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Frank on the Ropes

Apr
2
2003

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

New York Attorney General Eliot Spitzer is negotiating immunity agreements for some “friends” of former Credit Suisse First Boston star tech banker Frank Quattrone.

The immunity agreements were demanded by attorneys working to protect their clients – some of the 63 “friends of Frank” whose names were published in a Silicon Valley newspaper – from prosecution on possible criminal charges under New York’s Martin Act.

If the “friends” appear before the grand jury – the only way they could be forced to give information to prosecutors – they would automatically receive immunity under New York law.

The Martin Act, a 1920s-era law, allows Spitzer to bring criminal or civil charges of fraud. Even though the “friends of Frank” live and work in California they can be charged under the act since states enforce one another’s laws.

Members of the list were called by Spitzer’s office soon after their names appeared, according to one “friend” who asked to not be named.

When that “friend” called his lawyer, he was told that other clients had received similar calls from Spitzer’s office.

The firm, Gray Cary, then began negotiating agreements in which lawyers from Spitzer’s office would hold a series of interviews at the firm’s Palo Alto offices.

The meetings were first scheduled for mid-March.

Gray Cary’s lawyers demanded immunity in return, but discussions over the extent of that protection from criminal charges broke down over details, according to the “friend.”

The protection offered by the AG’s office was not broad, he said. “They got pretty combative,” he said of the AG’s office.

But all this activity doesn’t mean criminal charges from Spitzer are definitely in the works, according to someone familiar with the proceedings.

Most observers have been – and some still are – expecting the U.S. attorney to file criminal charges while Spitzer files a broader civil case.

Shirli Weiss, a Gray Cary attorney involved in the negotiation, declined to comment.

The executives and CEOs who were offered special “friends of Frank” accounts by Credit Suisse First Boston’s tech group made tremendous profits – in some cases, millions of dollars.

At the height of the Internet stock bubble, the accounts bought and sold first-day offerings of hot tech stock offerings.

Those shares, purchased for very little money, were usually sold for double or triple what the “friend of Frank” account holders paid.

Several account holders on the public list made more than $1 million from their special accounts.

Among those on the published list are former and current executives at technology companies – some of which have been acquired or gone belly-up – such as Next Level Communications, Phone.com, Tumbleweed Communications and VeriSign.

The National Association of Securities Dealers said in its complaint against Quattrone that there were 300 “friend of Frank” accounts, but it has declined to provide any more information about those accounts.

In its filing – accusing Quattrone of failing to properly supervise the bankers in his Palo Alto office – the NASD described the accounts and their profits as a “gratuity” offered to bring more business to CSFB.

In addition to the New York Attorney General’s office and the NASD, the U.S. Attorney’s office for the Southern District of New York is also said to be weighing charges against Quattrone.

That office is looking at allegations that Quattrone encouraged his employees to destroy documents and other material in 2000, as part of an attempt to thwart an earlier investigation by the Securities and Exchange Commission and the U.S. Attorney into CSFB’s tech stock offering process.

Share  Posted by Chris Nolan at 9:22 PM | Permalink

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