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The Frank Quattrone affair has turned into a mortifying episode for Gary Lynch, vice chairman and global general counsel for Credit Suisse First Boston Corporation. Quattrone, the company’s former star investment banker, was indicted on federal charges of obstruction of justice in May. (He has since pleaded not guilty.) For more than a year CSFB had stood by Quattrone, relying on an investigation by Lynch that found the banker had done no wrong. But Lynch and CSFB were forced to change their tune this past January, when some incriminating, two-year-old e-mails surfaced. In hindsight, it looks as though Lynch and his outside counsel at Davis Polk & Wardwell and Wilmer, Cutler & Pickering could have done more to find the smoking guns earlier. Should they have? Wrong Time To Clean Up Those Files The tale of the e-mails dates back to 2000, a year before Lynch, a former director of enforcement at the Securities and Exchange Commission, joined CSFB. The bank hired him, in part, to deal with investigations into its practice of “spinning” � allocating shares in hot initial public offerings to clients who paid inflated commissions on other trades. The following version of events is taken from the Manhattan U.S. attorney’s criminal complaint, unless otherwise indicated. Over the summer and fall of 2000, various members of CSFB’s in-house legal staff had alerted Quattrone of SEC and NASD investigations into IPO allocations. On December 3 of that year, David Brodsky, the bank’s general counsel for the Americas, e-mailed Quattrone to inform him that the company had received federal grand jury subpoenas. Two days later, Brodsky advised the banker that he needed his own lawyer. Later that day, December 5, Quattrone routed an e-mail to the several hundred members of his technology group. Titled “Time to Clean Up Those Files,” Quattrone’s message “strongly advise[d]” the group to comply with the company’s “ document retention policy,” which required the destruction of notes, drafts, and internal memos. The banker did not mention pending government investigations, but warned of potential private securities suits. Quattrone’s e-mail quickly got the attention of the bank’s legal department, which warned employees not to discard documents because of “various” investigations, according to documents given to The American Lawyer, a sibling publication of Corporate Counsel. By then, however, relevant documents had been deleted, the criminal complaint alleges. Soon after, Brodsky told Quattrone that his e-mail was “highly problematic [and] posed a risk of serious legal and reputational problems.” In July 2001, John Mack took over as CEO of CSFB and hired Lynch from Davis Polk as his general counsel. Mack asked Lynch to conduct an “internal inquiry” into Quattrone, according to a September 2002 Business Week cover story. According to the magazine, Lynch gave Quattrone a clean bill of health. In January 2002 the company agreed to pay $100 million to settle SEC and NASD civil charges over IPO allocations, but Quattrone was not charged with wrongdoing. This January, federal prosecutors asked CSFB’s lawyers to do a more thorough search of communications between Quattrone and the company’s lawyers, according to The Wall Street Journal. As a result, the company turned over the December 3, 2000, Brodsky-Quattrone exchange, showing the banker’s awareness of the subpoenas when he sent the “Clean Up Those Files” e-mail. CSFB placed Quattrone on leave in early February, and he resigned the next month. How did this breakdown in oversight happen to someone as smart and experienced as Lynch? Quattrone’s troublesome December 5 e-mail was sent out months before Lynch joined CSFB, but it was hardly a secret within the company. The investment house declined to address questions about the matter. In a prepared statement it simply said: “On January 31, 2003, Gary Lynch and CSFB’s outside counsel learned for the first time that Frank Quattrone was aware of the pending criminal and regulatory investigations into IPO allocation practices at the time he wrote his December 5, 2000, e-mail. This news was conveyed immediately by CSFB to relevant investigating authorities.” Quattrone’s lawyer, John Keker of San Francisco’s Keker & Van Nest, declined to comment. But he has stated in a letter to the U.S. attorney’s office that there is no evidence his client knew that authorities had specifically asked for documents in his group’s files at the time he wrote his December 5 e-mail. Lynch declines to comment, as do Wilmer, Cutler and Davis Polk. Brodsky, who joined Latham & Watkins in June 2002, also had no comment.

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