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September 9, 2004

Quattrone sentenced to 18 months in prison

Former CSFB Silicon Valley investment banker Frank Quattrone was sentenced to 18 months in prison for obstructing a probe of how IPO stocks were doled out. The sentencing follows his obstruction conviction in May, which was largely based on an e-mail he sent underlings that encouraged them to obey document-management procedures that prosecutors alleged would have destroyed evidence sought by investigators.

The punishment was well above federal guidelines, which called for no more than 16 months, and from a probation department recommendation of 10 months, half on supervised release.

Mr. Quattrone, who is 48, is the highest-profile Wall Street figure to face prison since junk-bond king Michael Milken was given a 10-year sentence (later reduced) for alleged securities-fraud violations nearly a decade ago.

In handing down the sentence, U.S. District Judge Richard Owen granted a prosecution request to lengthen Mr. Quattrone's sentence to between 15 and 21 months on the grounds that he had committed perjury when he testified at his trial. The judge based his decision on Mr. Quattrone's denial before the jury that he intended to obstruct investigations by the Securities and Exchange Commission and a federal grand jury. Mr. Quattrone's attorneys argued that the alleged perjury was not proved before a jury. But Judge Owen ruled that it was clear to him that Mr. Quattrone's denial that he intended to obstruct justice was not true and commented that Mr. Quattrone could have avoided the perjury issue by not taking the witness stand.

H'mm. A criminal defendant should not take the stand to defend himself from a criminal charges because he might commit another criminal offense that the judge will convict him of during sentencing without a trial? Let's see how that proposition plays out on appeal.

At any rate, at least Judge Owen agreed to allow Mr. Quattrone to serve his time at the federal minimum-security prison camp in Lompoc, Calif. However, Judge Owen denied Mr. Quattrone's request to remain free pending appeal and ordered him to surrender on October 28.

A jury convicted Mr. Quattrone in May of obstructing a government investigation into how CSFB allocated shares of hot IPO stocks. Prosecutors charged that Mr. Quattrone obstructed the investigation when he forwarded a single e-mail to his subordinates advising them to clean-up files per the bank's document-management policies soon after he learned about the federal grand-jury investigation. A first trial last October ended in a hung jury.

Mr. Quattrone still faces a possible lifetime ban from the securities industry under charges pending against him by the National Association of Securities Dealers and the SEC. His former firm CSFB paid $100 million in 2002, without admitting wrongdoing, to settle charges that the SEC and NASD had brought against the firm.

Posted by Tom at September 9, 2004 6:37 AM |

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