Court tosses conviction of high-profile tech banker

NEW YORK — High-powered technology banker Frank Quattrone was granted a new trial Monday when a federal appeals court tossed out his conviction on charges he obstructed a government probe of stock offerings at the height of the dot-com boom.

The 2nd U.S. Circuit Court of Appeals in Manhattan said the evidence was sufficient to sustain a conviction but that the May 2004 verdict must be thrown out because the jury was improperly instructed on how to interpret the law.

It also ordered that the case be reassigned to another judge. The government is weighing whether to retry the case.

Quattrone was sentenced to 18 months in prison after he was convicted of obstruction-of-justice charges related to a federal investigation of initial public offerings of stock. An earlier trial of Quattrone ended in a mistrial when a jury deadlocked.

Quattrone, 50, has been allowed to remain free while appealing his conviction.

The appellate decision represents a setback for federal prosecutors in New York, who had successfully convicted several other high-profile defendants in the past few years. Martha Stewart was found guilty of lying about a stock sale, while cable-company founder John Rigas was convicted of looting Adelphia Communications.

A year ago, former WorldCom CEO Bernard Ebbers was found guilty of charges related to the $11 billion fraud at the former telecommunications company. Ebbers received a 25-year prison term, which he is appealing.

Quattrone was one of the biggest names on Wall Street during the 1990s Internet stock boom, supervising 400 technology investment bankers from the Palo Alto, Calif., offices of Credit Suisse First Boston (CSFB).

The trial of Quattrone focused on what he knew and did after the National Association of Securities Dealers (NASD) in May 2000 began investigating CSFB's underwriting of initial public offerings. The NASD has since barred Quattrone from the securities industry for life.

The NASD probe was followed by investigations by the Securities and Exchange Commission and a federal grand jury into how the company handled initial public offerings.

The company was never criminally charged, but Quattrone was accused of hindering the federal probe. Prosecutors cited a December 2000 e-mail in which Quattrone endorsed a colleague's suggestion that bankers "clean up" their files.

Quattrone testified he was following bank policy when he issued the e-mail and that he knew almost nothing about a grand-jury subpoena seeking documents involving hundreds of initial public offerings of stock during the late-1990s Internet boom.

In its ruling, the appeals court said the trial judge, Richard Owen, incorrectly told jurors they did not need to find a nexus between Quattrone's actions and pending investigations of his company.

It said Owen's instruction was at odds with last year's U.S. Supreme Court ruling throwing out the conviction of the Arthur Andersen accounting firm for destroying Enron-related documents.

The Supreme Court in that case ruled that the jury instructions were too broad.

In its ruling, the 2nd Circuit said: "We cannot confidently say that if a rational jury was properly instructed, it is clear to us beyond a reasonable doubt that they would have convicted Quattrone."

Quattrone, who took prominent companies like Amazon.com public during the Internet stock craze, was the highest-profile Wall Street figure since junk-bond pioneer Michael Milken to face a criminal conviction.

His lawyers said Owen also made inconsistent rulings about evidence and testimony that kept their client from getting a fair trial.

The appeals court ordered several changes at any future trial favorable to Quattrone, including the elimination of one line of government questioning that it said went too far and the inclusion of some Quattrone evidence that was kept out.

The appeals court called Owen a dedicated judge but ordered the case reassigned, saying portions of the trial transcript "raise the concern that certain comments could be viewed as rising beyond mere impatience or annoyance."

In a statement, Quattrone said that for three years he has "held my head high knowing I was innocent and never intended to obstruct justice."

Mark Pomerantz, Quattrone's lawyer, said that "everything about a next trial if there is a next trial would be different, including the result."

He predicted a changed climate would improve Quattrone's chances in a retrial.

Prosecutors issued a statement saying they were reviewing the ruling and considering their options.