There’s something hilarious, in a sick kind of way, about Credit Suisse First Boston’s move to put on leave Frank Quattrone (Mercury News), the supernova investment banker who brought so many riches to the bank and himself over the past few years. This outfit has been defending its man to the hilt, but the odor around him may be getting too strong.
The smell now includes possible obstruction of justice. Did Quattrone try to get his staff to get rid of documents after he knew CSFB was under investigation?
As the Wall Street Journal reported (paid registration required) today:
“The inquiry, by the U.S. attorney’s office in Manhattan, focuses on whether Mr. Quattrone knew of regulatory investigations into CSFB’s handling of hot new stock offerings when he forwarded a December 2000 e-mail urging his investment-banking staff to purge drafts of notes and other documents from their files.”
Here’s how the New York Daily News covered the story this morning, less delicately:
According to E-mails obtained by the Daily News, Quattrone, a superstar banker who took scores of high-flying dot-coms public, told members of his banking unit to destroy potentially incriminating records.Quattrone’s suggestion came just days after he had learned from CSFB general counsel David Brodsky that a federal investigation, possibly involving his group, was heating up, according to people familiar with the situation.
The spin we’re getting from Quattrone’s side is that a) he did nothing wrong; and b) there’s an innocent explanation for everything. Okie dokie.
Quattrone’s hot water was already warm enough. He’d been told by regulators that they were getting ready to file a civil suit (Mercury News) against him for securities misdeeds.
But his character was never in much doubt in my mind, not after the way he got to CSFB. In case you’ve forgotten, let me remind you what happened.
In mid-1998, Quattrone, then head of Deutsche Bank Securities Inc.’s technology group, quit to join CSFB. Just weeks earlier, responding to rumors that he was job-hunting, he told his clients in a letter: ”We are here to stay. Please trust us.”
Later that summer, explaining his move, he told Upside magazine that one reason for his jump was that Deutsche Bank was looking for loopholes in their contract in order to not pay out so much to the technology group. But as I noted at the time, Quattrone wasn’t shy about using loopholes, either.
He told Upside: “We’d put out voice mail to all employees announcing our resignations. They were shocked. We explained that subject to a contractual restriction, we were barred from recruiting them. But they could talk to Credit Suisse.” Wink, wink.
The odor surrounding Quattrone has been growing for years. Consider his notorious stock-spinning operation, known as “Friends of Frank” (part of a detailed Fortune magazine story). True, everyone was doing it at the time, another example of how insiders enriched themselves at the expense of everyone else during the bubble. But Quattrone’s tech group at CSFB took things even further.
Earlier this year CSFB paid $100 million to settle a kickback case. The bank wasn’t happy enough with its already huge fees generated from technology public offerings, especially in the era when prices would soar the first day of trading. So CSFB allocated IPO shares to some hedge funds on the condition that they kick back outrageously large commissions on their trades, according to documents filed with the SEC settlement. Let’s see. Make billions, pay a hundred million in fines. Sounds like good business to me.
I find myself agreeing with Adam Lashinsky’s commentary this morning, in which he says Quattrone’s troubles are “the beginning of the end of these scandal-ridden times. That’s because Quattrone is bigger than Blodget. And he’s bigger than Grubman. Symbolically, he’s the big fish, as big to this era’s story as Michael Milken was to his.”
Big fish, scum-covered pond.