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An Appeal for Reason: Why Frank Quattrone’s Appeal Should Be Granted

As some may know, I used to work as a Wall Street technology analyst for CSFB and DMG.   My ultimate boss was a guy named Frank Quattrone.   Frank was basically the best technology investment banker on the planet.  Being the best, he made a lot of money.   Unfortunately, the money in turn made him a convenient symbol of “Internet excess”.  Thus, when the Internet bubble burst in 2000 and the French Revolutionary-style purge began, the knives came out for Frank with a vengeance.

Let Them Eat Frank
In an effort to throw some red meat at aggrieved individual investors (and get some piously sanctimonious face time with the press), the federal government and the SEC decided to tag-team Quattrone and launched a number of coordinated investigations in an effort to try and pin some criminal blame for the bubble’s collapse on Frank’s well paid shoulders.  Unfortunately for the government, despite all of their efforts, they basically came up with bupkis as their criminal investigations drew a blank.

That was until some enterprising paralegal unearthed a single 22 word e-mail in which Frank briefly endorsed another colleague’s much longer e-mail encouraging employees to follow the firm’s “document retention policy” and throw away any old documents that weren’t required.  Stymied in its attempts to pin any kind of criminal wrap on Quattrone, the government now found a convenient scapegoat for their fruitless efforts:  they would accuse Frank of obstructing justice by nefariously encouraging employees to destroy documents.

As I outlined a while back, the government’s case requires a jury to simultaneously buy two mutually exclusive and logically inconsistent points of view.  The first view they must buy is that Frank was a master of the universe, so smart, so canny, and so capable that it would be impossible for him to have not known that his e-mail was illegal.  The second view is that Frank is so skittish, clumsy, lazy and ignorant, that he would make the centerpiece, indeed the sole piece, of his obstruction of justice efforts, a very public and entirely superfluous e-mail to 500+ people.  It’s as if Frank Quattrone, master of Wall Street, suddenly hadn’t even graduated from the kindergarten school of Corporate Intrigue and Politics.

If At First You Don’t Convict, Try, Try and Try Again
Undeterred by the logical contradictions of their case, the government plowed ahead and put Frank on trial.  The first trial ended in a hung jury, but the government decided to try again.  The second time proved the charm for the government and Frank was convicted on all three counts of obstruction.  The judge in both trials, who made little secret of his dislike for Frank and is a great exhibit for why mandatory retirement ages for Federal judges should be enacted, not only gave him the maximum sentence for the three counts, but gratuitously tacked on some extra time because the judge personally believed that Frank lied when he was on the stand (even though he wasn’t charged with perjury and the jury never considered that charge).

Appealing For A Reason
The reason I am rehashing all of this is that tomorrow Frank’s lawyers are presenting to the Federal Appeals Court in New York in an attempt to get his conviction overturned.  Having followed the case closely I have had an opportunity to read Frank’s appeal as well as a bunch of other documents (you can read the latest doc here ) and I have come to conclusion that if there is any justice in the world Frank will, at the very least, get a new trial, and if he’s lucky he will either have the case either thrown out completely or sent back with so many restrictions that the government will have to finally give up the ghost.

Now I am no lawyer and I am definitely not a Federal Appeals Court judge, so my opinion basically counts for nothing in the grand scheme of things, but I can read and I can reason, and given this it’s hard to see how Frank won’t at least get a new trial given the following points:

  1. Arthur Andersen To The Rescue: Frank’s best chance for an acquittal has to do with a recent Supreme Court case involving Authur Andersen, the once mighty accounting firm.  As you may recall, the government charged Andersen, as a firm, with obstruction of justice based on a set of circumstances very similar to Frank’s.  In Andersen’s case, with Enron rapidly imploding and the specter of regulatory action increasing hourly, an internal Andersen lawyer sent an e-mail out to members of its Enron account team encouraging them to follow the firm’s “document retention policy”, which basically was legalese for “my god man, destroy every document you can before the feds show up”.   The government maintained this order to destroy documents represented a criminal conspiracy to obstruct justice and charged the entire firm with obstruction of justice, which for a corporation basically amounted to a summary execution without trial.   A few weeks ago, the Supreme Court ruled that the government actually had no right to charge Andersen with obstruction of justice because the court held that you can’t convict people for following a corporate policy when they have no evidence to suggest that they shouldn’t.  While it was hollow victory for Andersen (it went out of business a long time ago) it was a potentially huge victory for Quattrone.  In Frank’s case, he too was simply encouraging employees to follow a valid policy (in fact the government didn’t even charge the guy who authored the main e-mail encouraging people to follow the policy).  While the government maintains that Frank should have known that the documents in question were under government subpoena or shortly would be, they also admit that they have no evidence anyone ever told him that.  So in many respects Frank’s position is very similar to Andersen’s and one would expect that the appeals court judges, with the Supreme Court decision hot off the presses, would also see the same similarities.
  2. There’s This Little Bit of Evidence We Forgot To Tell You About…:  Turns out the judge excluded so much evidence in Quattrone’s trial you’d think he was a North Korean censor editing a Heritage Foundation report on Kim Il Jong.   For example, the judge wouldn’t let Quattrone’s lawyers enter into evidence discussions amongst CSFB’s own lawyers in which they, in violation of their own policies, decided not to tell anyone in the firm about the government’s document subpoenas, the same subpoenas Frank was supposed to have obstructed.  How he is supposed to have obstructed a subpoena that his firm’s own lawyers apparently didn’t even tell him about is beyond me and probably would have been beyond a jury, but they never got to hear about that.  Another choice nugget the judge decided to exclude were a huge set of e-mails in which Frank basically endorsed other colleague’s e-mails.  The defense obviously wanted to show the jury that it was routine for Frank to offer short endorsements of other people’s e-mails so they could demonstrate that the e-mail about the document retention policy was not unusual in the slightest, but the judge inexplicably excluded the e-mails as irrelevant.
  3. Following the Wrong Instructions:  At the end of trials, judges give juries instructions in which they basically tell the jury how they are supposed to apply the law.  In Frank’s case, the judge’s instructions basically said “you can convict this guy even if you think he just had a hunch that he might be breaking the law and you can even convict if him if you think he played stupid and consciously avoided trying to find out that he might be breaking the law.”  These instructions were similar to ones in Andersen’s case that the Supreme Court said were silly so there’s a decent chance that the appeals court will follow suit.

There are a lot of other little things that bolster Frank’s appeal, but if the appeals court finds in Frank’s favor on any of these main issues outlined above, it will probably get him a new trial at a minimum and may just get him completely acquitted as the government knows it will face a much tougher fight a third time around with the precedent now set by the Andersen case.

In fact, if Frank does get acquitted the stage will be set for a Phoenix-like comeback as it looks like he also has a decent shot of overturning the SEC’s lifetime ban in another appeal.  If he were to beat both the Feds and the SEC, there would be nothing preventing Frank from coming back to Wall Street and putting "the hurt" back on all the competitors that merrily jumped up and down on his supposed grave.  Unfortunately, I suspect that will never happen as Wall Street probably doesn’t hold the same allure these days and Frank’s experience with the “justice” system has likely left him with more important battles to fight.   It’s too bad though as that sure would be a sight to behold.

July 11, 2005 in Wall Street | Permalink


Legal Disclaimer

The thoughts and opinions on this blog are mine and mine alone and not affiliated in any way with Inductive Capital LP, San Andreas Capital LLC, or any other company I am involved with. Nothing written in this blog should be considered investment, tax, legal,financial or any other kind of advice. These writings, misinformed as they may be, are just my personal opinions.