Hi Teresa, It seems as though every time I meet you, we're talking about food...
I was reading an interesting article in Frobes written by Michael Malone. He is predicting a massive turnaround from chips to wireless to information technology . He said it will come in the form of universal broadband access, unlimited network server availability, global virtual malls, real-time enterprise computing.
BUT, he states that such a boom will place a burden on America's infrastructure that it currently cannot bear. He says it needs the money and political will to carry the load.
He goes on to say that the past left some of the industry's keenest analysts convinced that the traditional business cycle was obsolete, and that the tech bubble could expand indefinitely.
This is all interesting, but we must study our past to understand our future, right? This article points out some of the greed and mismanagement of the past that may have scared off many investors who would have otherwise helped the push forward...with good reason, I might add.
I wanted to post this article that is in the latest issue of Fortune Magazine. Many analyst may now find themselves in hot water, this might be the tip of the ice berg.
The Trouble With Frank
Frank Quattrone was the top investment banker in Silicon Valley. Now his firm is exhibit A in a probe of shady IPO deals.
FORTUNE
Monday, September 3, 2001
By Peter Elkind and Mark Gimein
Will Wall Street Go Up In Smoke?
John Mack the Apostle
They did not think of themselves as Masters of the Universe, at least not yet. They were just a bunch of startup folks, gathered in a startup office, listening to that startup pep talk that everybody else in Silicon Valley was hearing back then. And like every startup pep talk, it included a statement of principles. There were ten in all, the first of which admonished everyone there to "act ethically."
Their boss, Frank Quattrone, hammered home the point that if the people in that room did not follow that prescription, they would not, and could not, succeed. The goal of the group--most of them, like Quattrone, defectors from Morgan Stanley--was to build an investment banking powerhouse. The business cards said that they all now worked for Deutsche Morgan Grenfell, the investment banking arm of the giant Deutsche Bank, but everybody in the room--indeed, everyone in Silicon Valley--knew that it would have been a lot more accurate to call the enterprise Quattrone & Co.
In the years following that 1996 meeting, Quattrone & Co. would become almost as closely associated with Netmania as Drexel Burnham Lambert had been with the junk-bond-fueled takeover battles of the '80s. It was, in fact, Quattrone himself who, as a Morgan banker, had brought Netscape public, sowing the seeds of the Internet frenzy. At Deutsche Morgan Grenfell and later at Credit Suisse First Boston, Quattrone would become the most visible--and powerful--investment banker in Silicon Valley. The Internet stock run-up of the late 1990s would make many of the people in that room, particularly Quattrone and his top lieutenants, George Boutros and William Brady, extremely rich. And it would sorely test the limits of that early terse prescription.
By any estimation CSFB is now in very hot water. It is the subject of investigations by the National Association of Securities Dealers, the Securities and Exchange Commission, and the U.S. Attorney's office in New York. The firm has been notified by the NASD that six East Coast sales and trading officials may face charges for taking inflated commissions--essentially kickbacks--in exchange for doling out hot tech IPO shares in 1999 and 2000. In response to the investigations, CSFB has fired three members of an elite private client services (PCS) brokerage force that catered to rich tech insiders--the venture capitalists and entrepreneurs known in Silicon Valley as Friends of Frank. And it has seen CEO Allen Wheat sacked by CSFB's parent company, the Credit Suisse Group. Though the firm claims that Wheat's firing is unrelated to the investigation, few in Silicon Valley or on Wall Street give that much credence.
In the harsh glare of the investigations, CSFB has begun stripping away elements of Quattrone's pervasive control, eliminating his authority over the private client services group as well as the 60-member technology research team that Quattrone both supervised and paid. In a July telephone conference, journalists and analysts pressed Credit Suisse Group CEO Lukas Muehlemann and Wheat's replacement, John Mack--Quattrone's former boss at Morgan Stanley--with pointed questions about CSFB's "compliance structure" and Quattrone's future role at the firm.
Through all this, CSFB executives maintain that the firm has done nothing but follow accepted industry practices. They note that at least half a dozen Wall Street firms, including Morgan Stanley and Goldman Sachs, have been subpoenaed in the IPO probes. Quattrone, the executives add, has not been named as a target of any investigation and was "not responsible" for overseeing brokerage accounts, commissions, or IPO allocations. CSFB (whose spokesperson said in a statement that it is cooperating with investigators but would not comment on specific points in this story) insists that he did nothing wrong, even though the brokers that it has fired were part of a select group that Quattrone supervised--and indeed had created to cater to the personal finances of his most treasured clients. Nonetheless, there is little question that Quattrone, who declined repeated requests for interviews, is in the sights of the prosecutors and regulators circling the firm.
In trying to understand Frank Quattrone and his organization, FORTUNE conducted its own four-month investigation, which included more than 100 interviews with current and former employees of CSFB, investment bankers from around the industry, and executives and financiers in Silicon Valley. In discussions with both Quattrone's fans and detractors, the name Michael Milken comes up over and over. There are obvious parallels: As the dominant investment bankers of their day, Milken and Quattrone came to personify the giddy excesses of their respective eras--the former, the go-go 1980s; the latter, the wildly speculative Internet stock bubble. Quattrone's fans emphasize that, like Milken, he is a maverick who broke the mold of the traditional investment banker and argue that he is being pursued less for any real misdeeds than for his success. His detractors say that--again like Milken--he amassed enormous power by ignoring the normal checks and balances of the financial world.
Eventually, of course, Milken pleaded guilty to six felonies and spent two years in jail. For all the headlines the CSFB investigations have generated, it is far too early to say whether the same fate awaits Quattrone. The law is murky; not all the facts are in; potential key witnesses have not yet come forward. Indeed, it isn't hard to find people who say that the actions taken by Quattrone & Co., even cast in the harshest light, simply do not cross into illegality. It's not too early to say this, though: Rarely has any advice sounded so hollow as that uttered by Quattrone back in 1996--before it all got crazy.
Profiles of Quattrone, 45, invariably note that South Philadelphia, where he was raised, was the setting for the movie Rocky. It is an image Quattrone relishes. He has always presented himself as a scrappy, street-smart outsider and likes to snicker about Wall Street bankers with "suspenders and slicked-back hair." That picture, however, is a bit misleading. By 1995, the year he took Netscape public, Quattrone--who has an undergraduate degree from Wharton and an MBA from Stanford--had already spent 17 years at Morgan Stanley, certainly enough time even for a kid from South Philly to become acculturated to Wall Street. |
