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It was a mortifying turn of events for Credit Suisse First Boston Corp. and its vice-chairman and global general counsel Gary Lynch. In May the company’s former star investment banker, Frank Quattrone, was indicted on federal charges of obstruction of justice. For more than a year the company had stood by Quattrone, assuring the world that Lynch had investigated the banker and found he had done no wrong. But Lynch and the company were forced to change their tune in January, when some incriminating, 2-year-old e-mails surfaced. In hindsight, it looks as though Lynch — the former head of enforcement at the Securities and Exchange Commission — and the company’s high-caliber lawyers at Davis Polk & Wardwell and Wilmer, Cutler & Pickering could have done more to catch these smoking guns earlier. Should they have? The tale of the e-mails dates back to 2000, a year before Lynch joined CSFB, when the company was dealing with investigations into its practice of allocating coveted 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 Dec. 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, Dec. 5, Quattrone routed an e-mail to the several hundred members of his technology group. Titled “Time to Clean Up Those Files,” Quattrone’s e-mail “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 company’s legal department. Effectively countermanding Quattrone’s instructions, the in-house lawyers warned employees not to discard documents, citing “various” investigations, according to documents given to The American Lawyer. 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.” The following summer, in July 2001, John Mack took over as CEO of CSFB and embarked on a much-publicized mission to run the most ethical house on Wall Street. To that end, he hired Lynch from Davis Polk as his general counsel. Mack asked Lynch to conduct an “internal inquiry” into the controversial Quattrone, according to a September 2002 Business Week cover story. Lynch gave Quattrone a clean bill of health, the magazine said. 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 Dec. 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? Even though Quattrone’s troublesome Dec. 5 e-mail was sent out months before Lynch joined CSFB, it was hardly a secret within the company. The investment house declined to address questions about this. 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’s no evidence his client knew that authorities had specifically asked for documents in his group’s files at the time he wrote his Dec. 5 e-mail. Lynch declines to comment, as does Wilmer, Cutler and Davis Polk. Brodsky, who joined Latham & Watkins in June 2002, also had no comment.

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