Reading the interviews with the jurors who convicted Frank Quattrone of obstruction of justice and witness tampering you can see a bunch of important differences between this case and the last one.
First, the background noise has changed. It’s not just Martha Stewart, who proceeds Quattrone in getting a sweeping conviction. There’s a general sense of mistrust out there. Up against prosecutors who took their measure last time, Quattrone and his lawyer John Keker had more of an uphill battle than they realized. They can blame Judge Richard Owen but I don’t think that appeal will work very well.
Then, in court, Quattrone was forced to acknowledge, without protest, that he knew details of how the bank allocated shares when it issued “hot” tech offerings. Left unsaid: Almost all of Credit Suisse First Boston’s offerings were “hot.” Secondly, Quattrone had to back track and say, on the stand, that yes, well perhaps he did understand the importance of a “federal grand jury” investigation. Randy Smith (who also had a line on the “clean up those files” email when I did) does the best job on this stuff. And lastly, it seems that former CSFB lawyer David Brodsky was a better, more focused witness this time around. Brodsky came across as disengaged and mealy-mouthed on the stand the first time because he couldn’t remember many details. Asked to do less, he remembered — or didn’t forget — more.
The result: This jury got a better understanding of how Quattrone worked. For whatever reasons they didn’t see how he could make $120 million a year and only kinda know what was going on. They’re right. That’s always been my problem with the defense. The Frank Quattrone who sat in court and the Frank Quattrone who advised some of the smartest people in the country on how to run their companies, weren’t the same guy. Silicon Valley Frank was a relentless detailed-oriented guy who often drove his clients crazy. Courtroom Frank was a nice man overwhelmed by email and subordinate’s queries and comments. Silicon Valley Frank would have fired Courtroom Frank in a heartbeat.
Opinion on this is divided, of course. And it’ll stay that way for a long time. Many people in Silicon Valley believe Quattrone was tried for something he didn’t do. But like the banker himself, they’re kinda right. The federal government never bothered to find out what Quattrone – what all of Silicon Valley – was doing during the bubble. When the Securities and Exchange Commission got wind of the “friends of Frank” type deals being done by the area’s boutique tech-oriented banks it didn’t bother to do any investigating or serious regulation. They condemned the practice in the Wall Street Journal and called it a day. No one — particularly not the larger banks who started using the boutique bank tactices to win clients — took that too seriously.
When everybody does something and no one tells them to stop, they don’t think they’re doing anything wrong. That’s, of course, why Quattrone had to be tried and tried again by the U.S. Attorney for the Southern District of Manhattan. They are Wall Street’s top cop and they don’t like being fooled with. Why? Well, imagine if the securities business was run by a bunch of people who intended to make money or weren’t involved in the lawyerly details of their business but somehow let things slide and when they lost you money they just stood there and said ‘Oh gosh, well, I guess that’s just how the market works. Better luck next time.’ That’s an exaggeration. But it’s not a huge one. Silicon Valley is famous for loving the market and hating government oversight and regulation. But this is a case where a little oversight – Quattrone denounced spinning even as he doled out stock to the “friends of Frank” – would have gone a long way.
The New York Times’ Floyd Norris does his usual look back in resignation postscript to Quattrone citing Google’s new fangled auction process as getting ahead of regulators. Norris who was once spectacularly obnoxious to me (peer evaluation, yup) should get out – out on the web – more often.
He’s right about this being a change. But for those of you looking for signs of change, there’s something else just as important as the Google stock auction. Tom Siebel, renowned rude man and founder of the Siebel Systems, has been replaced. Siebel ran one of the more abusive stock option mills in the valley, giving himself tens of millions each year in options. He’s been sued and fined and sued again so, finally, it seems, he’s getting the message. Siebel gets to keep the money. There’s a lot of it. In 2002 he was the best-paid CEO in the Merc’s much despised but always well-read “What the Boss Makes” taking home $34.6 million. The hiring of a CEO from a big well-run company like IBM tells you just how much of a change Silicon Valley is going through.