Frank Quattrone archives
With the probably permanent set-aside of Silicon Valley banker Frank Quattrone's conviction on obstruction of justice and witness tampering, a new era begins in Silicon Valley. One that will probably mark the full maturation of the area’s very healthy financial services business - business that doesn’t need New York.
Yes, yes, the judges have ordered a new trial. But the lawyers who prosecuted Quattrone are in private practice now. And three trials? Well, it does seem a bit much to get a man who, when it comes down to it, did nothing more than send an email. That's particularly true now that his reasons for sending that mail can't be implied to a jury. That’s why it's likely that Quattrone will get a pass from the Department of Justice (NASD, the folks who regulate stock brokers are another matter and they are much less likely to be so charitable, continuing to bar Quattrone from the banking business).
UPDATE:Just goes to show what I know: The Securities and Exchange Commission has over-turned NASD's decision to bar Quattrone. The story is here and it makes pretty much every other prediction in this column doubly-true.
But 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. But this isn’t the Internet v. "real" world that you hear so much about outside the valley. No, 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 staring role in that drama. He’s sure to take center stage again.
See, Silicon Valley is not about the stock market. It’s about selling stock to the market - to reap the rewards of private investments. The valley runs one of the more remarkable private equity pools in the world. You can’t see it. Almost no one talks about. It’s taken for granted, much as the spectacular views down U.S. 280 or the foggy and damp San Francisco summers. But it’s real. Millions and billions of dollars worth of real. It sits with venture capital funds but also - almost as importantly - it sits in the hands of the many people who became very wealthy in the 1990s. (Many of those folks have, in fact, funded enterprises like this one.) They invest shrewdly and carefully in technology that many people can’t - or won’t understand. Those initial investments - pennies on the dollar - pay well for those who are careful and smart. But to get paid, they have to see the stock sold in some kind of public-market transaction. Facilitating that process was Frank Quattrone’s job; no one did it better.
The money made in the 1990s in Silicon Valley did not evaporate in the dot.com bubble. It just sat on ice for a bit. With the Google IPO it started to recirculate. This time, Silicon Valley - which has always hated the dismissive and condescending attitude that oozed from technically unsophisticated bankers from New York - is gonna get theirs. Frank Quattrone will - again - be the man to lead the charge.
Let me be very clear about this: Frank Quattrone’s talent as a banker should not be questioned. For all I have written about the man (and it’s a lot) I have never doubted his intelligence or his ability to speak for and understand his clientele of science-minded geeks. “He vibrated at the same frequency” said one his former associates. I can’t improve on that description.
Continue reading "Back on The Block" »
That loud noise you heard was the sound of a large, heavy book being thrown at Frank Quattron by a cranky, long-established federal judge. Quattrone's gotten 18 months, according to the WSJ, longer than anyone officially anticipated. It's a sad end to what would -- greed and hubris having not gotten in the way -- have been a spectacular career.
For those of you new to this site, welcome. Our normal editorial diet is business and politics from a California and Silicon Valley perspective. If you’re interested in Quattrone – and who isn’t really? – you’ll find this site fun and interesting.
Continue reading "Greetings Quattrone Searchers" »
We don’t have enough going on around here, what with helping give away money to voters, trying to figure out what to say about the election – don’t give up yet, Democrats, really – and generally waiting around for tempers to start flaring on a whole bunch of races, local, state-wide and national.
Nope. Not enough.
Now comes a reminder from Andy Sorkin at The New York Times that our friend Frank Quattrone will be sentenced tomorrow.
Continue reading "We Break For Frank" »
Reading the interviews with the jurors who convicted Frank Quattrone of obstruction of justice and witness tampering you can see a bunch of important differences between this case and the last one.
First, the background noise has changed. It’s not just Martha Stewart, who proceeds Quattrone in getting a sweeping conviction. There’s a general sense of mistrust out there. Up against prosecutors who took their measure last time, Quattrone and his lawyer John Keker had more of an uphill battle than they realized. They can blame Judge Richard Owen but I don’t think that appeal will work very well.
Continue reading "That's All, Folks" »
I thought gay marriage was good for business. It rocketed our numbers. But Frank’s put us through the roof. Welcome. Pull up a chair. Stay a while. For now, the topic of the day is Frank Quattrone but if you’re interested in the trial and its sad outcome, you might be interested other stuff I’m writing about: the intersection of politics and business, is one part of this 'blog’s regular beat. How San Francisco is being changed by the culture of the self-employed is another. And, naturally, Gov. Terminator, the businessman’s politician figures large in our commentary.
To make things easy for newcomers, here’s the archive of all the straight dead-tree (newspaper) reporting I’ve done on this stuff, starting with the very very very very first – okay, I’m blushing – “friend of Frank” story that ran on Jan. 11, 2001.
Here’s the first “clean up those files” story from Jan. 30, 2003. Both pieces ran in the New York Post. The straight trial coverage from last fall also ran in the Post and has been integrated into the posts I did to the site from the trial.
I wasn’t in New York for Quatrone 2.0. But I sat through the whole first trial. And, yes, I’m pretty sure Quattrone was the first criminal defendant to get ‘blogged' which, in its own way, is appropriate.
We’re going back to normal programming tomorrow. That’s probably going to include a look at how Gov. Terminators’ status is changing. Todays’ New York Times acknowledges that he’s a pretty good governor and compares his approach to New York Mayor Michael Bloomberg’s. If you’d been reading this ‘blog you’d know that. And there’s some stuff to say about Democratic nominee John Kerry’s economic plan. Like Schwarzenegger, he’s called on Warren Buffett. There’s more. But I’ll keep the surprises to myself.
Y’all come back now, ya hear?
Frank Quattrone has been found guilty of all charges against him. Silicon Valley will never be the same. It now realizes it must conduct its business just like everyone else.
Continue reading "Guilty. On All Counts." »
Frank Quattrone’s second jury will begin deliberating his guilt or innocence on obstruction of justice and witness tampering charges tomorrow. Today will be given over to the usual closed-door fireworks between Judge Richard Owen and Quattrone attorney John Keker over what the judge should tell the jury.
The fireworks and excitement in this trial are mostly between the judge and the lawyer, Keker deciding that he’s had enough fun with the press. And they’ve been pretty much going off in private out of the jury’s and reporters’ sight. Last fall, we got to see Frank squirming – well, really just displaying quiet contempt -- as he watched some pretty damning email show up for all to see and read. This year, it was just quiet acknowledgment.
Continue reading "Real Irony in an Ironic Age" »
It’s probably not exactly the story he’d like but it probably did Frank Quattrone a lot of good to see his work – his years of hard work in Silicon Valley – finally acknowledged by The New York Times on the day he’s taking the witness stand (This link is no longer active.) in his obstruction of justice trial. Frank is a great witness – he’s not so good on defense – but this piece will play to his strengths.
Playing catch-up (sorry boys) Mr. Sorkin and Mr. Thomas, pulled together the Google IPO and Quattrone in one story. Damn. Where, oh where, do you think they got that idea. Sorkin and Thomas offer a view from New York and they use the term digerati – a word once applied to the Times’ main man here in San Francisco – but it gives a glimpse of Quattrone’s success wresting financial control away from New York banks for his geeky brethren. It can only please Quattrone that the banks he once led still follow his lead. I sorta know how he feels.
UPDATE: For me, the term "digerati" is somewhat dated. But, it seems, Markoff himself coined it so it's only appropriate that he gets to wear it too. Today's theme: It's not being right that's hard. It's being right all the time.
If Andrew Ross Sorkin’s reporting in today’s New York Times is to be believed – he went a little overboard last time around reporting and poking holes in the prosecutors’ case against Silicon Valley banker Frank Quattrone – Judge Richard Owen has finally risen to the bait.
