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Former investment banking superstar Frank Quattrone was found guiltyMonday of obstructing federal investigations and witness tampering. A Manhattan jury deliberated for less than seven hours before findingQuattrone had violated the law by endorsing an e-mail that calledfor employees in the global technology group at Credit Suisse FirstBoston to “clean up” their files in December 2000 while grand jury andU.S. Securities and Exchange Commission (SEC) subpoenas were pending. A somber Quattrone nodded and hugged family members after the juryhad been dismissed and Southern District Judge Richard Owen had set aSept. 8 sentencing date. Quattrone’s attorney, John Keker of Keker & Van Nest said after theverdict that he was disappointed and planned an appeal. Keker repeatedly clashed with Judge Owen during the proceedings,protesting that the judge’s evidentiary rulings and his demeanor made ithard for his client to get a fair trial. The guilty verdict came six months after Quattrone’s first trialended in a hung jury in October. It was a significant win for prosecutors with the U.S. Attorney’sSecurities and Commodities Fraud Unit. Like the March conviction of Martha Stewart for obstruction and makingfalse statements, the guilty verdict was obtained against a high-profilewhite-collar defendant accused of interfering in investigations that didnot result in charges on the underlying crime. In Quattrone’s case, prosecutors Steven R. Peikin and David Anderswere able to prove to the jury that the banker intended to frustrate anongoing investigation into the allocation of shares in initial publicofferings (IPOs) at Credit Suisse. The investigation was into the “spinning” of initial public offeringshares — the giving of shares of hot offerings to favored customers toensure a share of their investment banking business. At issue was the investment bank’s document retention policy, whichcalls for employees to rid their files of all non-essential documentsonce the IPO process has been completed. The policy states that the clearing out of files is to be suspended ifthe documents in question are being sought by subpoena. Quattrone had received an e-mail from employee Richard Char, whocited the drop in the stock market and the possibility of securitieslitigation and proposed a message telling employees to follow thepolicy. Char said employees should clean up their files, half-joking thatrun-of-the-mill administrative housekeeping might one day be considereddestruction of evidence. Quattrone responded in a chastising e-mail to Char, warning himthat he should not “make jokes like that on e-mail.” On Dec. 4, Char submitted a similar message, minus the joke. Quattrone endorsed the e-mail the following day, telling employees thathe had been a witness in a securities case before and was “strongly”suggesting that the employees follow the document retention policy. Although in-house lawyers at Credit Suisse had not issued a statement toemployees telling them that the document retention policy had beensuspended, Anders and Peikin were able to show that Quattrone knew that the normal sweeping of files should cease. To prove it, they once again presented former Credit Suisse GeneralCounsel David Brodsky. Brodsky, now a partner at Latham & Watkins,testified that he warned Quattrone in a series of e-mails on Dec. 3that a federal criminal grand jury had issued a subpoena to CreditSuisse just before Quattrone had the e-mail exchange with Char. Brodsky also said that he counseled Quattrone on Dec. 5 to hirehis own attorney, although not because Quattrone was a target perse, but because he might be called as a witness. ‘BUREAUCRATIC SNIPPET’ In closing argument, Keker decried the fact that Quattrone wasin the dock because a government that had turned a “22-word bureaucraticsnippet” into a crime. Quattrone, testifying in his own defense for a second time, expandedon the central theme of the defense — that he played a relatively smallrole in IPO allocations and had nothing to fear from the investigationbecause he believed the federal probe focused on another part of thebank. He told the jury that Brodsky left him with the impression that theinvestigation was focused on hedge funds and high fees charged by thebank — and not on IPO allocations. As in the first trial, Keker presented his client as a busy man whodashed off a quick response to Char without thinking of theimplications of the e-mail. But the prosecution was able to prove that Quattrone played a muchgreater role in deciding how IPO shares were allocated and that theinvestigation was far broader than he suggested.The government was also able to show that Quattrone had more thanenough time to stop and think before sending the e-mail — and that hewas on notice that the normal destruction of documents under the policyshould stop. Quattrone was convicted of obstruction of justice, obstruction ofagency proceedings, which carry a maximum sentence of five years each,and witness tampering, which carries a maximum of 10 years. Absent anadjustment under the federal sentencing guidelines, he is most likely toreceive a sentence of somewhere between 10 months and 16 months inprison. U.S. Attorney David Kelley released a statement following the verdict,saying, “The Government’s ability to fully and fairly investigateallegations of wrongdoing in out financial markets depends upon theintegrity of Grand Jury and SEC investigations.” “When we learn of efforts to obstruct or interfere with thoseinvestigations, we must, and we will, prosecute those cases to thefullest extent permitted by the law,” he said. – The Associated Press contributed to this report.

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