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The U.S. Attorney’s Office for the Southern District of New York has charged former Silicon Valley investment banker Frank Quattrone with obstructing justice by instructing subordinates to destroy documents sought by federal subpoenas. In a complaint filed Wednesday by U.S. Attorney James Comey, prosecutors allege Quattrone, the former head of Credit Suisse First Boston’s San Francisco-based global technology group, knowingly obstructed ongoing federal investigations when he sent an e-mail to the members of his group “strongly” advising them to heed an e-mail sent the day before by a subordinate. The earlier e-mail encouraged employees to comply with the bank’s document retention policy and “clean up” files relating to initial public offerings handled by the group. “Today it’s administrative housekeeping,” the subordinate wrote in the Dec. 4 e-mail. “In January, it could be improper destruction of evidence.” According to prosecutors, it was already improper. At the time, CSFB was under investigation by the National Association of Securities Dealers, the U.S. Securities and Exchange Commission, and a Manhattan federal grand jury over how the bank had allocated shares in a number of technology IPOs in 1999 and 2000. The SEC and the grand jury both subpoenaed CSFB documents relating to IPOs in the fall of 2000. Prosecutors allege that Quattrone’s Dec. 5 e-mail resulted in the destruction of “numerous” subpoenaed documents. According to the complaint, Quattrone was aware that investigators were seeking documents and, in fact, he had been informed about the grand jury subpoena by CSFB’s general counsel for the Americas on Dec. 3, 2000. He had earlier been advised to retain documents relating to certain IPOs as well. Quattrone, who resigned from CSFB last month, faces up to 10 years in prison if convicted of obstructing the federal grand jury investigation, and up to 5 years if convicted of obstructing the SEC probe. He also faces one count of destruction of evidence, which carries a maximum sentence of 10 years. Quattrone voluntarily surrendered to authorities and pleaded not guilty Wednesday morning before Southern District Magistrate Judge Theodore H. Katz. He was released on his own recognizance. In a statement issued yesterday, Quattrone’s lawyer, John W. Keker of San Francisco’s Keker & Van Nest said his client was innocent. “Only prosecutors who see the world through dirty windows would take a one-sentence e-mail supporting company policy and try to turn it into a federal criminal case,” he said. “These accusations are wrong and unfair.” Keker said he would seek an early jury trial in the matter. ‘HONOR SYSTEM’ At a press conference Wednesday, Comey said the charges should send a strong message to those who do not take federal subpoenas seriously. Describing the use of subpoenas by federal law enforcement as an “honor system” necessitated by scarce resource, he added, “It is an honor system guarded by an iron fist of enforcement.” The grand jury investigation of CSFB’s IPO practices closed in November 2001 without criminal charges being brought. Comey said Wednesday there were no plans to reopen the investigation. CSFB settled with the SEC and NASD for $100 million in January 2002. However, the NASD recently brought civil charges against Quattrone for his alleged role in allocating IPO shares to corporate executives who would in turn hire CSFB for major capital markets transactions. Such practices have been bemoaned by investors and regulators as one of the lamentable excesses of the tech bubble. Star research analysts such as Salomon Smith Barney’s telecom analyst Jack B. Grubman have been accused of similar practices. Perhaps the leading dealmaker of the dot-com boom, Quattrone shepherded many of the iconic initial public offerings of the era, including Amazon and Netscape, as well as lesser-known chart-topper VA Linux. VA Linux’s IPO became the subject of an investigation by the NASD in the spring of 2000, followed swiftly by the SEC and Southern District investigations.

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