Continue reading "A Subtle Shift" »
The flurry of activity around the trial of former Credit Suisse First Boston banker Frank Quattrone will probably die down for this week. The lawyers made their opening statements Friday and today. Now, they’ve got to have all the experts – investigators and auditors and the like – testify about what they did and when they did it. That took about three days last time around and Judge Owen doesn’t make jurors work long days or on Friday.
Continue reading "The Possum Strategy: Playing Dumb" »
I’m 3,000 or so miles away right now so maybe when John Keker gets back in to town – he lives about a block and a half away – he won’t glare at me over his little half-glasses with the same enthusiasm he’d display if I were standing outside Courtroom 101 at 40 Center Street in New York City.
So, I can crack wise: Mr. Keker, you don’t know jack about the New York press. Actually, make that less than jack. I thought so last fall when I was there. I am sure of it now.
Continue reading "Festina Lente, Not Semper Fi*" »
Monday’s NYTimes Business Section talks about the political split that outsourcing is creating in Silicon Valley, between those who are business-minded and those who are Democrats. I’ve heard that someplace. Where, oh, where? Oh, yeah. Here and here. Forgive me. I almost never scoop The Times.
Continue reading "Stuff We Knew, Special NYTimes Edition" »
The Wall Street Journal’s talented court duo, Scannel and Smith, are probably writing their Frank Quattrone retrial curtain raiser as I type, so it’s probably as good a time as any to note that yes, indeed, the man who brought you the Internet stock bubble goes on trail (again) Tuesday in Manhattan.
Quattrone’s lawyer John Keker got things off to a fine start this week by asking Judge Richard Owen to give him an anonymous jury. The judge treated that request the way he’s treated most of Keker’s motions: he turned it down. But you gotta wonder if Keker hasn’t gone begging for trouble here.
Continue reading "Quattrone 2.0" »
It wasn’t just the half-assed look at the book business that sent my blood pressure soaring, though. In Sunday’s Times, Frank Rich, not exactly a guy who’s slow on the uptake, echoes some of what I said here last week about Martha Stewart. It’s hanging season out there.
Rich talks about all the big scandals. Big because they were reported in the New York Times, not necessarily big in terms of impact. He correctly notes that Martha’s conviction – a slam dunk on all four counts – has summed up the anger brewing out there about corporate malfeasance. It’s a sentiment that’s bad for the Rigas family, it’s bad for the Tyco execs, it’s bad for MCI/Worldcom CEO Bernie Ebbers. But it’s also bad, very bad, for our friend Frank Quattrone.
Continue reading "La Plus Ça Change...." »
Well, Martha Stewart’s guilty conviction on all of the charges against her is something of a sea change in the atmosphere that’s been surrounding white collar crime.
Actually, the change started earlier this week when
Continue reading "Not Such A Good Thing" »
Silicon Valley banker Frank Quattrone is going to go to court again.
The only people surprised by this are people living and working in Silicon Valley, where conventional wisdom says that the U.S. Attorney will look twice as silly if a second trial fails. Many of these people were treating the mistrial as though it were an acquittal.
Looking silly, as the U.S. Attorney would probably tell you, is not the point. The Southern District of New York is the policeman of Wall Street. They have to try Quattrone again. They believe he screwed with a grand jury investigation and, as prosecutors said again and again in court, if wealthy people like Quattrone -- and Wall Street is filled with them -- can trifle with the law and with grand juries, the system will not work. Deborah Lohse at The Merc gets at this point very quickly in her story.
For a few weeks now, the talk has been that Quattrone should "settle." That he should pay a fine and let the matter go. But it's not that simple. This is not a regulatory or civil matter. A plea agreement is just that and it almost always involves some sort of concession of guilt. It is not -- as many in the valley seem to think -- a small matter of paying a fine, accepting the slap on the wrist, and moving on. That attitude, in fact, is one very good reason why Silicon Valley has such a cavalier attitude about enforcement agencies. They've never had, until now, to consider the idea of jail. A second trial might pound that idea a little further into people's brains.
Andy Sorkin's NYT story carried an indication of just how convinced Quattrone remains of his innocence. Plea bargain talks that took place between Quattrone and the U.S. Attorney's office went nowhere. The two sides were too far apart.
Translation: both sides think they can get a jury they want.
Quattrone is the first person to face the wrath -- the real honest to God indignity -- of regulatory and other agencies outside Silicon Valley. And there is very good and sound argument to be made that if those agencies were more aware, more on-the-ball, and more interested in what was happening in the financial markets -- in other words, if they'd done their jobs -- three year ago, Quattrone wouldn't be in any trouble.
But that's water under the bridge, a high deep bridge, that was crossed many years ago.
It's Quattrone Day again.
The Chron profiles Quattrone attorney John Keker.
The WSJ previews the decision that the U.S. Attorney's office has to make on what to do about the mistrial tomorrow.
And P.J. Corkery, in what looks like a new web blog on San Francisco -- perhaps, like Micky Kaus, he believed Herb Caen was the first blogger -- goes to a birthday party for Tina Keker and comes away with an interesting first-hand account of the mistrial.
This is a quote rather than a link because it's embedded in a much lengthier entry:
"Famed criminal defense attorneys John Keker and Doron Weinberg were at Bizou the other night. … Keker, fresh back from defending $ilicon Valley banker Frank Quattrone in N.Y., threw a party to celebrate Mrs. Keker’s birthday. The birthday cake there looked like a birthday cake…Keker got a mistrial in his case. The fact is that client Quattrone, unlike many of the white collar accused these days, is well liked by his colleagues and office staff. This communicated itself to the jury. Quattrone may have played loose with the legal regs, but he comes across not as a vicious would-be Master of the Universe, but as a likeable, if hard-driving boss, well disposed to his employees and devoted to his wife and family. Jury seemed to think, “yeah, it’s a cut-throat business world, but we should all have a boss like Frank Quattrone.”
Uh, P.J. Denise Quattrone was no where near that courtoom and the one juror who was voting "not guilty" said the presence of the Quattrone famly didn't matter in his decision although, obviously, that's not what jurors may have told the consultant who polled them after the trial. There's a reason those CSFB guys who hung around the courtroom are called "dickheads" but it's nice to see that John Keker -- or "someone close to him" -- can spin with the best of them even if Bob Chlopak isn't around.
The last word on the Quattrone trial goes to Randy Smith and his bulldog Ed over at the Wall Street Journal who gets Juror No. 6, Stuart Siegel to talk and talk and talk. Those engineers -- this guy works for IBM -- once you get 'em going, they're hard to stop.
The WSJ edit board, as expected, says that Quattrone's jury did the right thing. And the NYPost's Chris Byron (This link is no longer active.) weighs in with his own dose of ridicule.
Editor's Note:This post originally appeared as a news story in The New York Post.
Jurors forced a mistrial in the cast against Frank Quattrone yesterday; saying they weren't convinced the former star tech banker destroyed documents or ordered others to do so in the face of a federal investigation.
Prosecutors indicated they will likely try Quattrone again on obstruction of justice charges, and the banker still face other investigations.
But the mistrial declared by Judge Richard Owen during the fifth day of the deliberations was clearly a big win for Quattrone.
Jurors initially favored acquittal on all three charges by a margin of 6 to 5.They eventually moved to convict 8-3 on two of the charges and remained 6-5 for acquittal on a third.
"It was a very weak case by the prosecutors," explained juror No. 5, Mayo Villalona. "There was no witness who really said 'I did this. I destroyed this e-mail.' "
Neither Quattrone nor his family, who have accompanied him in court throughout the trial, had any comment.
"We are disappointed because Frank Quattrone is innocent," his lawyer, John Keker said. "Frank Quattrone is a man of integrity. Frank Quattrone is a man who has always followed the rules."
Quattrone who was charged with two counts of obstruction of justice and one count of witness tampering after federal prosecutors learned of an e-mail Quattrone had sent to employees in CSFB's Palo Alto tech banking practice.
