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Quattrone's Warm Welcome Back


Tech bigwigs are pledging support for the controversial banker's new Qatalyst Group

Perhaps there are some people who question whether the controversial banker Frank Quattrone will be able to drum up business for the boutique investment bank he unveiled on Mar. 18. But there aren't many of them in Silicon Valley. "I'll recommend Frank to everybody I come across," says Marc Andreessen, the co-founder of Netscape Communications and an investor in roughly 40 technology startups, including LinkedIn, Digg, and Meebo. "When they need advice, or help, or an investment bank of any form, he'll be at the top of the list."

Quattrone has been out of the securities industry for five years, having resigned from Credit Suisse (CS) in 2003 under pressure from obstruction of justice charges. But since the federal government agreed to drop the charges against him, the tightly knit tech industry is welcoming him with open arms. His tech-focused firm, San Francisco-based Qatalyst Group, will provide advice on mergers and acquisitions, help with financing, and invest in promising deals, alongside venture capital and private equity firms.

Tech executives are eager to send business Quattrone's way, as something of a protest vote against his prosecution. Many felt that during the numerous investigations into the dot-com bust, Silicon Valley's own culture was on trial. "People are willing to show their support because they feel Frank was wronged, and he's been vindicated," says John Thompson, chief executive of Symantec (SYMC), which makes security and storage software. Supporters such as Google (GOOG) CEO Eric Schmidt and venture capitalist Jim Breyer have publicly pledged Quattrone business. Breyer, whose Accel Partners has invested in Facebook, says Qatalyst could help the social-networking site make acquisitions.

Federal prosecutors agreed to drop charges against Quattrone in August, 2006, on the condition that he stay out of legal trouble for one year. He had been tried twice on criminal charges that he attempted to obstruct an investigation into Credit Suisse's practices of allocating shares in hot initial public offerings during the Internet boom. The first trial led to a hung jury, and the second resulted in Quattrone's conviction, but that decision was overturned on appeal. Dropping the obstruction charges avoided the prospect of a third trial and opened the door for Quattrone to return to the securities business.

OPPORTUNITY KNOCKING

Quattrone declined to comment for this story. But a spokesman, Robert Chlopak, says Quattrone didn't obstruct the investigation and it wouldn't have made sense for him to do so since the probe didn't target his technology group.

A new, tech-savvy investment bank could have appeal at a time when the industry's dealmaking is surging and many full-service investment banks are distracted by the widening credit crunch. While merger-and-acquisition activity in other sectors has plummeted, the tech sector has seen a solid increase in the value of deals so far this year, led by Microsoft (MSFT)'s $44 billion bid for Yahoo (YHOO).

Still, the technology market today is very different from the one Quattrone left. While several large investment banks have scaled back their technology practices, new players like Allen & Co. have stepped in to fill the void. Andreessen says he'll keep using Allen & Co. for the banking needs of Ning, the social-networking site that he co-founded.

With Qatalyst, Quattrone will likely aim to cultivate a small roster of high-quality clients rather than attempt to rebuild a technology banking empire similar to the one he oversaw at Credit Suisse. For now, Qatalyst will operate as a division of JMP Securities. It remains to be seen whether Quattrone can once again become a major player in tech without the backing of a major Wall Street bank. But given his connections, "he's going to be the default choice for a lot of people," Andreessen says.


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