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Witness: Banker Knew of Probe

October 04, 2003|Walter Hamilton | Times Staff Writer

NEW YORK — A key government witness testified Friday that he told Frank Quattrone that the former Silicon Valley investment banker could become involved in a grand jury investigation only hours before Quattrone instructed his staff to destroy documents.

During the fifth day of Quattrone's criminal trial, federal prosecutors introduced evidence showing that Quattrone was paid about $160 million over two years -- a revelation that seemed timed for maximum effect because it came minutes before the jury was dismissed for the weekend.

The testimony presented Friday represented the heart of the government's case against the onetime star of the Silicon Valley investment world, and the courtroom atmosphere was charged as government attorney David Anders introduced evidence showing that it was rare for investment banks to face criminal grand jury probes and indicating that Quattrone believed the investigation posed a serious threat to him.

David Brodsky, who was a top lawyer at Quattrone's former firm, Credit Suisse First Boston, testified that the grand jury investigation could be a "fatal blow" to the company and especially to Quattrone, who crafted many of the initial public stock offerings at the center of the probe.

"It was very largely Frank Quattrone's business ... that was potentially threatened," Brodsky testified.

The government has accused Quattrone of obstruction of justice and witness tampering, alleging that he wrote a Dec. 5, 2000, e-mail to his staff to stymie probes into how CSFB issued shares of hot IPOs to favored clients. The e-mail advised the staff to follow an e-mail sent by another banker, Richard Char, on Dec. 4, suggesting they "clean up" IPO files.

Quattrone claims he did not believe that the grand jury probe was targeting him, because it focused on how IPOs were distributed to CSFB clients, not on how the offerings were put together by Quattrone and his staff.

Brodsky testified that he told Quattrone in a phone call less than eight hours before the banker sent the Dec. 5 e-mail that Quattrone should hire his own lawyer because he was likely to be called to testify before the grand jury.

In an e-mail to Quattrone two days earlier, Brodsky warned Quattrone that the probe "is serious and unless I can slow it down and curtail what they do, it will spread to others in the firm."

A dispute arose over the way the prosecution introduced the issue of Quattrone's pay.

As Anders worked through a chronology of e-mail messages between Quattrone and Brodsky, the prosecutor changed gears shortly before the court session was to adjourn for the weekend and introduced documents detailing Quattrone's pay.

It appeared that the prosecution wanted Quattrone's compensation to be one of the last items the jurors heard about before a long weekend off for the Yom Kippur holiday. Earlier in the session, Anders had asked Judge Richard Owen what time that day's session would end.

Quattrone's defense team bitterly denounced the introduction of the salary information, but Owen said it was acceptable.

"The fact that it came in where it came in is ... entirely appropriate," Owen said. "It was going to come in anyway, somewhere. There was no question about it."

That didn't mollify John Keker, Quattrone's lead attorney, who outside court labeled the introduction of the pay data "a ploy and a cheap shot." Quattrone's lawyers had fought unsuccessfully in pretrial hearings to exclude compensation information on the grounds that it was irrelevant, Quattrone spokesman Bob Chlopak said.

Quattrone has contended that CSFB lawyers did not tell him to preserve documents until after he sent out his e-mail. He maintains that his e-mail complied with a CSFB policy calling for the destruction of certain documents unless there was a countermanding order to hold on to them.

After the hearing, Chlopak blamed Brodsky for not telling Quattrone to keep documents.

Earlier in the day, prosecutors called as a witness Linda Jackson, a former CSFB investment banker who worked for Quattrone. Jackson testified that she began to destroy documents after receiving the e-mails from Char and Quattrone.

"I started cleaning out my files," Jackson said. "Anything that shouldn't have been in the deal file I discarded."

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