That e-mail entitled "time to clean up those files," circulated in December, 2000, days before word of two government investigations was becoming public. Quattrone forwarded it to his employees on the same day he discussed the grand jury investigation with former CSFB General Counsel David Brodsky.
Quattrone maintained throughout his trial that he did not understand the seriousness of the grand jury subpoena. Brodsky, Quattrone said, had assured him that there was nothing to the investigation.
"I believed the story when he was speaking to Brodsky," Villalona, the juror, told reporters outside the federal courthouse. "I put myself in his position. I would do the same thing. I wouldn't think I was obstructing justice."
Villalona, who works at HSBC, a commercial bank, said he was one of those who never believed Quattrone, once Credit Suisse First Boston's best known banker, was guilty of any of the charges that have been levied against him.
Juror No. 4, Michael Roman, a graphics designer, said he, too, had not been convinced by the government of Quattrone's guilt. "You had to make a leap because the evidence wasn't strong enough. I was in the 'not guilty' [group] the whole way."
Editor's Note:This post originally appeared as a news story in The New York Post.
Frank Quattrone walked out of federal court yesterday; but he's not a free man.
In addition to his still-ending federal court case, the former Credit Suisse First Boston banker faces a range of charges from a variety of different regulators.
New York Attorney General Eliot Spitzer is pursuing a criminal investigation against Quattrone looking at the brokerage accounts he established for prominent CEOs and other important Silicon Valley insiders.
Investigators from his office have made visits to Silicon Valley asking these "friends of Frank" to cooperate with their investigation by offering them immunity. It's unclear how many have accepted that deal.
A spokesman for Spitzer's office declined to comment.
The "friend of Frank" accounts also played a key role in a complaint against Quattrone being brought by the National Association of Securities Dealers (NASD).
In April, NASD accused Quattrone, once head of CSFB's booming tech-banking practice of creating a "conflict-ridden" bank-within-a-bank. The allocations of hot IPO stocks - a practice known as spinning - encouraged people to do business with him, the NASD said in its formal complaint.
A hearing on those charges should take place by the end of the year.
An NASD spokesman declined to comment citing the organization's confidentiality rules.
There is no way anyone who has sat in the courtroom with him over the past four weeks can’t feel a mixture of both admiration and sympathy for Frank Quattrone.
Sitting and hearing testimony had to have been bad enough. But these past two weeks of waiting around for a verdict have to have been some kind of hell that not even the steady concern and faith of his closest friends Bill Brady and George Boutros sitting in the courtroom almost every day could dispel. Quattrone has artic sangfroid – the French for ‘cold blood’ – and it is a wonder to watch. I have always thought he was smart, cool and graceful under pressure. I had no idea.
So it’s not fun to say – for anyone – that there will be a second trial. Quattrone has not won a clear victory. And he has two more fights on his hands in addition to his second criminal trial: Eliot Spitzer’s on the warpath. And the NASD will have a hearing on its charges against Quattrone by the end of the year.
Quattrone’s jury couldn’t decide whether he was guilty or not. They started out voting six to five to acquit. They ended up at 8 to 3 to convict. Oh, and by the way, while the word ‘innocent’ is used by defense attorneys a great deal, it has no place in the law.
The government didn’t make its case, one juror told a gaggle of reporters. Actually it was a polite but large – and growing by the minute -- pack of cameras, tape recorders, notebooks and microphones all squeezed around a heavy-set guy named Mayo who was nice enough to stop and answer the same bazillion questions over and over again. You got the feeling that he was, indeed, a nice man. And nice guys, well, there aren’t a lot of them in investment banking.
The Quattrone non-verdict verdict is the perfect ambiguous pause in the story of a man who is seen as both a genius and a criminal, a man without whom there would be no Netscape, no Cisco, no Tivo, no Amazon, no MP3. But who also unleashed Fogdog, Razorfish, Phone.com and Autoweb (yup – that little deal that became a huge pain was a CSFB offering). The jury couldn’t decide if Quattrone was a saint or a sinner. They’re not the only ones.
One thing is for sure, with his grudging concession that, on occasion he was involved, consulted and knew about IPO allocations, Quattrone’s reputation and that of his spin doctors has taken a serious hit. More importantly, this trial has shown the outlines of the money machine he created. Finally people outside the valley are getting a closer look. And they’re beginning to understand just how finely tuned this creation was.
The New York Times’ Floyd Norris finally – and I do mean finally – catches on to some of what Quattrone did, repeating for New Yorkers what most of Silicon Valley knows about Quattrone. And that doesn’t bode well for Quattrone’s next trial. Or the looming fights with the New York Attorney General or the NASD. The more they know, the smarter they’ll get. The game may be changing.
Norris’ column is a day late and well, more than a dollar short. If you’ve been reading this ‘blog, or this writer, there’s precious little that’s new there. But what appears in the New York Times set the agenda for the way the country’s most influential people think. And with the Norris piece, more people will be thinking about Silicon Valley as a “money machine.” That gap between the East and West coast just got a little narrower.
That’s why Friday's FT’s story on Google (This link is no longer active.) – that it expects to hold a “Dutch” auction IPO with share price set by true demand, not some gigged up estimate by a bunch of guys in French cuff shirts all clamoring to take their seven percent off the table – is an important sign.
The guys behind Google – some of the same crowd that brought you Netscape – can read the political winds. And they’re blowing strong.
On Monday, bright and reasonably early, the Quattrone jury returned to delibate.
One guy was missing. The wife of juror No. 6 -- no names until this thing is over -- had gone into labor. So court was cancelled for two days.
That doesn't mean there was a break in the action, however. The word "mistrial" practically lept out of Quattrone attorney John Keker's mouth.
Try as he might -- and Keker argued hard -- Judge Richard Owen is not a man who caves easily. No mistrial. He told the jury they'd take a few days off and, if all was well with the juror's wife, they'd return Wednesday. He's kept that stance through two days, on and off, of hard-fought arguments with the lawyers.
Most of the legal wrangling took place behind closed doors. So, to find out what was going on, we had to order transcripts. Which we did. So we all have the same quotes down to the punctuation.
Before all that hard cutting and pasting -- woops, I mean reporting -- we had to have a new pool. The last ones, calling for Friday verdicts and no babies were clearly out of date. The new pool asks for outcome (acquital, conviction or mistrial), a time and, naturally, the sex of Baby Juror No. 6. At least one person suggested the baby be called Boutros.
So far, I'm one and nil, having gotten the sex correctly. Henry Lee joined us sometime in the past 48 hours. The trial resumes tomorow and, never fear, The Post plans a birth announcement.
There's lots of funny stuff in these transcripts. There always is when a bunch of men stand around and talk about pregnancy. The judge -- who is 81 and tough as nails -- was very sweet and funny. When the judge's kids were born, he told the juror, he and his wife had to find a special hospital that would let him be with her during her labor. "I don't have much of a choice," the juror told the judge, sounding just like a first-time dad.
There's media criticism, too. Keker complained to the judge tat my Sunday piece was "truly nasty." I got to read about that in the New York Times and the transcript.
Man, this is living.
The Quattrone jury went home for the weekend Friday evening and there was, of course, a lot of speculation about what it all meant. Conditioned for the Law and Order timing, we all want a dramatic ending within a certain reasonable period of time.
But all this means is that a tough case. And that Frank has good lawyers.
There’s a note from the jury describing their dilemma. The AP is saying – it’s Friday evening – that at least two jurors, one on each side, are stubborn in their refusal to change the opinions. That’s from the conversation the judge had with the lawyers in chambers but he’s sealed the exact contents so it’sl secret. The WSJ, which has been buying transcripts since Quattrone took the stand, will have all the gory details on Monday. (In-house press joke: God is a Wall Street Journal subscriber – they have no Saturday paper. Response of Journal reporters: Big grin and a shrug, as if to say, of course).
