Diane Francis on Business Issues

Monday, April 24, 2006

Quattrone: Victim or Perp?

Diane Francis column Saturday April 21:


NEW YORK CITY - The case of technology superstar investment banker, Frank Quattrone, borders on legal harassment or is, as one commentator speculates, a form of inter-coastal rivalry.

Last month, the 2nd Circuit Court of Appeals in New York threw out Mr. Quattrone's 2004 conviction of obstruction of justice because of erroneous jury instructions. The judge in this case did not emphasize to the jury that they must be convinced that Mr. Quattrone intended to obstruct justice.

The appeal court said that meant the conviction was flawed, but in a strange move the court recommended that a third trial be held because they believed there was sufficient evidence of wrongdoing to convict.

Mr. Quattrone is the former head of Credit Suisse First Boston Corp's. technology group. He is accused of sending an email on Dec. 5, 2000 to his Palo Alto colleagues asking them to purge files about initial public offering allocations. Prosecutors say he did this to frustrate evidence gathering underway by a securities as well as a grand jury investigation.

Mr. Quattrone testified that the purge was routine procedure. The prosecution labeled it obstruction of justice by him and Credit Suisse to hide the unfair allocation of IPO shares to favored clients.

The firm paid a fine eventually.

But Mr. Quattrone's first trial in 2003 ended in a hung jury. His second was in 2004 and led to a conviction, just overturned. A third trial, many believe will occur, could take place this year.

"It would be unusual for the government to abandon a criminal conviction, particularly where the Appellate Court, Second Circuit, found the evidence more than adequate to convict," said Columbia University Professor John Coffee in a recent telephone interview. "What they [appeal court judges] agreed on was that the judge was not neutral."

To some this would constitute double, or triple, jeopardy. But this has no basis in law because he appealed the case, won an overturn and now has another chance to disprove allegations, say legal experts. This means he has been able to exercise his right to a fair trial.

However, it does appear to be harassment by anyone's standards even though Mr. Quattrone has been free on bail since charged in 2003. He's been professionally sidelined and fighting bans by various regulatory bodies. A recent ban was overturned.

"He's facing a third trial and yet it's never been clear he's committed any crime whatever," said Jack King in a recent telephone interview. He is spokesman for the National Association of Criminal Defense Lawyers in Washington. "They're just trying to make a professional defendant out of him."

The Association submitted a brief on his behalf.

Ironically, superstar Quattrone would be out of jail now if he had done a "Martha Stewart" and served the 18-month sentence he received in 2004.

Instead, he's spent that 18 months fighting only to face the possibility of another lengthy, expensive trial.

"It would be over but the problem is he would have to live with a conviction the rest of his life," said Ellen Podgor in a phone interview. She is a law professor at the University of Stetson and at Georgia State. "I think prosecutors should drop it. They've already punished Quattrone. They've made their point."

Besides, another trial is not cost effective and the initial prosecutors are now in private practice.

"A third prosecution would not be wise because it was a very tenuous type of case," she added. "Lots rested on one email exchange. At two tries, it makes it very difficult for prosecutions to be successful."

Professor Podgor also thinks the government has sufficiently frightened market players and their employers against destroying documents whenever investigations are underway. (It also frightened people who would fib with its Martha Stewart conviction.)

But another important legal point is at stake here. The appeal court overturned the conviction because the judge failed to require intent. This is the same basis for appeal mounted by Arthur Andersen case, Enron's former accountants, as well as WorldCom's former Chairman Bernie Ebbers. He claims he knew nothing.

And Quattrone is also hanging tough and rich enough to refuse to settle and fight another case. He made a rumored US$120 million.

Still other commentators see him as a martyr being persecuted, not prosecuted, by New York's jealous financial establishment.

For instance, Valley "voice" BigBlog.Com wrote: "His ability to once again move and shake in Silicon Valley - look for him to join a big venture capital firm soon - will be a continuation of the much-denounced dot.com bubble...This is another important chapter in the decade-long fight between Silicon Valley's money guys and the New York financiers. Quattrone has played a starring role in that drama. He's sure to take centre stage again."

Whatever the explanation, the wheels of justice grind slowly and politically. So count on Mr. Quattrone to be harassed in the dock one more time just because so much elsewhere rides on his conviction.

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