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Pastimes : Investment Chat Board Lawsuits -- Ignore unavailable to you. Want to Upgrade?

To: dantecristo who wrote (4182)	3/7/2003 10:46:58 AM
From: dantecristo	Respond to of 12465

[CSFB]"Tech banker faces charges ATTORNEY: HE'S BEING USED AS A SCAPEGOAT By Chris O'Brien Mercury News Regulators charged Silicon Valley investment banker Frank Quattrone on Thursday with violating a series of securities rules for the aggressive strategies he pushed to land clients for his firm, Credit Suisse First Boston. After years of being at the center of one of the valley's most influential networks of entrepreneurs, venture capitalists and executives, Quattrone now faces the prospect of being permanently barred from the securities industry. The National Association of Securities Dealers alleged that Quattrone improperly enticed clients by offering them the opportunity to buy shares in potentially lucrative IPOs and by promising that analysts who were supposed to be independent would provide favorable stock ratings. Along the way, Quattrone made hundreds of millions of dollars and was given what the NASD claims was the power to run his technology banking group as a ``firm-within-a-firm.'' The result was a strategy that the NASD said enriched hundreds of insiders at companies while typical investors with less access and less information suffered large losses. Quattrone also was charged with failing to cooperate with part of the NASD investigation related to possible destruction of documents. That latest twist prompted Quattrone to resign from Credit Suisse earlier this week. Quattrone's attorney labeled the charges an attempt to turn his client into a scapegoat for an entire industry and vowed to fight them vigorously. He argued that the structure of Quattrone's group as well as its tactics were approved by Credit Suisse executives and common to the industry. ``The NASD charges are completely without merit and represent an unprecedented attempt to take punitive action against an individual for conduct that was legal at the time and widespread throughout the industry,'' said Howard Heiss, an attorney for Quattrone, in a statement. Officials at Credit Suisse declined to comment. Credit Suisse has already agreed to pay $200 million as part of a global settlement with state and industry regulators over IPO and research practices and another $100 million in a separate settlement over IPO-related commissions. Spinning is the practice of giving selected customers access to potentially profitable shares of companies as a reward for, or incentive to, giving business to the firm. During the course of those investigations, regulators set their sights on Quattrone, who arrived at Credit Suisse in 1998. Over the next three years, Quattrone built a banking powerhouse that led more technology companies' IPOs, or initial public offerings, than any other investment bank. Quattrone oversaw a group that included investment bankers, research analysts, and brokers who provided personal financial services to associated clients. The 20-page complaint filed by the NASD cites a series of company e-mails, marketing packets and internal Credit Suisse audits to support the charges. The complaint says Quattrone's group set up brokerage accounts for about 300 critical executives -- the so-called ``Friends of Frank'' -- who were then allowed to buy shares in other companies and then sell them for big profits after they went public. Such access is usually reserved for a bank's biggest brokerage clients. The NASD complaint says such ``spinning'' amounts to a gift in violation of securities rules. Quattrone also compromised the independence of his group's analysts because his bankers promised favorable stock ratings' research in an effort to land clients, according to the NASD. The probe took another turn in recent months when investigators uncovered a series of Credit Suisse e-mails that raised the question of whether Quattrone advised employees to destroy documents even though he knew the firm was under investigation. Quattrone is under criminal investigation by New York authorities for the e-mails incident. His lawyer advised Quattrone not to testify at a NASD hearing last week to avoid giving testimony that could be used in the criminal investigation. But the decision not to appear before NASD led to Quattrone's resignation this week. Quattrone now must respond to the complaints in writing, after which it will be tried before a professional hearing panel, complete with testimony. The hearing panel will render a decision, which is then appealable to NASD's appellate group and the Securities and Exchange Commission. In its failure-to-respond complaint, the NASD is seeking to ban Quattrone from the industry for life. For his role in the alleged spinning and research violations, the NASD is seeking an order that he return the profits or ill-gotten gains, including making restitution to customers. The amount of such remedies would have to be decided during the hearing process." -------------------------------------------------------------------------------- Chris O'Brien can be reached at cobrien@sjmercury.com or (415) 477-2504. -------------------------------------------------------------------------------- Posted on Fri, Mar. 07, 2003 bayarea.com