This, of course, is good news for Quattrone. It means his lawyers have been able to successfully plant the “reasonable doubt” seed without which we’d have a conviction. His family and the dickheads, which now include Ted Smith and Ethan Topper, were happy.
So, right now, it looks like we’re headed to an ambiguous ending to this whole mess.
It’s be almost perfect, really. What did Frank intend to do? And when did he intend to do it?
And when it comes to stuff like the “friend of Frank” accounts, the allocations to favored clients like Michael Dell, the “allocation madness,” that was talked about on all the mail back and forth between Quattrone, his bankers and his clients, there are heated opinions on both sides. Spinning wasn’t illegal when Quattrone or anyone else did it. And that’s not the charge.
Even people who want to lock Quattrone up and throw away the key – no names, please – will tell you that, in many respects, he’s on trial for the wrong thing. It happens, of course. But if the U.S. government is going to do anything about the little games that investment bankers play and they really want to clean up this whole mess, they should do a detailed investigation of the entire allocation process. You can argue they were headed in that direction in December 2000. But – for a lot of reasons, among them the World Trade Center bombings (I walk by the hole to the courthouse) that didn’t happen.
It wouldn’t be an easy case. It’d be long. And expensive. And complicated. And if you think a jury has a hard time with obstruction of justice, think about trying to explain the ins and outs of floats, allocations, “friends and family,” institutional investors, etc.
Not to mention that, by now, everyone in the valley hates them so much they’d never talk.
So, we’re into week four. Earlier in the day, I had been thinking it was a bad idea for John Keker to dis Derek Jeter. Jeter led the Yankee rally last night. But maybe there are some Red Sox fans on the jury.
Editor's Note:This post originally appeared as a news story in The New York Post.
Frank Quattrone wasn't a mind reader or an attorney, but an honest man who made a simple mistake and is now suffering through a nightmarish legal drama.
Or else he's a calculating financier who flouted the law, encouraged his employees to destroy documents and tried to cover up his illegal deeds by lying.
That, in essence, is the decision that the six men and six women who began deliberating Quattrone's fate yesterday will make as they decide former star tech banker Quattrone's guilt or innocence.
Quattrone, formerly head of Credit Suisse First Boston's tech group, is charged with two counts of obstruction of justice and one count of witness tampering in relation to an e-mail he sent to his employees entitled "time to clean up those files."
The jury broke for the evening at 5:30 yesterday after about 90 minutes of deliberations. They asked to see a number of the e-mails that had been displayed during the trial, and sought clear instructions.
"Clarify judge's charge," read the handwritten note sent out by the jury. "Is it necessary that FQ knew of investigations (GJ and SEC) to be guilty of counts one & two. Count three. Clarify negligence vs. criminal intent."
Quattrone attorney John Keker in his closing remarks yesterday morning made a bid for sympathy for his client.
"It's a nightmare to face clever and agile prosecutors who can keep you on the stand asking you convoluted questions you have to answer "yes" or "no" to "you try it sometime," Keker told the jury.
"It's also a nightmare to somehow get the facts wrong," Keker said, talking about Quattrone's conversation with Credit Suisse First Boston General Counsel Gary Lynch.
In January, as The Post was first reporting the existence of the "clean up" e-mail, Lynch questioned Quattrone about when he knew about the various investigations of the bank.
Frank Quattrone has a good lawyer. And, fortunately, for him, a thoughtful jury. They’ve paid attention.
They’re deciding what to do today. In the very complicate game of telephone that involves U.S. Marshals, judges and handwritten notes being passed back and forth, the jury has given up one hint about where they’re headed.
They have picked up on the difference between obstruction of justice and witness tampering, asking the judge to describe the differences to them. This is important because the tampering charge is not as difficult to prove as obstruction. The government’s demonstration doesn’t have to be as thorough.
It’s hard to say who’s going to win this. I’ve entered the pool – don’t be shocked pack journalism always has a pool, there’s no real prize, just bragging rights – saying Quattrone will be convicted just after lunch today. But I’m clearly not reliable. I know the case far too well.
And I’m not sure the evidence proves – beyond a reasonable doubt – what I suspect happened. I don’t think Frank forgot about the NASD or the SEC investigations. I think he, like many in Silicon Valley, brushed them off. And I don’t think he made a mistake when asked if he knew about the grand jury – and his need to seek legal counsel – when he endorsed Char’s mail. This is a guy with legendary attention to detail.
As he has throughout his career, Frank coolly and deliberately took advantage of what was going on around him, first endorsing Char’s mail in a way that’s not terribly suggestive, as it came across his screen. That message sat on his machine for at least 24 hours. It was deliberately considered.
Later, when he was asked about the exchange, by the NASD, Quattrone took advantage of CSFB’s in-house lawyer, Adrian Dollard. Reminded of the Char mail and his endorsement, Quattrone had had Dollard search CSFB’s email records to see what turned up. None of general counsel David Brodsky’s notes showed up in that search. It’s unlikely that they would since Dollard worked for Quattrone and for Brodsky and the two senior executives at enjoyed a privileged relationship, that of lawyer and client. Lacking anything to show that he knew what was going on with the grand jury, Quattrone, with Dollard’s help, rearranged his memory. That’s why he told Gary Lynch that he didn’t know about the grand jury when he sent the “clean up” memo.
It’s not one mistake. It’s not one false move. It’s a series of feints and drifts – the quick response, the brilliant come-back, the stuff that makes great bankers and Frank Quattrone was -- and maybe once again -- a great banker.
Frank Quattrone has certainly had better birthdays.
He turned 48 yesterday and spent the morning being questioned by lawyers and the afternoon listening to the U.S. Attorney damn him with high praise. There are more fun ways to spend your time.
The WSJ has the uptight run-down and, even more helpful, transcripts of the actual proceedings. We at The Post ran Frank's "if today's your birthday" horoscope. See, full service journalism.
For the first time, someone in the courthouse described the Frank Quattrone that Silicon Valley knows: A smart, agile banker who knew what he was doing. Who was in charge and in control. Unfortunately for Quattrone, that description came from AUSA Dave Anders – named correctly here and in the paper, for once – and not from his own attorney.
Keker’s doing a fine job. How fine, we’ll know later today, perhaps tomorrow when the jury brings back its verdict.
In fine ‘blogging tradition, I got ‘blogged by my favorite East Coast foil, the always fabulous Elizabeth Spiers who heroically claims greed – specifically banker greed – as an East Coast invention.
She’s right in the sense that it was bankers, not geeks, who realized the millionaire-making potential inherent in the tech business. And, for the most part, that happened just about the time that all those MBA (more specifically all those Harvard MBAs) started showing up in venture capital firms.
It was Frank Quattrone’s particular genius to introduce geeks to large piles of cash at the same time that he stoked their ‘us against the world’ thinking. The cash helps him retain the loyalty of those he’s helped the most. Just take a look at what Cypress Semi’s T.J. Rodgers had to say at the beginning of the summer.
Rodger is a free market nut. But his thinking isn’t totally flawed. Financial markets, and the people who run them, are regulated because the business of making money makes people greedy. It makes them loose control of their good sense.
Many people in Silicon Valley – particularly the “friends of Frank” who have gotten to see their names in the paper – think they’re getting a raw deal. They have good reason to think so. If the SEC had taken a true interest in what was going on in the valley, they would have flat-out banned spinning bank in 1997 when they first noticed it. That’s Arthur Levitt’s SEC, not some pro-business Republicans.
If the U.S. Attorney’s office was serious about investigating how the markets were working in this new more open, Internet-driven trading era, they should have done what NY Attorney General Eliot Spitzer did: Get on a plane and go out there and talk to people. But in 2000 they were too busy thinking about hedge funds, not about private banking and IPO allocations. So they stayed in New York and missed the larger picture.
