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OCTOBER 24, 2003
By Steve Hamm The Jury Hangs, Quattrone Waits With a retrial looming, but not definite, the former CSFB tech banker's defense may reconsider having him take the stand again The face of former star investment banker Frank Quattrone showed no joy when the judge in his obstruction-of-justice case declared a mistrial on Oct. 24. Maybe there should have been. One juror interviewed afterward says "it was a very weak case by the prosecution" because the evidence against Quattrone was circumstantial. Mayo Villalone, a 26-year-old Manhattan bank employee, says the strongest evidence weighing against Quattrone was his own performance on the witness stand, where he was "evasive" during cross-examination. If the case is retried, Quattrone might decide not to testify again -- avoiding a repeat of what created some of the worst problems for him in this trial. Quattrone, who's widely credited with putting Silicon Valley on Wall Street's map, has been on the hot seat since he was arrested on Apr. 23. He was charged with three counts of obstruction of justice and witness tampering. Prosecutors allege that Quattrone, formerly head of Credit Suisse First Boston's global tech banking division, interfered with federal investigations into the firm's initial public offering process by sending an e-mail to employees on December 5, 2000, "strongly" urging them clean up their files. NO SALE. He sent the message a few hours after a top CSFB officer had advised him to get a personal lawyer to represent him in connection with the federal probe. Eight of the 11 jurors had voted to convict him because they clearly didn't buy his defense: that he didn't think the investigation involved him. The 48-year-old Silicon Valley resident's worst days in court came when he was cross-examined by U.S. Attorneys on Oct. 10 and 14. His lawyers had argued throughout the first part of the trial that Quattrone knew little about the investigations being conducted into CSFB's handling of allocations of IPO stock offerings and that he had nothing to do with how those shares were handed out. Yet on Oct. 10, Quattrone admitted that he was party to allocation discussions, and the government presented a slew of e-mail that suggested his involvement was substantial. Quattrone's attorney, John Keker, later clarified that the discussions he was involved in concerned passing out shares to his clients, not allocations of shares to hedge funds, which was the main focus of the federal probes. BETTER PREPARATION. "He did a bad job" on the stand, says Villalone, who voted repeatedly to acquit. This juror says the ones who voted to convict him "said he was too high up and too smart not to know what was going on." Quattrone won't likely be tripped up on the witness stand again. Prosecutors indicated before the mistrial was declared that they would probably retry the case if the jury remained deadlocked. If so, the defense will have an opportunity to prepare the jury for news that Quattrone played a role in allocations -- and make it clear which ones. A transcript of Quattrone's testimony from this case will be admissible -- albeit not a videotape -- in a second trial, but, "if jurors thought he was evasive and looked dishonest, Keker might decide not to put him on the stand again," says Melinda Haag, an attorney at Orrick Herrington & Sutcliffe, and a former chief of the white-collar-crime section of the U.S. Attorney's office in San Francisco. "DISAPPOINTED." While Quattrone's chances of getting off may have been improved by this outcome, he showed no sign of that after the mistrial was declared. Quattrone and Keker walked grim-faced down the front steps of the U.S. District Court in lower Manhattan into a phalanx of reporters and TV cameramen, and then across the street to a traffic island. There, Keker said: "We are disappointed because Frank is innocent, a man of integrity, and a man who followed the rules." Quattrone would not comment, except to say he looked forward to returning to his home in California. His respite might be short, and his problems are far from over. Judge Richard Owen has scheduled a conference on Nov. 5 and a second trial, if there is one, could begin in a matter of weeks. Beyond that, Quattrone faces an inquest by the National Association of Securities Dealers, which says he violated its rules by handing out IPO stock allocations to his clients -- a practice called "spinning." During Silicon Valley's go-go days, Quattrone and his ilk were famous for moving at Internet time. Now, his fate is in the hands of the legal machinery, and that's grinding mighty slowly.  Hamm is a senior writer for BusinessWeek in New York Edited by Beth Belton
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