A Subtle Shift

If Andrew Ross Sorkin’s reporting in today’s New York Times is to be believed – he went a little overboard last time around reporting and poking holes in the prosecutors’ case against Silicon Valley banker Frank Quattrone – Judge Richard Owen has finally risen to the bait.

That’s the bait Quattrone’s defense attorney John Keker has set. The bait that might – if Keker is very lucky and manages to swim against the ‘one for the little guy tide’ – acquit Quattrone. Between the lawyer’s constant prodding and what the Wall Street Journal described as “derisive laughs and coughs” from Quattrone’s supporters, a group I call the dickheads, it seems that decorum has been stretched and the judge isn’t happy. Last time Credit Suisse First Boston lawyer David Brodsky testified George Boutros and the boys from CSFB confined themselves to elbow-jabs, knowing looks and angry glares. This time, it seems, they’re taking a cue from the Tyco trial’s “batty blueblood.”
And the judge is showing his displeasure. He’s also, Sorkin says, showing the jury just how much he favors the prosecution so much so that the trial may have “tipped” in Quattrone’s favor. So far, Sorkin is alone – in print — in that assessment, however. We’ll see what happens after the Sunday papers are out with their weekly trial coverage wraps. But it looks good for Quattrone. Suprisingly good, particularly since Brodksy’s testimony – the government’s key but somewhat absent-minded witness from the last trial — has changed.
Prosecutors rested their case, today, Friday. So far the Michael Dell email from last time around isn’t up on the screen here. It’s taken a little bit of the high tech industry drama out of the case. The “friend of Frank” stuff is really what the government would like to try Quattrone for – for creating a lucrative and effective rewards system that benefited his close associates and enriched his bank and, by extention, himself. But they can’t get anyone to tell them that’s what happened. They’ve given up trying to break Silicon Valley’s code of cooperation; its Friends and Family culture.
Quattrone, like Martha Stewart, isn’t exactly on trial for the thing he’s supposed to have done wrong. And everyone in Silicon Valley – particularly those Friends of Frank whose names have remained hidden – knows it. If Quattrone is acquitted, Silicon Valley will rejoice like it has never rejoiced. One of their guys – one of their top guys — won. And he won big. The control that New York banks have long exerted over the valley – control that Quattrone helped them wrest away – will have a big gaping hole where there was once a solid wall. And the insular Friends and Family culture that keeps the valley going will be, well “sanctified” is too strong a word, how ‘bout “encouraged”? “Accredited”? That’s important for a bunch of reasons, some of them financial, but most of them psychological.
Silicon Valley has a long history of enriching the men who come here with their bright idea, their oddly intuitive understanding of computers and their awkward social skills. During the tech bubble, what started as a small, esoteric undertaking – David Packard and Bill Hewlett with their oscillator in a Palo Alto garage – became a multi-million dollar marketing and stock market promotion scheme. Netscape – a Quattrone deal – was the first of the tech companies to turn everyone’s heads and make them realize just how much gold was in these here hills. Every deal done through the dot.com bubble, from its sky-rocketing stock price to its short-term insider lock-ups to its “friends and family” stock and its simultaneous marketing of stock and product as well as the personalities of the CEO and founder, was a copy of Netscape’s strategy. Google – brought to you by many of the same investors, executives and other interested parties involved in Netscape — is the latest. A Quattrone acquittal, coming close on the heels of the Google stock offering, will change the valley’s dynamics back to the ways in which many of its most important and wealthiest people prefer to operate: with those they know, with those who can help them, with those who understand it’s us against them.