Quattrone’s trial is the interest-due on all this stuff. And, regardless of what happens in the next day or so here in federal court, his troubles are not over. If he’s acquitted, courthouse wisdom says Spitzer will file his own, criminal charges here in New York. If Quattrone is convicted, he still has the NASD to worry about. And Spitzer. And all the private lawsuits.
The first page of this week's New York Mag's Intelligencer column cares this quote from Tom Wolfe, who used to be a smart guy.
"It's fascinating to see that not a single scandal has erupted in Silicon Valley. It was all right to have a corporate plane there, but you had to fly it yourself. Greed was not in style -- but it sure was here."
Huh?
If having a pilot's license was a requirement for plane ownership, the San Jose Jet Center -- once so crowded they were talking about housing the millionaires' birds in Stockton -- would be empty. The plane is the ultimate status symbol. How else can you commute between your homes in Sun Valley, Kauai and Atherton?
Silicon Valley was and is about money, getting it hiding the fact that you're richer than God behind a bland suburban exterior. New York is about getting money and spending it to prove you're God and are therefore qualified to run the universe. Greed is in style in Silicon Valley. Consumption -- New York style consumption -- is not.
There haven't been any scandals because, well, because no one wants or wanted to look for them. Until Friday. What's been described in U.S. District Courtroom 1106 this week is pretty scandalous. There's a whole country between New York and California and sometimes, well, sometimes it takes more than 5 hours to cross it.
New Yorkers think Quattrone is a Wall Street guy because he worked for a Wall Street firm. They think he showed Silicon Valley how to be greedy because, well New Yorkers think they invented everything.
But that's not true. As I and many other have reported, again and again since 2001, Quattrone almost single-handedly built a money-making machine that enriched a small group of people using money generated by the public's insatiable thrist for tech issues.
Quattrone encouraged that thirst by keeping stock offerings small so their prices would double or triple. Shareholders -- the executives of the companies -- would become millionaires (so they could go buy planes). He also used -- as U.S. Attorney Steve Peikin demonstrated with a ruthless effeciency Friday -- his ability to make IPO stock offerings as a way to build his business -- not his bank's, his -- in Silicon Valley.
There is something very strange about sitting and listening to someone tell you that everything you've ever suspected is in fact true. Because your suspicion grows: is it even worse?
The Wall Street Journal will spend a lot of time on Monday on the email messages that Quattrone exchanged with Micheael Dell. Quattrone wasn't subtle. He roped Dell into appearing at CSFB's tech conference by offering him shares of Corvis, an optics company (remember that bubble within a bubble?) on the day it went public. And he solicited Dell's thought on a personal computer industry analyst.
"NFW" Dell wrote bank. No fucking way.
That's not all. There's another email in which Foundation Capital was asking for Corvis allocations, too. The shares, the message says, will go into the partners' individual accounts, not to the venture firm's general fund. Spinning. And I'm not talking public relations.
Oh yeah, and most of these messages were written by Andy Fisher, the guy who CSFB used to swear had nothing to do with investment banking but just happened to have an office in Palo Alto. The rest of the messages come from Mike Grunwald -- the young banker who lived with Bill Brady and Ted Smith in Brady's huge Telegraph Hill house -- and Grunwald's boss, John Schmidt. Sound familiar? Those are the two guys, the brokers of record on the "friend of Frank" accounts who were fired from CSFB for supposedly rigging the bank's commission scheme.
Yeah. Greed. It's good. But until you spend all your cash on a Park Avenue apartment, an idiot trophy wife and her couture wardrobe, it's not a scandal.
Editor's Note:This post originally appeared as a news story in The New York Post.
Clearly, calmly, with humor and intelligence, Frank Quattrone took the witness stand just before lunch yesterday and began selling something he truly believes in: his innocence.
Quattrone's testimony is a risky, all-or-nothing strategy that, after about a half-day or testimony, appeared to be paying off for his defense.
Jurors leaned forward in their chairs to hear the testimony of the man who led Credit Suisse First Boston's high-voltage investment banking group through the Internet boom. He will be cross-examined today.
Quattrone denied that he intended to obstruct and interfere in a number of investigations of the firm.
When he sent the message endorsing an e-mail send by subordinate Richard Char, did Quattrone "[think] about the SEC investigation r the grand jur investigation?" asked Quattrone attorney John Keker.
"No, I did not," Quattrone repeated.
Quattrone has been charged with obstruction in connection to an e-mail he circulated within his office in December 2000 entitled "time to clean up those files." The email was sent just days before news of several investigations of CSFB became public.
Quattrone said consistently that he did not believe that any of the investigations facing the bank by securities regulators, the SEC or the grand jury had anything to do with his investment banking division.
Instead, they concerned another part of the bank, equity — or stock — sales and trading, a division for which he had no responsibility.
"I didn't understand much," Quattrone said of the message he got from former CSFB counsel David Brodsky talking about the probe by the SEC enforcement division. "it was a lot of legal mumbo-jumbo."
When Brodsky told Quattrone about the federal grand jury investigation, Quattrone said he still wasn't worried. "This was about IPO allocations," Quattrone said. "it was in a different division of the bank."
He said he was further reassured because Brodsky said the matter would soon be resolved. "Mr. Brodsky said the bank hadn't done anything wrong and he was gong to explain that to the regulators."
That, said Quattrone is why he didn't think of either matter when he got the "clean up" e-mail from Char.
"It was about civil litigation. I didn't mean a grand jury or anything like that."
Keker led Quattrone through the hour in which he forwarded Char's e-mail to his banking group. During that time, he answered more than a dozen e-mails, ranging from questions about personal investments, deals the bank was hoping to land and relationships it was trying to build.
"I was interruption-driven," Quattrone said of his day. "That was what my life was all about."
But, said Quattrone, he was worried by the tone that Char took in his first draft of the e-mail, in which he warned bankers that "administrative housekeeping" done before any lawsuits are on the horizon could become "improper destruction of evidence," once legal action began.
"I thought Mr. Char was using some inappropriate language, and e-mail is a medium that can last forever and can come back to haunt you," Quattrone said. "I guess I was right."
The courtroom — at that point, standing room only with prosecutors lined up against the rear wall — erupted in laughter.
As I said late yesterday (for those of us on the East Coast) Frank had a very good day.
He took the stand and in his clear altar boy tenor did what he does best: he sold. He sold his consideration. He was solicitous of a court reporter. He sold his intelligence. His explanation of investment banking and how it works was the clearest, most concise that I've ever heard and the only one that's made sense in this whole trial. I even learned a thing or too (although given my history with the stock market, that's not saying much). Quattrone sold his humor. He joked about email coming back to haunt you.
He was smart, calm and cool. In short, he was perfect. The Jesuits at St. Joe's would have been very pleased. And yes, Quattrone was very clear to make sure the jury knew it was the Jesuits, the Marine Corps. of the Catholic Church that gave him that high school scholarship. The Jesuits are a breed apart -- I know -- they're tough and they're smart and they despise bullshit when it's aimed at them. But they are also capable of creating entire cow patty pastures in no more than single sentence. That may or may not work as Quattrone gets cross-examined.
The jury loved it for the first hour. After lunch they weren't as enamored -- after all by then they'd heard the guy and seen him -- but they're following along.
Court broke yesterday as Quattrone was explaining his emails for the hour in which he got and responded to Richard Char's "clean up those files" memo. It was the usual flow that anyone who conducts conversations via mail (or IM) is accustom to seeing: Audrey MacLean wrote and warned him of a computer virus, Ken Hausman wanted to know about a property in Monterey. Quattrone asked Bill Brady about the transfer of an employee to the SF office. He "talked" to bankers about building better relationships with AOL's Myer Berlow. And he made a very funny joke about Divine Interventures. Did they, Quattrone asked, give ponytail clips as gifts at their closing dinner? No one explained that last one, a classic Quattrone quip, dissing the offering by suggesting -- correctly-- that it made no money for the company.
