Charges against investment banker Quattrone dismissed
Frank Quattrone, the one–time Silicon Valley investment banker who came to personify the excesses of the wildly speculative Internet boom, has reached an agreement with federal prosecutors that frees him to reboot his high finance career with the help of a faithful cadre of highly placed friends and former business associates.
In a major victory for Quattrone, a federal judge in Manhattan today signed off on a deal that would dismiss obstruction–of– justice charges against the former Credit Suisse banker if he doesn’t break the law in the next 12 months. Unlike in some deferred prosecution agreements, Quattrone made no admission of guilt.
Quattrone read a brief statement outside the courthouse, thanking his lawyers and friends and saying he looks forward to getting back to business.
The settlement brings to a close a bitterly fought legal battle and ends the possibility of a third trial. Quattrone was charged in March 2003 with allegedly urging fellow Credit Suisse bankers to destroy records after learning of a federal investigation into how the bank distributed cheap shares of hot initial public stock offerings. His first trial ended in a hung jury, but he was retried and convicted in May 2004 on two counts of obstruction of justice and one count of witness tampering. He faced a prison term of up to 20 years.
Then his fortunes shifted. In March, a federal appeals court reversed the conviction and the Securities and Exchange Commission overturned a lifetime ban imposed by the National Association of Securities Dealers.
Before a legal maelstrom took over his life and short–circuited a luminous career, Quattrone’s revolutionary and controversial tactics, widely imitated by competitors, created a financial powerhouse that launched the fortunes of Silicon Valley companies and showered Quattrone and his lieutenants with millions. In fact, Quattrone became famous in the Internet heyday for making $100 million in a single year.
Now the investment banker who broke records taking Netscape Communications Corp., Amazon.com Inc. and hundreds of other companies public can rely on his deep connections in Silicon Valley to help him regain his footing, maybe even his vaunted status, friends say.
"Frank can start up a boutique investment bank and be in business tomorrow. He will undoubtedly be successful," said longtime competitor Sanford Robertson, one of the first bankers to specialize in high–tech now a partner at Francisco Partners in Menlo Park. "The whole tech community will welcome him back very quickly. The slate is clean. Everyone understands what a witch hunt this was."
Quattrone, 50, did not specify his future plans. But with the public markets still largely closed to tech upstarts, Quattrone likely will open his own investment boutique focused on mergers and acquisitions, says New York investment banker Ken Marlin. After all, Quattrone not only knows and understands the geeks who started companies; he understands the venture capitalists who fund them.
"Frank Quattrone will do well in that world because to be really successful in the M&A world, you need a combination of assets: access to buyers and sellers, in–depth knowledge of the industry you serve and you have to be a good negotiator. These are all skills that Frank Quattrone has got," Marlin said. "If he wanted to go back to a large established investment bank, there could be the potential for some issues he might have to work through. But as an independent, he has the luxury to start small and build up."
Quattrone would establish himself in an even stronger position if he were to reassemble his team of star bankers. Top lieutenants, George Boutros and Bill Brady, co–chairmen of Credit Suisse’s technology group, attended his trials in New York.
A working–class kid from South Philadelphia, the setting for the movie "Rocky," Quattrone was among the first New York investment bankers to bet their careers on Silicon Valley after earning his MBA from Stanford University.
Quattrone set out to learn the industry from the inside out. A consummate networker, he took part in the legendary Silicon Valleykeiretsu that thrives on the interlocked interests of venture capitalists, bankers, lawyers and entrepreneurs. He became known for his casual style, bushy mustache and brown mop of hair, penchant for ugly sweaters and karaoke and for his high–powered team that moved with him from bank to bank.
He joined Credit Suisse in July 1998, taking more than 130 investment bankers, analysts and other staff with him from his former employer, rival Deutsche Bank. Together they rumbled into the bull market of the late 1990s at full bore.
His shrewd business sense, knowledge of Silicon Valley and ties to its entrepreneurs and moguls helped him become the reigning banker of the Internet boom. He oversaw more initial public stock offerings than any other banker, enriching entrepreneurs and boosting his reputation as a valley powerbroker.
Dubbed "God’s banker," his friends say it was Quattrone’s success that made him the ideal fall guy in the government’s rush to prosecute after billions were made and lost in the Internet collapse.
Quattrone came under scrutiny for allegedly pressuring analysts to overvalue companies and for setting up about 300 brokerage accounts to give shares in hot IPOs to a privileged list of tech company executives and others, both common practices in the Internet heyday. Credit Suisse did not admit or deny any wrongdoing, but settled with regulators for $100 million in 2002.
Quattrone was not charged with either, but with obstructing the government’s probe. The government’s case hinged on one e–mail he sent urging employees to follow another banker’s instruction to "clean up" their files.
Friends say Quattrone was dismayed to be linked in media reports to corporate scallywags like Kenneth Lay, Martha Stewart and Bernie Ebbers. The ensuing courtroom saga took a toll on his health and that of his wife, Denise, friends say. But Quattrone has kept up his spirits and his golf game. And he has been devoting his time and money to Santa Clara University’s Northern California Innocence Project which works to exonerate poor California prisoners it believes were wrongfully convicted and the Tech Museum of Innovation in San Jose.
Now some speculate that he may prefer to spend his time on philanthropy rather than get back into the finance game. If he decides to hang his own shingle, his allies say Quattrone’s past legal troubles will not taint his ability to operate successfully in Silicon Valleywhere many viewed his prosecution as a "witch hunt."
"It’s the American tradition: A person is innocent until proven guilty," said Dick Kramlich, general partner of New Enterprise Associates, a Menlo Park venture capital firm. "He’s done a lot for the investment banking business in Silicon Valley. He has always been, in my experience, totally professional, above board and honest. ... I think it is part of the American ethic to respect somebody who perseveres against tall odds and is able to hold his dignity intact."
Reach Jessica Guynn at email@example.com.