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Lawyers for Frank Quattrone are challenging the former banker’s lifetime ban from the securities industry and say Tuesday’s Ninth Circuit U.S. Court of Appeals ruling on securities arbitration will help make their case. In a 74-page filing, Jerome Falk Jr. of Howard, Rice, Nemerovski, Canady, Falk & Rabkin argues that Quattrone should not be punished for invoking his constitutional rights, and he berates the NASD for trying to operate by its own rules. “While NASD is a nominally private entity with many genuinely private functions, it can no longer pretend that its federally mandated disciplinary function is non-governmental and thereby avoid honoring the Constitution,” Falk wrote in the filing. Quattrone, a former Silicon Valley investment banker with Credit Suisse First Boston, was convicted last May of obstructing justice, tampering with a witness and obstructing an agency proceeding. Quattrone, who was represented at trial by John Keker of San Francisco’s Keker & Van Nest, received 18 months of jail time and a 10-year ban from the securities industry. In addition to those punishments, Quattrone was also hit with a permanent ban by the securities industry. The National Association of Securities Dealers issued the prohibition after Quattrone refused to testify during an NASD investigation. Quattrone had cooperated earlier in the NASD’s inquiry into alleged wrongdoing at Credit Suisse, but then invoked his Fifth Amendment right against self-incrimination when he learned that state and federal prosecutors were also looking into his activities. In his appeal filed with the Securities and Exchange Commission, Falk argues that because the NASD worked with the SEC on the Credit Suisse investigation, it was required to abide by constitutional protections because there is no doubt the SEC is an arm of the government. Wednesday, the NASD said it would respond to Falk’s legal argument “in the proper forum.” But NASD spokesman Herb Perone pointed out that Quattrone’s constitutional arguments were already rejected when he fought his punishment at the NASD’s National Adjudicatory Council. The NASD at first slapped Quattrone with a $30,000 fine and one-year industry ban. When he appealed to the council, it upped the punishment to the life ban. “We stand by that decision,” Perone said. Falk contends that the Ninth Circuit’s decision Tuesday in Credit Suisse First Boston Corp. v. Grunwald, 05 C.D.O.S. 1751, will help Quattrone. In that ruling, a unanimous panel held that the NASD’s rules preempt state law. The case was a challenge to a California law that set new ethical rules for arbitrations. But the Ninth Circuit ruled that the NASD as a federally backed agency can set its own rules for arbitrators. “[The ruling] basically accepts the legal analysis that we’ve made,” Falk said. Because the SEC and Congress have delegated law enforcement authority to the NASD, subject to SEC oversight, “that makes what NASD does federal law,” Falk said. “With the power comes the Bill of Rights,” Falk said. “Otherwise, the government could contract its duties out” to avoid constitutional protections like the Fifth Amendment, he added. If the SEC rejects Falk’s argument on behalf of Quattrone, he could appeal to the Ninth Circuit or the D.C. Circuit Court of Appeals. Quattrone is free on bail while he appeals his criminal conviction.

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