Today, the cross. We'll see how well the Jesuits taught Frank patience, calmness and understanding -- not their strong suit. But, hey, maybe Quattrone went to a Franciscan grammar school.
Editor's Note:This post originally appeared as a news story in The New York Post.
It was the first day of defense arguments, but government prosecutors — not attorneys for disgraced banking star Frank Quattrone — carried the day.
In questioning two witness called by Quattrone's attorneys, U.S. Attorney Scott Anders got both men to concede key parts of the government's argument that Quattrone obstructed justice when he urged his employees to "clean out" their files in December, 2000.
Former Credit Suisse First Boston banker Richard Char was reduced to a series of increasingly quiet "yes" agreements with Anders as he was cross-examined yesterday morning.
His former colleague, John Hodge, head of the bank's corporate finance department also had a tough time on the stand and at one point had to be prompted by Judge Richard Owen on the proper way to respond to questions.
Both men said, under questioning, that they did not need to rely on others to tell them how to follow the policy; that CSFB's written documents relied on individual bankers to police themselves.
Both men's names were the first to appear on the now famous "time to clean out those files" e-mail sent to CSFB tech group employees on Dec. 4, 2000, days before news of various investigation against the bank became public.
An endorsement by Quattrone of that first e-mail message became public in January and led to Quattrone's suspension from the bank and his eventually indictment on obstruction-of-justice charges.
Char said he drafted the note because he was worried about the liability the bank might have if it were sued. Char also said he was not joking when, at the end of a draft e-mail message, he warned of the consequences of not following the bank's document policy.
"Today, it's administrative housekeeping,"Char wrote. "In January, it could be improper destruction of evidence."
Today, Thursday, was a very good day for Frank Quattrone. He began testifying on his own behalf before a standing room only audience of former employees, prosecutors from the U.S. Attorney's office -- that was the row against the wall -- and the press.
For the first hour, the jury loved him. The dickheads were happy, congratulating Quattrone. Even Boutros was smiling.
But yesterday wasn't such a good day. CSFB banker John Hodge -- a big, blond example of what makes Stanford University the place it is -- got sliced and diced by prosecutor Dave Anders. (Note to Mr. Anders' mom: I am very sorry to have renamed your son in Thursday's Post. You don't know how upset I was to hear that you actually live in New York City).
In addition to having to be ordered -- it went past cordial reminders -- by the judge to answer Anders' questions, Hodge was probably the most uncomfortable witness of the trial, squirming in his seat, hesitating and stammering as he realized that Anders had him on one important point. There is nothing in CSFB's policies that says that bankers have to be told by lawyers what to do if they think there's a lawsuit in the works.
And there is no better picture of the differences between the way they do things in New York and they way the do things in California than the pained expression on Hodge's face as he was cross-examined. It's rough stuff on this side of the country. And, as too few people are learning a bit too late, this is the place where it really counts.
Before Hodge, Richard Char, the guy who wrote the "clean up those files" mail took the stand. He, too, found himself slowly but surely agreeing with Anders. Nope, no one had to tell him what to do when litigation loomed. Char, a soft-spoken guy to begin with, took the cross-examination in stride probably because he's a lawyer (formerly with Wilson Sonsini -- one more reason why Larry Sonsini turned down Dick Grasso's job). But the judge had to ask him to speak up at one point, his responses were so soft.
Char also painted one part of the picture that's been missing from this whole thing: What the office looked like. It was a mess. Any policies on keeping documents or tossing notes and drafts had clearly gone out the window. Files were everywhere. That's not a surprise given the sheer amount of work that CSFB did in 1998 and 1999. But, well, that's just what the prosecutors want the jury to wonder about. From such seeds convictions grow.
This is not to put a damper on what may or may not happen next week when Quattrone's jury deliberates. They may well acquit him. If they like him, they will almost certainly acquit him. But if they don't, he's done.
All in all, Keker has done a good job of painting the CSFB team as a bunch of well meaning, slightly naive guys who were more interested in deals and complying with the law and being stand-up soldiers. How much of that sticks remains to be seen.
Particularly since the government prosecutors aren't amateurs, either. Take a look at what the WSJ had to say about them. The stakes here are high, very high, on both sides. This isn't just a career-making conviction for lead assistant U.S. Attorney Steve Peikin. It's a very rare opportunity to actually cross-examine a smart, wiley, well-prepared defendant. Quattrone's up for it, for sure. But so is Peikin.
Andrew Ross Sorkin, who dresses a lot like a dickhead, what with the little silk cufflinks and the flannel suit -- pinstripes, no less -- told me to 'blog him and since I always do what the NYTimes tells me, I am happy to oblige. Ain't that right, Markoff?
UPDATE: From the be-careful-what-you-wish-for department. The bit on Sorkin got picked up, misunderstood and showed up on Elizabeth Spiers' New York mag-based 'blog Friday.
This prompted Andy's mom to call him up and ask who was calling him a dickhead. Not me! Andy's a little bit of a smarty pants but hey, kettle, I am indeed pitch black.
Editor's Note:This post originally appeared as a news story in The New York Post.
Former Credit Suisse First Boston general counsel David Brodsky said he didn't "recall," didn't "remember," or didn't "know," the answer to more than three dozen questions put to him during his second day or testimony against former colleague Frank Quattrone.
Brodsky is the government's main witness against Quattrone, who is on trial for obstruction of justice in regard to an e-mail he endorsed to employees at CSFB's Palo Alto, Calif. tech banking group. The former CSFB lawyer was questioned yesterday by Quattrone's attorney, John Keker.
The e-mail entitled "time to clean out those files," was circulated within the Palo Alto office just days before news of a criminal investigation of the bank became public.
Brodsky's apparent inability to remember details of the conversations he had with Quattrone about his own subordinates in the banking division might become important later, when Quattrone himself testifies.
Arguing before Judge Richard Owen after the jury had left for the day, Keker said he did not think current CSFB counsel Gary Lunch should be able to tell the jury about a conversation he had with Quattrone covering the events of December 2000.
"They want to argue that since he told Mr. Lynch something that was … that we realized was wrong once we looked at the records … that was deliberate," Keker told Owen.
A Quattrone spokesman has said the banker's conversation with Lynch in February of this year — which eventually got him put on leave by the bank — was nothing more than simple confusion about dates and times.
Owen was having none of that argument, seeming to side with the government against Quattrone. "He sent the e-mail … he knew he should not have sent that e-mail."
That discussion took place after a long day of testimony that included accounts from Brodsky as well as two CSFB employees who received the "clean out" e-mail.
In his testimony, Brodsky got testy as Keker repeatedly asked him about differences between what he might have told federal investigators, members of the U.S. Attorney's office (including the two lawyers prosecuting this case) and the grand jury that indicted Quattrone earlier this year on obstruction.
Brodsky was also asked about a copy of the "clean out" e-mail that had been sent to his attention by one of his subordinates — a message that sat unread for two days.
"Mr. Keker, as I sit here today and consider, I have no recollection of seeing the subject line, the preview of it or the e-mail itself," Brodsky said.
He’s not the Terminator but San Francisco lawyer John Keker scored a few points Tuesday in his defense of Frank Quattrone.
Keker didn’t convince anyone that Quattrone was a complete patsy. The judge was unmoved, to be sure. But Keker did a good job of showing Brodsky to be, as a minimum, not terribly involved in what was going on at the bank.
Brodsky said he couldn’t remember a lot of stuff that, well, he probably should remember. He didn’t do a lot of stuff that he probably should have done.
Listening to Brodsky’s testimony, it was hard not to have the same reaction that I did when I first read of the CSFB investigation and the bank’s response. They were scrambling. Fast and hard. They were scared. So they were doing damage control where it counted, trying to slow down whatever investigations were coming at them as quickly as they could.
