Quattrone will walk:
The agreement leaves Quattrone the option of returning to investment banking, where he was a dominant presence who earned more than $100 million in a single year. But it is unclear whether he will find a home at one of the major Wall Street banks that have struggled to polish their images after the trading abuses and conflict-of-interest allegations that have emerged over the past several years.
Deal With Quattrone Would Avert Third Trial
By Carrie Johnson
Washington Post Staff Writer
Tuesday, August 22, 2006; D01
Former investment banking star Frank P. Quattrone is expected to appear in a New York courtroom today to seek a federal judge's approval for a deal that would allow him to avoid prison time, bringing his six-year legal odyssey to a murky conclusion.
Prosecutors in the U.S. Attorney's Office for the Southern District of New York are preparing an agreement that would avert the need for Quattrone to stand trial for a third time on obstruction-of-justice charges. Under its terms, Quattrone would promise to stay out of legal trouble for a specific time period -- at least one year -- after which the government would dismiss the case, according to two sources who spoke on condition of anonymity because the deal still requires the blessing of U.S. District Judge George B. Daniels.
Legal experts said the deferred prosecution was the government's way of resolving several problems, including the relatively slender evidence against Quattrone, lingering questions about one of the laws under which he was charged and turnover within the prosecution's ranks.
Quattrone, who played a central role in the initial public offerings of such prominent companies as Amazon.com Inc. and Cisco Systems Inc., earned hundreds of millions of dollars as the technology sector boomed in the late 1990s. But his role in doling out shares of hot IPOs to favored customers brought his then-employer, Credit Suisse First Boston LLC, under the scrutiny of securities regulators. CSFB eventually paid $100 million to settle the allegations.
Separately, federal prosecutors filed criminal obstruction-of-justice charges against Quattrone for urging employees in a December 2000 e-mail to "clean up those files" as the investigation of IPO share allocations was widening. But the government's case was built around that single e-mail and what Quattrone intended his employees to do with it, and his first trial ended in a hung jury in 2003. The government tried Quattrone again the following year and won a conviction only to have it overturned by an appeals court this March because of faulty jury instructions.
"It's one of those gray cases that falls a little bit short of the proof-beyond-a-reasonable-doubt standard," said Columbia University law professor John C. Coffee Jr.
The obstruction-of-justice law that prosecutors wielded against Quattrone is itself a problem. In most fraud cases, obstruction charges are attractive because it is easier for jurors to understand the concept of destroyed documents or erased e-mails than the mechanics of a complex accounting scam. But jury instructions that accompanied the old statute, since supplanted by the 2002 Sarbanes-Oxley law, would have allowed jurors to find a defendant guilty even if they concluded he did not intend to break the law.
That flaw became clear after Chicago accounting firm Arthur Andersen LLP was convicted of obstruction charges in 2002. The firm hemorrhaged clients and partners -- but three years later, the Supreme Court, citing the faulty jury instructions, tossed the case. Given the firm's near-defunct status, the Justice Department decided not to retry Andersen. Meanwhile, business groups protested that the government had imposed a virtual death sentence on the company rather than targeting specific employees who may have engaged in wrongdoing.
So the Justice Department increasingly has rolled out deferred prosecution agreements of the sort under discussion with Quattrone. The deals allow government lawyers to avoid a costly, resource-intensive trial and offer defendants a middle ground that often includes no prison time.
William B. Mateja, a partner at Fish & Richardson PC who oversaw the Justice Department's white-collar crime efforts earlier in the Bush administration, said the decision to strike a deal with Quattrone is a purely practical one. Two government lawyers who prosecuted him have departed for private practice.
"The guy's already been tried two times," Mateja said. "There is a substantial price that he's paid. He's had to sit through two trials and has paid his lawyers."
Coffee, the Columbia professor, noted: "This is becoming a historical incident, not a current crisis."
The agreement leaves Quattrone the option of returning to investment banking, where he was a dominant presence who earned more than $100 million in a single year. But it is unclear whether he will find a home at one of the major Wall Street banks that have struggled to polish their images after the trading abuses and conflict-of-interest allegations that have emerged over the past several years.
© 2006 The Washington Post Company
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