20 investment funds suspected of kickbacks, Quattrone jury is told

Defendant said to have had 4,489 unread e-mails

October 02, 2003|By BLOOMBERG NEWS

NEW YORK - The National Association of Securities Dealers suspected 20 investment funds of paying kickbacks in return for shares of initial public offerings, according to testimony in the trial of former Credit Suisse First Boston banker Frank Quattrone.

"These were some of the accounts that we suspected may have been involved in what we were investigating," Roger Sherman, who runs the enforcement division at the NASD, told a Manhattan federal court jury yesterday.

Quattrone is accused of obstructing justice by urging his colleagues to destroy documents sought in a probe of the bank's IPO allocation process.

Prosecutors yesterday sought to lay out for the jury details of the investigation Quattrone is accused of impeding.

The defense countered by trying to show that his investment banking unit was not the focus of the probe.

Witnesses from the Securities and Exchange Commission and NASD, the self-regulatory group for the brokerage industry that was also investigating the bank, testified about documents they demanded from Credit Suisse.

During Sherman's testimony, prosecutors introduced an NASD letter, dated Sept. 11, 2000, in which the agency asked for information about investors that got IPO shares.

The SEC and the Justice Department wanted to know if recipients of IPO shares kicked back part of their profits to CSFB after shares soared in first-day trading. Quattrone, who lives in Palo Alto, Calif., ran CSFB's technology unit, which managed the most computer-related IPOs during the Internet stock boom.

Investigators suspected that in return for getting IPO shares, recipients paid inflated commissions in trades involving other companies, Sherman said.

Also yesterday, Sherman and witnesses from the SEC and the U.S. attorney's office in Manhattan testified that they were seeking documents from CSFB on many IPO-related subjects, including pricing, valuation and distribution of shares.

Quattrone defense attorney John Keker sought to show that his client didn't have personal knowledge of the subpoena requests, and he got the witnesses to testify that investigators dealt with CSFB lawyers, not Quattrone directly.

Also, in an effort to demonstrate how busy Quattrone was, the defense said he had 4,489 unread e-mail messages on his computer Dec. 4, 2000.

The government's case centers on a Dec. 5, 2000, e-mail message in which Quattrone alludes to his prior experience as a witness in a securities fraud lawsuit and encourages subordinates at CSFB to follow firm policy calling for destruction of some records.

CSFB agreed to pay $100 million in January 2002 to settle charges related to claims that it doled out IPO shares in exchange for kickbacks. The SEC said the firm charged commissions of as much as $3.15 a share, compared with a typical rate of 6 cents.

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