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The decision by former investment banker Frank Quattrone to take the stand and deny he knew he was breaking the law when he urged employees to “clean up their files” led a federal judge Wednesday to increase his sentence to 18 months in prison. Judge Richard Owen of the Southern District of New York rejected a Probation Department recommendation that Quattrone serve only five months behind bars for his May 3 conviction for obstructing justice, obstructing an agency proceeding and witness tampering. Judge Owen found that the former star investment banker at Credit Suisse First Boston perjured himself on the witness stand and deserved a higher sentence. Granting a government motion for an upward departure under the U.S. Sentencing Guidelines, the judge rejected pleas by Quattrone to show “mercy and compassion” and by defense lawyer John W. Keker for a downward departure under the guidelines based on the fragile mental health of his client’s wife and teenage daughter. Prosecutors Steven R. Peikin and David Anders were able to win a conviction of Quattrone by convincing the jury that he knew a federal grand jury and the Securities and Exchange Commission had issued subpoenas for information on Credit Suisse’s allocation of shares in initial public offerings when he endorsed a subordinate’s e-mail urging employees to “clean up those files” on Dec. 5, 2000. And as head of the bank’s division handling initial offerings in technology companies, the prosecutors said, Quattrone knew he was obstructing the grand jury, interfering with an SEC proceeding and tampering with potential witnesses by endorsing the e-mail. Quattrone and Keker, of Keker & Van Nest, tried without success to convince the jury that Quattrone was merely following the bank’s document retention policy, which calls for the routine destruction of non-essential documents after a transaction has been completed — unless the documents are being sought by subpoena. Peikin and Anders countered with evidence that Quattrone had learned from in-house counsel at Credit Suisse about the existence of the subpoenas and that he knew his message would be interpreted as a clear directive to destroy documents. In granting the government’s motion based on the perjury enhancement, Owen turned aside an argument by Keker based on the U.S. Supreme Court’s controversial decision in Blakely v. Washington. In Blakely, the Court invalidated a Washington state sentencing scheme because it allowed enhancements based on findings by a judge, and not a jury. The Supreme Court is set to hear arguments in two cases next month on whether the language of Blakely should be read as invalidating the guidelines based on the same Sixth Amendment right to a jury trial. The 2nd U.S. Circuit Court of Appeals has asked the Supreme Court for expedited consideration of Blakely‘s application to the federal guidelines, saying the administration of justice is being thrown into chaos by the ruling. The circuit followed that request by issuing another opinion in which it stated that, until the Supreme Court rules otherwise, district court judges in the circuit should continue to apply the guidelines. PERJURY CITED Peikin, co-chief of the U.S. Attorney’s Securities and Commodities Fraud Unit, urged Judge Owen to find the perjury enhancement, citing the 2nd Circuit’s statement that the guidelines still apply until further notice. But Keker cited a footnote from Blakely in which the Supreme Court paid specific attention to the questionable use of judicial findings of perjury by defendants in enhancing sentences. It would be wrong to apply the perjury enhancement to Quattrone, Keker said, because the Supreme Court in Blakely expressed clear disapproval of applying such an enhancement “unless the jury had made the appropriate finding — and here the jury was asked something different.” The jury was told, he said, that if Quattrone had “consciously avoided knowledge” critical to the commission of a crime, he could not be convicted of perjury. But Peikin said, “We think the jury verdict itself indicates the jury rejected defendant’s testimony,” and, in any event, Owen could have made the perjury finding based on his own assessment of Quattrone’s testimony, either at his first trial that ended with a hung jury last fall, or at the second trial that ended with his conviction in May. Owen, who clashed repeatedly with Keker throughout both trials and again Wednesday, said he could not chalk up Quattrone’s denials to “confusion or mistake.” “A defense lawyer runs the risk of this by putting the defendant on the stand,” he said. “You can avoid the perjury issue by simply not taking the witness stand.” The judge said he felt obligated to enhance Quattrone’s sentence because it is “terribly damaging to the administration of justice if this kind of thing goes unremarked or undealt with.” NO HOME CONFINEMENT Once the judge decided to add the enhancement, it increased Quattrone’s sentencing range from 10 to 16 months, in which Quattrone was eligible to serve half in prison and half in home confinement, to 15 to 21 months, with no hope of home confinement. Keker was thereafter forced to argue that Owen should sentence his client to the “low end” of the new range — 15 months. But the veteran defense attorney was clearly not optimistic. “I know you think he’s guilty,” Keker said with an edge in his voice. “I don’t have a doubt about what you think, but that doesn’t mean you should hurt him beyond what the law requires.” As a final blow to Quattrone, Owen denied Keker’s request that Quattrone remain free pending appeal. He ordered Quattrone to surrender and begin serving his sentence in 50 days.

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