They weren’t in a hurry to tell employees what was going on because they knew — or guessed — that some would be found guilty. And the less the employees knew, the easier it would be for the bank.
So Brodsky holed up in meetings with his bosses looking for ways to protect the bank. He didn’t read his email. He didn’t call people as quickly as he should have because he could have given a damn about them. The bank was spinnning, spinning, spinning to the press.
It’s exactly what Quattrone’s public relations team has been doing since he left CSFB.
Every day, during breaks in testimony, after court has adjourned, Quattrone spokesman Bob Chlopak, a veteran of more than one presidential campaign with a smooth baritone and a fine poker face tells the press stuff it already knows. He diligently tries to inch on to the record Quattrone’s version of the story. He did that with this week’s Business Week account of the CSFB team’s departure from Deutsche Bank. Chlopak does a much better job of telling Quattrone’s story than Frank would do. He doesn’t loose his temper for starters. And like a good spin guru, it’s not personal. He’s one cool cat.
But he’s doing what CSFB used to do for Quattrone. So it’s a bit odd to stand in the hallway and listen to Chlopak then go back inside and listen — between the lines — as Brodsky talks about doing something similar for CSFB.
UPDATE: Wednesday after court, Keker gave Chlopak a nasty look and made the "no mas" sign as he walked by the press huddle. He walked down the marble hall toward the door and then turned the corner. But then he came back, breaking up the spin session.
Oh, and Bill Brady is in the house. He don't look happy about it either. The Gang of Dickheads has grown to about a dozen, all clean-cut nice men (and a few women) sitting in the court's church-pew benches (about as comfortable, too). They look worried.
Editor's Note:This post originally appeared as a news story in The New York Post.
Frank Quattrone was rich, in charge and warned repeatedly about the consequences of various federal government investigations of his bank.
That's what David Brodsky, former general counsel for Credit Suisse First Boston, the investment bank that employed Quattrone as head of its Palo Alto, Calif., tech banking division told a court yesterday.
Brodky is a key witness against Quattrone, who is charged with obstruction of justice. In his testimony, Brodsky detailed CSFB's interactions with the U.S. Attorney's office, the Securities and Exchange Commission and the NASD.
Quattrone declined to comment on the day's proceedings, which included a look at his compensation records showing that in 1999 and 2003 he made more than $200 million in cash and stock options.
Quattrone spokesman Bob Chlopak said the government had not established proof that Quattrone knew the investigations could focus on him or any of his activities.
CSFB was more concerned about the bad press it might receive if word of the investigations became public than it was about its employees obeying the law, Chlopak said.
The grand jury investigation — looking at whether or not CSFB charged some of its clients higher than normal commissions for share-allocations of hot initial public offerings Ex-CSFB counsel Brodsky can't recall Quattrone talks was the most troublesome of all the probes facing the bank, Brodsky said.
"Without getting overly dramatic about it, the federal grand jury investigation took this to a totally new level of danger to CSFB," Brodsky said.
"A possible indictment of the bank could put the bank out of business — or at least severely cripple the bank," he said. "This was very serious."
Brody said he told Quattrone of that investigation in an email exchange on Dec. 3.
He said he was concerned that any look at the bank's IPO business would eventually focus on Quattrone, head of the bank's semiautonomous tech group.
"CSFB's business was being threatened," Brodsky said. "Frank Quattrone's business that he had spent a lot of time building up was threatened. I wanted him to understand that."
The next day, Richard Char, a banker at CSFB's tech division sent an e-mail telling employees to "clean out those files."
On Dec. 5, Quattrone endorsed that sentiment and resent the e-mail to his division.
The government maintains that Quattrone was attempting to obstruct justice when he sent that message because he should have known that all of the bank's records needed to be preserved for investigators.
Meanwhile, with the trial only a week old, Frank Quattrone's defense attorney John Keker is already getting hot under the collar.
Angered that Quattrone's compensation records were made public during yesterday's testimony by Brodsky, Keker made a point of telling reporters at the trial what he thought.
"I called it 'a ploy and a cheap shot' on the record," Keker said, referring to numerous conferences he and prosecuting attorneys have had outside the jury's hearing.
If looks could kill, New York lawyer David Brodsky would have been carried out of Frank Quattrone's courtroom on slab Friday. And George Boutros would be guilty of murder.
Boutros, perhaps Quttrone's closest friend, glared at Brodsky through his morning of testimony. It's a hard, angry stare and it's stopped hundreds of bankers, lawyers and other tough guys in their tracks. Boutros looks like he could bite the head off a Komodo dragon, he's that pissed.
Boutros, no doubt, thinks what Quattrone's cooler-headed mouthpiece Bob Chlopak said outside the courtroom: That Brodsky, former general counsel at CSFB and the bank were so worried about PR and so concerned about leaks to the Wall Street Journal that they never bothered to tell their employees what to do to protect themselves and to protect the bank.
And I'm not so sure I don't buy that argument and the assumption that underlies it. What Chlopak is implying that Quattrone wasn't sophisticated enough to put together the existence of a federal grand jury sitting in New York and the need to start minding the niceties of the bank's document policy.
While we're on the subject, let's just get down to the real meaning of this so-called 'document retention policies.' They're not meant to encourage people to keep anything. What they are, instead, are lists of what should -- at a minimum -- be around in case anyone comes looking. Or, as a banker I know put it, if it's got handwriting on it, it goes. In other words, only the official record is preserved, not what may have actually happened.
But back to Quattrone and the grand jury. I can't count the number of conversations I had in Silicon Valley throughout 2000 and early 2001 with people who assumed that the investigation wouldn't amount to very much since it was in New York. Some didn't understand that the feds have jurisdiction through our great nation. Others thought it was nothing more than a silly spat with a bunch of hedge fund guys who weren't making as much money as they wanted. So it's conceivable -- although he has to come down a peg on the sophistication meter -- that Quattrone didn't realize what he was up against.
John Keker, who is having one whale of a fight with the judge in this case -- Friday he stopped by our notebooks to use the words "ploy and cheap shot" -- will get to cross-examine Brodsky on Monday. I'll be he asks Brodsky -- exactly -- what it meant to have the U.S. Attorney for the Southern District breathing down your neck. And I'll be the answer is "I don't recall."
There are way too many lawyers in the case.
That CSFB posse that's surrounding George Boutros as he watches the Quattrone trial has a name.
They're now officially unofficially known as the dickheads. After all, that's what George calls people he likes and I figure, what the hell, why not make everyone feel comfortable?
Okay, so it's too much to say they liked it. But they laughed.
Here's the story.
Dan Gillmor, who isn't a dickhead, stopped by the trial earlier in the week (Gillmor's frequent flyer accounts rival those of most investment bankers) and mused a little on his blog about what he heard on the first day of proceedings.
He should have stuck around. Today, Friday, was a barn-burner.
The email overload continues as Frank Quattrone’s jury is told that he had more than 4,000 emails in his in box. They’re probably in shock.
Chances are they don’t know what we know which is that anyone with a Blackberry – a friend of mine calls it his crackberry because he can’t stop sending messages on it – doesn’t take messages off the Microsoft system. So yeah, Frank has 4,000 messages, 2,000 of which his desktop says are unread. Hmmm. Maybe he just didn’t clean the thing out.
It feels kind of cheesy to be focusing on the tech but it is the biggest difference between these two worlds. Yesterday a juror was asked about his MP3 player by the U.S. Marshals at the courthouse door. He struggled a bit. “It plays music,” he finally said. A fine, direct explanation. But his pause was telling.
