Quattrone wins new trial as conviction thrown out
By Jonathan Stempel
NEW YORK (Reuters) – A U.S. federal appeals court on Monday
threw out the 2004 obstruction and witness tampering conviction
of former star investment banker Frank Quattrone and granted
him a new trial.
Citing erroneous jury instructions by U.S. District Judge
Richard Owen, a unanimous three-judge panel of the U.S. Second
Circuit Court of Appeals in New York directed that the case be
reassigned to a new district judge in the interest of justice.
Owen had sentenced Quattrone to 18 months in prison after a
Manhattan jury in May 2004 found the former Credit Suisse Group
Inc. banker guilty of two counts of obstruction of justice and
one count of witness tampering. Quattrone’s lawyers argued that
the trial was rife with errors.
“Essentially, the court of appeals said that Judge Owen,
while a good judge, has made up his mind and can no longer be
impartial,” said George Newhouse, a white collar criminal
defense specialist at Thelen Reid & Priest LLP in Los Angeles.
The jury concluded that Quattrone, 50, tried to block
regulatory and grand jury probes into how his bank allocated
shares of hot initial public offerings in the late 1990s, when
he told Credit Suisse colleagues in a December 2000 e-mail it
was “time to clean up those files.”
Another jury had deadlocked in 2003 on the same charges.
“With the wave of public opinion crying out for conviction,
a judge has to be careful not to be carried away with it,” said
Roy Smith, a professor at New York University’s business school
and former partner at Goldman Sachs & Co. “My guess is it may
be harder to bring about a conviction after this ruling.”
It was not immediately clear whether the government will
try Quattrone a third time. Megan Gaffney, a spokeswoman for
U.S. Attorney Michael Garcia, said: “We are reviewing the
opinion and considering our options.”
Representatives of Quattrone and Credit Suisse were not
immediately available for comment. Quattrone has been free
pending the outcome of his appeal.
In his 61-page opinion for the appeals court, U.S. Circuit
Judge Richard Wesley called Owen a “dedicated jurist,” and said
a “rational trier of fact” could conclude that Quattrone
deserved to be convicted.
Wesley wrote, though, that while there was no evidence to
seriously doubt Owen’s impartiality, “portions of the
transcript raise the concern that certain comments could be
viewed as rising beyond mere impatience or annoyance.”
The appeals court concluded that Owen erred in allowing the
jury to convict Quattrone of obstruction “regardless of whether
he intended such.”
It also said the judge erred telling the jury it need not
find a “nexus” between Quattrone’s actions and the pending
investigations, Wesley added.
Newhouse said: “At most, there was circumstantial evidence
on the all important issue of corrupt intent. The government
will need to take a hard look at whether to retry this.”
When he was convicted, Quattrone had been the most powerful
securities industry executive to face jail time since junk bond
king Michael Milken in the early 1990s.
After growing up in South Philadelphia, Quattrone became a
star banker at Morgan Stanley, helping take such companies as
Cisco Systems Inc. and Netscape Communications Inc. public.
Later, at Credit Suisse, he took home $120 million in
compensation one year by taking companies such as VA Linux
Systems Inc. public.
Quattrone was also reportedly instrumental in dishing out
shares in hot initial public offerings to top executives known
as “Friends of Frank.”
(Additional reporting by Kevin Drawbaugh and Paul Thomasch)