Credit Suisse Puts Banker On Leave; E-Mail Suggests He Was Aware of Probes

Credit Suisse First Boston Corp. put star investment banker FrankQuattrone on administrative leave yesterday after discovering e-mails that suggest he knew about ongoing criminal and regulatoryprobes when he and a subordinate advised employees to "clean up thosefiles," sources familiar with the matter said.

The U.S. attorney's office in Manhattan opened a probe into the e-mails after receiving copies of the information from CSFB on Friday,other sources said.

Quattrone, whose close ties to Silicon Valley technologyexecutives brought him many high-profile deals, said in a statementyesterday: "I did nothing wrong. I am confident the investigationwill show that."

Last week, Quattrone assured CSFB's lawyers that he knew nothingabout any probes when he and a subordinate sent e-mails on Dec. 4 and5, 2000, about document retention to the firm's technology-bankingemployees. They warned employees to delete notes, drafts and internalmemos because "the securities litigation bar is expected to [launch]an all out assault."

Then on Friday, CSFB officials found a Dec. 3, 2000, e-mailexchange in which David Brodsky, then-general counsel, told Quattroneof inquiries by the Securities and Exchange Commission and the NASD,the securities industry's main self-regulatory body, and a grand jurysubpoena, the sources said.

After discovering the Brodsky e-mails, the firm put Quattrone onleave and opened an investigation.

The firm said in a statement that "the information discoveredFriday raised questions about Mr. Quattrone's response to an inquirylast week by the firm about whether he was aware of pendinginvestigations in 2000 when he sent an e-mail to employees regardingdocument retention issues. Second, the new information raisedquestions about whether Mr. Quattrone acted appropriately in December2000 when he sent that e-mail."

The suspension of Quattrone, 47, comes shortly after the NASDinformed him that it plans to file civil charges against him forallegedly failing to police the conflicts between banking andresearch and improperly assigning initial-public-offering shares toexecutives at CSFB client companies. In a statement last week,Quattrone denied wrongdoing.

The new information on document retention could turn out to be farmore damaging to Quattrone than the IPO and conflict issues, outsidelawyers said. It can be a crime to destroy documents that are beingsought by government regulators or a grand jury.

"Most securities law violations [are] dealt with civilly. . . .But issues relating to destruction of documents substantially . . .increase the likelihood of criminal indictment," said HowardSchiffman, a former SEC lawyer. "Because of CSFB's problems, they'resimply going to have to behave with the highest ethical standards andtake a stringent view of any violation."

CSFB, a division of Credit Suisse Group of Switzerland, was one of11 investment-banking firms to participate in a $1.4 billion workingsettlement of conflict-of-interest claims late last year. It paid$200 million, second only to Citigroup. It also paid $100 million in2002 to settle civil charges alleging that the firm forced customersto pay higher commissions for access to IPO stock.

A spokesman for the U.S. attorney's office in Manhattan declinedto comment on Quattrone. But sources said the office, which at onepoint looked into IPO allocation, is now looking to see whetherfurther investigation is warranted. Quattrone was not the focus ofthe earlier probe, sources familiar with the matter said.

Last summer, the accounting firm Arthur Andersen LLP disintegratedafter being convicted of one count of obstruction of justice inconnection with the firm's handling of Enron Corp. paperwork.

New York-based CSFB declined to comment in detail on Quattrone'ssuspension. But its statement said "that following these December2000 e-mails regarding document retention, the Firm's legaldepartment acted promptly to ensure that all relevant documents wouldbe preserved and provided to authorities."

Quattrone, a key figure in the 1990s Internet boom, and his teamof technology bankers leapt from one investment-banking firm toanother, winning deals from high-profile firms including NetscapeCommunications Corp. and Amazon.com Inc. Quattrone joined CSFB in1998.

NASD has informed him in a "Wells notice" that one of the groundsfor its complaint will likely be his unusual role as the supervisorof both research and banking in the technology sector. Regulators saythe analysts, who are supposed to be independent, often wrotepositive reports on troubled companies to help the bankers winbusiness.

Quattrone, who still has an opportunity to submit new informationand change the regulators' minds, is also facing civil charges basedon the recently banned practice of "spinning," or giving shares inIPOs to executives at companies that were banking clients.