jury), was the district court's jury instructions on the required nexus between Quattrone's knowledge of the pending investigations and the conduct that allegedly obstructs the investigations.  The jury instructions on the 1503 and 1505 counts stated, "I charge that if you find that either, A, the defendant directed the destruction of documents that were called for by a grand jury subpoena, or that[, B,] defendant directed the destruction of documents that he had reason to believe were within the scope of the grand jury’s investigation, then this nexus requirement will be satisfied."  The Second Circuit held that the instruction failed to tell the jury how to determine if the nexus requirement had been proven:

The first portion of the "application" section told the jury in effect that if it found that Quattrone merely called for the destruction of documents that were within the scope of those sought by the subpoenas, that finding alone satisfied the nexus element. Clearly, that instruction is not a correct formulation of the law. Under the charge, as given, any defendant who urges the destruction of documents might run afoul of section 1503 (or 1505) without any proof that the defendant knew the documents were subject to a subpoena (or document request). More is required; a defendant must know that his corrupt actions "are likely to affect the proceeding."

The government argued that any mistake in the instruction was harmless because, based on the evidence, the jury necessarily found that Quattrone acted with the requisite corrupt intent when he sent the e-mail.  The court rejected that argument:

The government presents a forceful and thoughtful argument. However, that argument overlooks a glaring deficiency in the court’s charge. When the court finally explained to the jury how to apply the law to the facts, it eviscerated the nexus requirement. It removed the defendant’s specific knowledge of the investigatory proceedings and the subpoenas/document requests from the obstruction equation. It left a bare-bones strict liability crime. Given the court’s instruction for the nexus determination, all that need be proven was that an investigation had called for certain documents and that the defendant had ordered the destruction of those documents. Although wrongful intent, corrupt intent, and the nexus requirement were correctly defined, the charge, as a whole, relieved the jury of having to make those findings in assessing criminal liability.

In overturning the Sec. 1512 conviction, the Supreme Court's recent decision in Arthur Andersen [spelled "Arthur Anderson" in a number of places in the opinion, a common error as evidenced by the list of post topics on the right side of this blog] played a key role because there the Court held that the government must prove the nexus element linking the defendant's intent to the conduct alleged to be an obstruction of justice (or witness tampering, in this case).  The district court's instruction specifically said that the jury need not find such a nexus, the common understanding of that provision before Arthur Andersen that the government conceded was erroneous.

Quattrone won another important point by having the case remanded to a different district court judge.  The first two trials were presided over by Judge Richard Owen, who is viewed by many as being favorable to prosecutors and his conduct during trial was the subject of strong objection by the defense, who believed he showed favoritism to the government.  Some (but not all) of the judge's evidentiary rulings were overturned by the Second Circuit, although the evidence may not be of great significance at a retrial and the appellate court did not find anything untoward in those rulings.  While the Second Circuit did not find that Judge Owen committed error during the trial in how he conducted himself, it did grant the defense request that the case be reassigned to a new judge for the third proceeding.  The court stated:

This case has already endured two full trials before the same dedicated jurist. In our view, the contentions of the parties in this difficult and complex matter have taken a toll on all involved. We conclude that the better decision is that the case be reassigned to another judge upon remand. While we have considered the government’s arguments and do not find evidence that the trial judge made any inappropriate statements leading us to seriously doubt his impartiality, portions of the transcript raise the concern that certain comments could be viewed as rising beyond mere impatience or annoyance. Ultimately we believe that the interest and appearance of justice are better served by reassignment.

The remand to a new judge may be just as important as the change in the jury instructions for the defense.  The Second Circuit's finding of sufficient evidence to convict on the obstruction and witness tampering charges likely means that a third trial will take place.  (ph)

Download quattrone_second_circuit_opinion.pdf