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Quattrone Suspended; Feds Are Closing In

Feb
4
2003

Editor’s Note:This post originally appeared as a news story in The New York Post.

CSFB suspended star tech banker Frank Quattrone yesterday after discovering he knew of a federal investigation of his IPO practices when he reminded staffers to get rid of documents.

Investigators, meanwhile, are turning up the heat in their probes of Quattrone. They have expressed interest in a December 2000 memo telling staff to “clean up” documents, sent several days before a probe of IPO allocations became public, said sources familiar with the investigations.

Looking into the activity are the U.S. Attorney’s Office in Manhattan, the New York Attorney General’s Office, the National Association of Securities Dealers and the Securities and Exchange Commission.

Spokesmen for all of those agencies declined comment.

N.Y. Attorney General Eliot Spitzer has been eyeing charges against Quattrone on grounds of possible conflicts of interest between banking activity and stock analysts’ recommendations.

The NASD said Friday it was pursuing civil charges against Quattrone in regard to IPO allocations and possible “spinning” – the allocation of hot IPO stock to CEOs and other influential execs.

The focus of the many probes is on Quattrone, not on the bank as a whole, say regulators and those familiar with that investigation.

Quattrone was placed on administrative leave by CSFB yesterday following an internal bank investigation to determine if he knew about the federal probe when he encouraged his employees to “clean up those files.”

Bank execs now believe Quattrone knew of the pending investigation because he was told of it on Dec. 3 by former CSFB lawyer David Brodsky.

A call to Quattrone’s attorney was not returned.

But CSFB lawyers were asked about the “clean up those files” memos in talks with regulators late last year. CSFB General Counsel Gary Lynch “dismissed it out of hand and said ‘that happens on the street all the time,’ ” said a regulator who was in the meeting with Lynch.

Reports of the timing of those e-mails, however, prompted CSFB to begin an internal investigation.
That look uncovered a new e-mail – previously confidential because it was between Quattrone and the bank’s lawyer – showing that Quattrone was told of the IPO allocation probe on Dec. 3, 2000.

Brodsky did not want Quattrone to hear of the investigation from the bank’s clients, some of whom were being questioned by regulators, said a source familiar with the matter.

On Dec. 4, 2001, Richard Char, an attorney who headed the bank’s research executive division, sent out an e-mail encouraging employees to neaten up their records. That general message was reinforced on Dec. 5 by a similar e-mail that Quattrone sent two days after Brodsky told Quattrone of the investigation.

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