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Real Irony in an Ironic Age

Apr
29
2004

Frank Quattrone’s second jury will begin deliberating his guilt or innocence on obstruction of justice and witness tampering charges tomorrow. Today will be given over to the usual closed-door fireworks between Judge Richard Owen and Quattrone attorney John Keker over what the judge should tell the jury.
The fireworks and excitement in this trial are mostly between the judge and the lawyer, Keker deciding that he’s had enough fun with the press. And they’ve been pretty much going off in private out of the jury’s and reporters’ sight. Last fall, we got to see Frank squirming – well, really just displaying quiet contempt — as he watched some pretty damning email show up for all to see and read. This year, it was just quiet acknowledgment.


Quattrone didn’t have to backtrack and say, oh, yeah, well from “time to time” he was consulted on IPO allocations making every cynic in the place – guilty – think “A ha!” I still wonder if Quattrone’s deeply engrained belief in his own innocence – he did not intend to obstruct justice and intention is part of the law – became the source of his stumbles last time around. It would be like him to insist on testifying and it would very like him – knowing the evidence – to insist that the “Friend of Frank” allocations had no bearing on the accusations he was facing. Quattrone may have honestly thought they wouldn’t come up and brushed aside Keker’s insistence otherwise. That’s the only real explanation for the stubbornness the defense showed on this point last time around. But Quattrone turned out to be sort of right – the one juror who spoke at length to the press outside the courtroom said the allocations stuff had no effect on him. In fact, he said, he’d do similar sorts of things for his clients.
Well, it’s unlikely that his clients could partake in 4 percent of every tech offering issued by Quattrone’s bank, Credit Suisse First Boston, the hardest working bank in the IPO bidness at the height of the tech stock bubble. The friends took at least $1 billion off the table and, for the most part, they got cash money. Prosecutors never called the very people who – judging from the complaints, grievances and other actions they’ve filed against Quattrone and his bank – could tell the jury exactly how the system worked. Former brokers Mike Grunwald and John Schmidt, forced out of the bank as news of the grand jury investigation took hold, remain shadowy presences. Andy Fisher, who may or may not have run CSFB’s allocation process, and who hasn’t sparred with Quattrone or the bank, appeared during the trial via email but never in the witness stand. So this jury could, as the last one did, walk away thinking all this allocations stuff isn’t that big a deal. As a “friend of Frank” once said, Quattrone and company were “in the client happiness business.” To some extent, they still are. That “friends” name surfaced during this trial in an email exchange. I’m pretty sure that only a handful of people sitting in Judge Owen’s court know that exec was on the “friends” list.
So Quattrone’s jury will begin deliberations on the same day – all rumors and speculation holding true – that Google files for its stock offering. There are few occasions in real life to treasure genuine irony. So take this one while you can really enjoy it.
Google may be the Silicon Valley IPO to beat all IPOs but it could also be – as was suggested to me earlier this week by a former Quattrone associate – the last gasp of the valley’s insular culture. It could indeed be. Just look at how much play Google investors are getting (today’s SFChron boosted the NYTimes story from Sunday). Reports about Google investors have brought public attention to what was once a pretty quiet but well-accepted practice out here: cutting your friends – of those you want to be your friends – in on the deal. At the height of the bubble, when 500 percent returns were commonplace, everyone from now-Governor Arnold Schwarzenegger to Ben Affleck to Matt Damon and Tiger Woods put money in a fund that put money in Google. So you can see why I’m wondering if the idea of angel investing – early investments by a close group of insiders – will be the mechanism that replaces “friends and family” in the valley’s share-and-share-alike culture. Seed investing, which is often another name for “angle funding” has always been an early version of that practice – you get money from your friends, you give them a little stock. You do well, so do they. The bubble brought a new group – a group with much higher public profiles into this mix – and now it’s more public. The inner working of the money-machine that Quattrone helped build and maintain was on display in court yesterday. The mechanics of how it works in real life, outside the courtroom, should be available late tonight or tomorrow.

Share  Posted by Chris Nolan at 10:10 AM | Permalink

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