In the meantime, Judge Richard Owen is giving Quattrone’s attorney John Keker a very hard time. The Journal did the uptight version of this. We at The Post prefer the direct approach. You Silicon Valley types can read both stories while imagining the judge’s ruling as it really was: Accompanied by long-time Quattrone colleague George Boutros shaking his head and making disgusted faces. Clearly he's been briefed on the ins and outs of the case. Frank has game face and except for a little twitch under his right eye, he’s keeping it up. Boutros doesn’t have to bother with those niceties – as if – since he’s managed to get out of this whole mess with his beautifully tanned skin intact.
Boutros showed up yesterday afternoon, slipping into the courtroom after lunch and, during the break, giving Quattrone a big, heartfelt back-thumping hug. Eventually, he sat with a bunch of young men who, well, they looked like bankers with their ties, Egyptian cotton shirts and their little dopey looking gym bags. It’s a contingent from CSFB and boy are they giving me dirty looks. We’ll see a sweater before this is all over. A sweater and that other long-time Quattrone pal, Bill Brady.
There was another funny moment in the trail but it was a very inside joke, even by my standards. Rob Khazami, the guy who used to run the financial fraud division in the U.S. Attorney’s office, testified about the grand jury that Quattrone is accused of blocking. He’s not a US Attorney anymore, he’s got a cush corporate gig and he dresses almost as well as Boutros does. Where’s he working? At Deutsch Bank. That’s the bank Quattrone, Brady and Boutros stormed out of in July, 1998, after denying for months that they were leaving. Trust us – remember that? – they were there to stay.
Wednesday was given over to the gears and pulleys of the case: email back-ups and what the SEC knew. Today, Thursday, we should get out from under all this email and get some witnesses to tell us what they remember.
Frank's going to take the stand.
Tell me you're surprised. John Keker may be the lawyer but this is Frank's show.
Really, tell me you're surprised.
It'll be very interesting to see how the jury react to his testimony. Keker's doing a fine job laying the groundwork. During opening arguments yesterday, he showed a graph of Frank's email traffic for the day he got the "clean out those files email." It showed -- as it does for anyone with a blackberrry and a head office in New York -- more than 200 messages, coming in almost hourly, from just after 7 a.m. to right around 11 that night. The 'smoking' email, of course, was just one little message in this flow, late in the day. "When does he sleep?" one East Coast reporter asked. This, of course, was email traffic in December, 2000 -- as things were slowing down.
By contrast, the jurors seem like the crowd that treats email as a special kind of communication, not the casual, constant give-and-take that's so common in Silicon Valley. And, almost to a woman, they said they didn't use the Internet to get news. Think they know the differences between the Internet and AOL? Probably not.
Money's the other big difference here. Keker's trying to immunize Quattrone on this -- telling the jury that they're judging a man not a symbol -- but that's got to be his toughest job. This jury includes secretaries, a nurse, a speech pathologist, a hotel worker and a graphic designer, none of whom are raking in the millions. It's probably no exaggeration to say that combined, all 12 of the people in the jury box (and the four alternates chosen for back-up) in their lifetimes won't come near the $200 million that Frank is said to have made in 1999 and 2000.
Frank Quattrone is not a potted plant. At least that’s what his lawyer, John Keker, is probably thinking. Keker prosecuted Ollie North, the guy who wouldn’t answer any question without discussing it with his attorney, Brendan Sullivan. The Congresional lawyers got so sick of it, they told Sullivan to stop. “I am not a potted plant,’’ he told them.
Quattrone in courtroom is one cool-headed dude, up and down, getting water -- the defense appears to have trucked in a case of Poland Springs -- talking to the lawyers, chatting and joking with his family. You can see how he got all those deals done. We in the press corps can’t hear what’s being said between Frank and his family – his Mom and Sis came for support – but it’s not all doom and gloom. Frank has a famously wicked sense of humor.
We haven’t seen Frank’s collection of tacky sweaters yet. But there’s hope. It’s going to get chilly this week and, besides, the whole idea behind this display is to portray Quattrone as just another guy from the neighborhood who’s made good. His jurors, so far, including nurses, social workers, a speech pathologist, a graphic designer and a pastry chef. The lawyers – including one from Goldman (ha!) got booted. So did the bankers.
The WSJ does all the analysis you could ever want including some stuff about the New York lawyer who will probably be the guy who testifies against Frank.
I’m writing for The Post. Remember, it’s a tabloid, it has those little pages that are easier to read on the subway.
The Merc's Deborah Lohse, who also gets to go to New York, rounds up the legal arguments on Quattrone and makes the indirect observation that this trial could come at a better time, at least from Quattrone's point of view.
The bro-ha-ha over NYSE Chairman Dick Grasso's resignation and the continuing headlines about shareholder rights, cozy financial dealings and people who all know each other making money off those friendships isn't helping his cause. Not at all. Particularly since Quattrone asked for -- and will get -- a jury trial.
Today, the AFL-CIO, which has a huge pension fund, is calling for the resignation of NYSE board member Kenneth Langone. Langone, founder of Home Depot, runs an investment bank, Invemed, which has run into trouble with the NASD over the way it allocates shares in IPOs it's backed. Langone, in contrast to the big banks like Goldman, Morgan and, of course, Quattrone's former employer CSFB, has vowed to fight for the right to allocate shares -- and charge for it -- anyway he wants. An investigation of similar behavior at CSFB is the backdrop for the "clean out those files" memo that's at the heart of the obstruction case against Quattrone.
Damn.
The Wall Street Journal has done what we in the ink business refer to as a "curtain raiser" on the Frank Quattrone trial.
Quattrone, formerly head of Credit Suisse First Boston's tech banking division in Palo Alto, goes on trial Monday in the Southern District of New York on charges that he obstructed justice.
The charges stem not from any banking activity but from steps Quattrone allegedly took to interfere with government investigations of the bank. Quattrone says he's done no such thing. The feds say otherwise and point to an email entitled "Time to Clean out Those Files."
The trial, an important one for Silicon Valley and all West Coast financial businesses, is expected to take at least two weeks. Starting Monday, I'll be covering it for The New York Post. An archive of the Quattrone stories I've done -- starting in January, 2001 with the first "friends of Frank" piece -- should be up at this site shortly.
No one in Silicon Valley will be surprised to hear that Larry Sonsini got offered the interim chairmanship of the New York Stock Exchange.
Nor will they be surprised to hear that he declined the offer.
Sonsini, Silicon Valley's cashmere-clad adult supervisor, is not a front office guy like former NYSE CEO Dick Grasso. No, Sonsini is your classic man behind the scene, poised, smooth and discrete. This is a man who can managed big egos and strong wills in part because he's got one of each, healthy enough to match any of his famous friends, some of whom are also clients. They include Sun Microsystems CEO Scott McNealy, Pixar and Apple CEO Steve Jobs and, of course, former Credit Suisse banker, Frank Quattrone.
That's one reason Sonsini got tapped for the NYSE job; he's good at managing these sorts of out-sized egos and the NYSE board has more than its share. The NYSE board is also in a lot of hot water, the kind of hot water that lawyers are good at cooling. Its members are up in arms over a host of management issues, including fees and other pricing issues, regulators are steaming over some of those same management issues, and the board itself is facing competition from the NASDAQ, the place where most Sonsini clients sell their stock. The NYSE needs a diplomat to get it out of trouble. Fast. Sonsini might have been just the guy.
But there's one little drawback, one the board probably saw as an asset. Despite his membership on the NYSE's board of directors, Sonsini is part and parcel part of Silicon Valley's 'friends and family' culture; a man who uses his status as part of the valley's inner circle of movers and shakers to enrich himself and his clients. What would be conflicts of interest in the rest of the world are not seen as problems in Silicon Valley where a delicately balanced money-making machine has been quietly operating for years. This isn't to say that Sonsini is corrupt, no more than it is to say that all of Silicon Valley's business practices are illegal. Irregular, yes. And under pressure to change.
Like the NYSE board, the valley is having to adjust the way it does business. It's not a coincidence that CalPers, the state's pension
