The long, drawn out trial of Frank Quattrone has come to a close today. Facing a potential THIRD trial for obstruction of justice and witness tampering, Quattrone emerged victorious as the judge gave him a "deferred prosecution" which in plain speak says that Quattrone can walk away free and clear provided he violates no laws in the next 12 months. According to published reports, Quattrone admits to no wrongdoing and, most importantly, is free to resume his deal-making ways under no restriction.
For those not keeping score at home [courtesy of the Merc],
- 1998 -- Quattrone joins Credit Suisse First Boston and runs a technology investment banking group from a Palo Alto office.
- May 2, 2000 -- NASD, an industry regulator, begins an investigation concerning IPO stock deals at Credit Suisse.
- Dec. 5, 2000 -- Quattrone endorses and forwards a colleague's e-mail that urges employees to "clean up those files."
- Feb. 28, 2003 -- Quattrone is scheduled to testify at the NASD, but he does not appear on the advice of his lawyers.
- March 2003 -- NASD files action against Quattrone for "spinning,'' claiming his role in IPO allocations violated rules against gifts and gratuities.
- April 23, 2003 -- Federal prosecutors charge Quattrone with obstruction of justice for forwarding the "clean-up'' e-mail.
- Oct. 24, 2003 -- Jurors are deadlocked and judge declares a mistrial.
- Feb. 28, 2004 -- Quattrone convicted at his second trial. Later initiates appeal.
- November 2004 -- NASD bars him for life from working in the securities industry for not testifying.
- March 20, 2006 -- A federal appeals court sets aside Quattrone's conviction.
- March 24 -- SEC overturns NASD lifetime ban against Quattrone working in securities.
- June 1 -- NASD dismisses all charges against Quattrone related to IPO stock deals at Credit Suisse.
From the Washington Post:
"I am very pleased that the case will be concluded and I look forward to the dismissal of all charges," a beaming Quattrone said outside the federal courthouse in Manhattan. "I plan to resume my business career while continuing my board service at the Innocence Project and the Tech Museum of Innovation. ..... Thanks to all of you who stood by me during the past four years. God bless you all."
In a market where VC and private equity funding is overflowing; yet public IPO exits haven't kept pace; the investment world shouldn't take Quattrone's statement lightly. In reaction to today's finding, Samuel Hayes, a professor at HBS said,
"He will never be able to recover his position'' of influence before the prosecution, Hayes said in an interview. "He'll have to maintain a low profile and, he'll have to stay away from any business that is controlled by people who have a fiduciary obligation to their investors.''
All due respect to Professor Hayes, I think he's kidding himself if he thinks an influencer like Quattrone won't re-insert himself into the process; and do so in grand fashion. Certainly one could argue that the system which was in place that allowed for Quattrone to earn more than $120 million in one year is long gone; but there are plenty of deals to be made in the private and public equity markets and Quattrone's relationships (or more to the point, his ability to bring interested parties together) isn't something that goes away easily.
Anyone that's been involved in the technology markets over the last 25 years has felt the impact of Quattrone's influence. A self-made deal maker of the highest degree, he was responsible not only for some of the biggest telecom and dot-com IPOs of the bubble; he also helped pioneer the role of the research analyst as a linchpin (and pawn) of the investment bankers. In 1999 and 2000, Quattrone personally made more than $150 million allegedly; which happens to coincide with the biggest investment bubble in our country's history.
There's excess capital everywhere, tons of companies (large and small) are for sale, and now there's one more rainmaker out there looking to get some people in a room to talk turkey.
- To my VC friends and readers, are you happy about this news? Do you believe he can foster a more liquid IPO market or will the sins of the Bubble continue to work against him and tech IPOs?
- To my PE readers and friends, could you see Quattrone moving to the LBO world where the big deals appear to be happening?
- To my public equity friends and readers, do you see his time as bygone or, like me, do you think that we collectively have short memories particularly when it comes to someone who we think can help us generate better returns?
- To my entrepreneurial friends and readers, have you dealt with Quattrone in the past and, more importantly, would you deal with him in the future?
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ya, I worked for DMG/CSFB before realizing I was miss-casted as an investment banker :)
A couple of Frank's lieutenants are partners at KKR. KRR is looking pretty jealously at Francisco & TPG (probably mroe so with TPG) looking at tech buyouts. (who knew you can do 12B buyouts in tech land?) So there is a likelihood as well of Frank doing something in that field . . . as the east coast buyout shops must be calling him non-stop by now. . .
Posted by: will | August 22, 2006 at 09:18 PM
Will,
Thanks for reading. I didn't realize you used to work for Quattrone...this is prior to the eBay days I guess?
Best,
J
Posted by: Jason Wood | August 22, 2006 at 08:57 PM
Hey Jason,
You hit the nail on the head, I used to work for Frank. . . the man will make a comeback not seen since Eric Schmidt :)
http://hitchhiker.blogsome.com/2006/08/21/quattrone-on-the-comeback-trail/
Posted by: will | August 22, 2006 at 08:53 PM