The one that didn't get away
By Steven Syre, Globe Columnist | September 9, 2004
Good-bye, Frank Quattrone.
The investment banker who became famous in money circles as one of Silicon Valley's main pipelines to Wall Street cash during the 1990s boom heard the bad news yesterday. A federal judge in New York gave him 18 months in prison, a slightly tougher stretch than the sentencing guidelines suggested. Expect the normal cycle of appeals, but the story is just about over.
Like Martha Stewart, Quattrone was convicted for things he did to muck up a criminal investigation, not the acts that were actually being probed. After a first trial ended with a hung jury, a second panel found him guilty of impeding an investigation into how Credit Suisse First Boston allocated stock in hot initial public offerings. The smoking gun: a brief e-mail urging employees to ''clean up" files amid the government investigation.
Quattrone stands out because he is different from most of the other convicts and defendants who have been charged for their roles in the stock market's wild bubble era that tipped from investment craze to criminal enterprise. He was a banker.
A lot of people have been charged with crimes related to the stock market boom. Over the summer, a US Justice Department report boasted that more than 900 people had been charged in the two years since a special task force on corporate fraud had been organized.
Plenty of corporate executives have been charged with crimes, including figures like Enron Corp.'s Ken Lay and WorldCom Inc.'s Bernie Ebbers. Investors have faced the music too, though in smaller numbers. Count Stewart in that category.
But the people who were at the center of the crazy money wheel of the late 1990s, investment bankers selling stock or commercial bankers moving around huge sums under sometimes dubious circumstances, are missing from the criminal docket.
True, Quattrone was one big fish. He was so big he earned as much as $120 million a year bringing technology companies public. But name another big shot from that crowd who ended up as a criminal defendant.
Here's one explanation for the dearth of Wall Street executives threatened with jail: No one committed any provable crimes. Stop laughing; something like that isn't out of the question.
Making a criminal charge stick in a complicated corporate case isn't easy. And there are a lot of aggressive tactics bankers can employ while remaining on the right side of a legal line.
But criminality and culpability are two different things. And the banker class is culpable up to its eyeballs. The appropriate measurement is money, of course.
The bill first came due in December 2002, when a long list of Wall Street firms agreed to pay a combined $1.4 billion for fines, restitution, and other expenses to make some of their regulatory problems go away. Citigroup Inc. wrote the biggest check, for $450 million.
Now many big companies have sized up the rest of their civil liabilities and bit the bullet in recent months.
JP Morgan Chase & Co. alone set aside $3.7 billion during the second quarter of this year for its ''litigation reserve," a stash dedicated to making legal problems disappear. During the same quarter, Citi took a hit of $7.9 billion to boost its reserve and settle charges related to its relationship with WorldCom. The silver lining for both companies: Their settlement expenses are tax deductible.
The banker class will continue to write checks to pay for the '90s. The final tab will be huge, even by Wall Street standards. But don't expect bankers to go to jail.
Except Frank Quattrone. And if it wasn't for a single e-mail, even he might have moved on to a life that didn't contemplate prison.
