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As the investigation into initial public offering allocations by Credit Suisse First Boston mushroomed in late 2000, the bank’s general counsel for the Americas, David M. Brodsky, found himself working damage control on several fronts. At the same time, according to Brodsky, he tried to persuade federal prosecutors in Manhattan to drop or limit their criminal inquiry and he worked hard to make sure CSFB’s star technology banker, Frank Quattrone, and his employees did not make matters worse by hindering the investigation or inadvertently leaking information to the media that could irreparably damage the investment bank. Brodsky related that version of events on Friday at Quattrone’s trial for obstruction of justice and witness tampering before Southern District of New York Judge Richard Owen. Quattrone is accused of endorsing or adding comments to e-mails urging employees to comply with the bank’s document retention policy. The policy requires employees to destroy all notes and other documents not considered essential to the official file kept by the bank for IPOs. But it does not apply when there is a civil or criminal subpoena, which suspends or “freezes” the destruction of documents. Quattrone’s defense from the beginning is that he was merely telling employees in his technology group in Palo Alto, Calif., that they should follow company policy. The lawyers for CSFB never suspended or froze the retention policy until after the suspect e-mails were sent, Quattrone’s lawyer, John Keker, said in his opening statement Sept. 30. The government is introducing Brodsky’s testimony in an attempt to show that Quattrone was well aware before the offending e-mails were sent that there was an outstanding federal grand jury subpoena and was on notice that the retention policy would be suspended. When the investigative arm of the National Association of Securities Dealers and the Securities and Exchange Commission launched separate probes in the spring and summer of 2000, their requests for documents or subpoenas were handled by in-house lawyers other than Brodsky. And the bank’s legal team responded to the wide-ranging subpoena from the SEC’s Enforcement Division by turning to Lewis J. Liman, then of Wilmer, Cutler & Pickering, who would oversee the production of documents. But when the Southern District U.S. Attorney’s Office began a federal grand jury investigation, Brodsky, managing director and general counsel for the Americas, became the man in the middle. He became directly involved, Brodsky said Friday, because “a federal grand jury investigation took this inquiry to a totally new level of danger to the franchise.” His first task was to confront a grand jury subpoena that sought documents concerning the way CSFB handled shares in new offerings for the previous three years, and threatened to go even deeper. Brodsky, now a partner at Latham & Watkins in Manhattan, had spent four years as an Assistant U.S. Attorney in the Southern District of New York, from 1969 to 1973, including a stint in the securities fraud unit. On Nov. 28, 2000, he returned to his old office to meet with prosecutors, including the two assistants now handling the case against Quattrone, Steven Peikin and David Anders. Also present was another CSFB in-house attorney, Kevin McCarthy, as well as Liman, who is now a partner at Cleary, Gottlieb, Steen & Hamilton. “We tried to explain the background of the inquiry and urge the U.S. Attorney’s Office that no criminal conduct had taken place,” he said, adding that he was “essentially urging” the government to have the grand jury “withdraw the subpoena and let the regulatory inquiry go forward.” “Our proposal was flatly rejected,” he said. Brodsky’s efforts now turned “to limiting the scope of the subpoena,” he said, because of potential damage to the bank if the U.S. Attorney’s Office started having the grand jury sending out subpoenas “willy-nilly” to bank clients. To achieve this goal, he retained Robert Fiske of Davis Polk & Wardwell, a former U.S. Attorney for the Southern District that Brodsky said had an excellent reputation and “credibility” with the U.S. Attorney’s Office. Brodsky then turned to his next concern, Frank Quattrone. In an exchange of e-mails on Dec. 3, 2000, he told Quattrone about the grand jury subpoena, warning “this should absolutely not be passed to anyone else.” Before the jury on Friday, Brodsky was asked by Anders why he placed such an emphasis on confidentiality. Brodsky said he was concerned about two potential problems arising, both of which later came to pass. “I was very concerned about the possibility there would be conversations among bank employees about the investigation that would spill out to newspapers,” he said. “I didn’t want the fact of the investigation to be discussed.” Brodsky said he was concerned that alerted employees might take actions that could be deemed “witness or evidence tampering” to arise, emphasizing he wanted “to keep this absolutely watertight.” The next day, Dec. 4, 2000, an employee of the firm issued an e-mail urging people to abide by the document retention policy, because civil litigation was likely due to the collapse in technology stocks. “Today, it’s Administrative Housekeeping — In January, it could be improper destruction of evidence,” the e-mail said. Quattrone answered, “You shouldn’t make jokes like that on e-mail.” On Dec. 5, 2000, Quattrone added his own note to the e-mail reminding everyone to abide by the policy, saying, “Having been a key witness in a securities litigation case — I strongly recommend you follow this advice.” This is a note that prosecutors say was essentially an order to destroy documents while a federal grand jury subpoena was pending. The note was issued within hours after Brodsky performed a key task for his real client, CSFB, telling Frank Quattrone in a phone call that he should get his own lawyer. He told Quattrone “the bank’s lawyers couldn’t represent him in his individual capacity.” He also told Quattrone that The Wall Street Journal was preparing an article on the IPO investigation. Anders asked him why he told Quattrone to retain counsel. “To protect the bank and prevent lawyers at the bank from having any professional obligation issues,” Brodsky answered. Anders also used his direct examination of Brodsky to introduce documents that defense attorney Keker had argued should not be shown to the jury: Frank Quattrone’s total compensation for the year 2000, in excess of $120 million. The direct examination of Brodsky is expected to resume Tuesday. The trial, which began with jury selection Sept. 29, is expected to take about two weeks.

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