Keywords: frank quattrone,obstruction of justice,appeal
Description: Frank Quattrone's conviction is overturned, but that may not be good news for the next round.
Former high-flying investment banker Frank Quattrone won another shot at freedom Monday when a U.S. federal appeals court overturned his 2004 conviction for obstruction of justice.
The 61-page decision by the Second Circuit Court of Appeals in New York was hardly the exoneration Quattrone had sought. The court found there was plenty of evidence the former executive at Credit Suisse Group’s CS First Boston had urged subordinates to destroy documents after he was informed about a federal grand jury investigation into allocations of sought-after stock offerings.
Where the government tripped up was in failing to require the jury to find that Quattrone had specific criminal intent when he issued an e-mail reminding employees to clean out their files. Its the same reason the U.S. Supreme Court last year reversed the criminal conviction of Arthur Andersen for shredding documents related to the Enron meltdown. Of course the courts intervention was too late to save Andersen, once one of the worlds largest accounting firms.
“We have the government being very aggressive on the concept of criminal intent in jury charges,” said Jacob Frenkel, a former U.S. Securities and Exchange Commission enforcement attorney who now specializes in white-collar defense. “And now we have the number two example of it being overturned.”
Quattrone, 50, was convicted in May 2004 of sending out an e-mail on Dec. 5, 2000, shortly after talking to David Brodsky. then a CS First Boston attorney who was monitoring the government investigation into how the investment bank allocated shares of hot initial public offerings. Hours after Brodsky told Quattrone the focus of the probe, Quattrone sent out an e-mail endorsing another executives earlier message urging employees to clean up those files.”
“For over three years during this difficult ordeal, I have held my head high knowing I was innocent and never intended to obstruct justice,” he said. Quattrone also said the reversal should help in his appeal of a National Association of Securities Dealers ruling barring him from the securities industry for life.
In its ruling, however, the Second Circuit said there was sufficient evidence for the jury to conclude that Quattrone intended to obstruct the grand jury investigation. The jury also could conclude Quattrone acted with corrupt intent because he allegedly lied to Gary Lynch, then the top lawyer at CS First Boston, when he told Lynch in January 2003 that he didnt know about the grand jury investigation when he sent out the e-mail.
The problem was the judge instructed the jury that it could find Quattrone guilty of obstruction of justice if he had directed the destruction of documents he had reason to believe were within the scope of the grand jurys investigation. That wasnt enough, the appeals court said: the jury had to find that Quattrone knew his actions were likely to affect the grand jury investigation. Otherwise any executive who ordered documents destroyed could be found guilty regardless of what the government proved to the jury about his knowledge of a probe, the court ruled.
Quattrone’s case was significant because the government relied upon CS First Bostons lawyers to testify about what Quattrone knew when he issued the e-mail and what he said later. Such testimony worries some legal experts because of the chilling effect it could have on future conversations between in-house lawyers and employees.
Quattrone, 50, was sentenced to 18 months in jail but has been free on bail while his case was on appeal. (The conviction was Quattrone’s second trial; the first ended in a hung jury.) Once one of the highest-paid investment bankers, he rode the technology-stock boom of the late 1990s, overseeing a 400-banker office based in Palo Alto, Calif.
The appeals court ordered his case retried before a different federal judge. The court said Judge Richard Owen shouldnt have allowed federal prosecutors to suggest that Quattrone had violated federal securities laws by seeking an additional $2.2 million in investment banking fees from Research In Motion. Quattrone presented e-mails about the fee request to show he was extremely busy on Dec. 5, 2000, and thus didnt have time to contemplate the possible criminal implications of his short e-mail sent the same day urging employees to clean up their files. It was unfair, the appeals court said, to allow prosecutors to raise questions about possible unrelated securities violations when they cross-examined him.