The One Who Got Away

Frank Quattrone was always good at making deals. As a sizzling Silicon Valley investment banker during the tech boom of the 1990s, he orchestrated the initial public offerings (IPOs) of start-ups from Netscape to Amazon.com collecting as much as $120 million a year for himself in the process. Yet the deal he reached last week may well be the one he cherishes most. After 31/2 years of court dates, two criminal trials and the prospect of jail time, Quattrone struck a deal in which federal prosecutors agreed to all but drop charges that he obstructed justice during a 2000 investigation into how his employer handed out IPO shares of hot new companies.

The deal marks the end of a sorry chapter in American business history. While high-profile white-collar crime persists, the dramatic criminal cases that were launched just after the dotcom economy fizzled are now mostly completed. The icons of massive, turn-of-the-century corporate fraud--Ken Lay and Jeff Skilling of Enron, Bernie Ebbers of WorldCom, Dennis Kozlowski and Mark Swartz of Tyco--are convicted and, in Lay's case, dead. Even Martha Stewart has served time. And many, if not most, of the cases the feds brought against smaller fish--to help assuage a share-owning public that had been scammed by phony accounting and overhyped stock--are resolved. The government claims that since mid-2002 it has won more than 1,000 corporate-fraud convictions, including those of more than 100 CEOs and presidents.

That's not to say the system has been wholly reformed. Although Wall Streeters were genuinely terrified by the wrath of the prosecutors, they eventually flocked to other legal schemes--like hedge funds--with which to vastly overcompensate themselves. Prosecutors too are cutting their losses, and, as the public outrage subsides, moving on to new areas.

The Quattrone case symbolizes that shift. During the go-go bubble years, Quattrone was the go-to guy at Credit Suisse First Boston (now called Credit Suisse) for tech deals. After the government started looking into how bankers set aside shares of promising IPOs for favored clients and pressured analysts to issue rave reports about companies that often had no way of making money, Quattrone sent an e-mail reminding colleagues to "clean up" old files, per company policy. The Justice Department viewed that as obstruction of justice, since it had already started investigating IPOs involving Credit Suisse. One jury was divided on the issue. Another, in 2004, found Quattrone guilty, after which he was sentenced to 18 months in prison.

But that verdict was overturned last March by an appeals court that cited faulty jury instructions. (The trial judge didn't explain that Quattrone would have had to know what he was doing was wrong to be convicted.) With their case, and perhaps their will, weakened, prosecutors waved a white flag and agreed to let Quattrone off--no fine, no admission of guilt, no ban from the securities industry--as long as he stays out of trouble for one year.

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