The One Who Got Away

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The evidence against Quattrone--who has all along proclaimed his innocence--was thin from the start, says Columbia University law professor John Coffee. But the prosecutors thought there was enough circumstantial evidence surrounding the e-mail to win a case. In the end the decision to drop the case echoes a broader trend to allocate resources to more timely issues. "You can't focus on everything," says Andrew Weissmann, former head of the Justice Department's Enron task force, who is now in private practice. "There are a lot of other things to do." For example: the backdating of stock options. More than 100 companies, from Home Depot to Apple, are being investigated for the way they handed out stock options to executives with issue dates earlier than the actual ones. (See box.)

There are still a few loose ends from the wave of prosecutions kicked off after the 2000 stock-market slump and the Enron meltdown. And some aren't as easy to wrap up as Quattrone's. Several British bankers, known in England as the NatWest Three, were hauled to Texas in July, after loud protests back home and a drawn-out extradition process. They face charges that they worked with ex-Enron CFO Andrew Fastow to siphon millions of dollars from a deal between their former employer, National Westminster Bank, and Enron. And in August, most of the convictions of four former Merrill Lynch executives, who stood accused of helping Enron inflate earnings by charading a loan as the sale of energy-producing barges, were overturned. An ex-Enron manager who was also convicted decided not to contest the decision. The government is expected to appeal the ruling on the four, which hinges on the interpretation of a controversial legal phrase.

Reversals like these often mark the true end of a contentious business cycle, as the legal system shakes out how old laws will apply to new crimes. The Supreme Court's decision last year to overturn the conviction of accounting firm Arthur Andersen wasn't without precedent. (Nor was it helpful: after the initial trial, Andersen had collapsed and some 28,000 U.S. employees lost their jobs.) Similarly, Charles Keating, one of the biggest nabs in the 1980s savings and loan scandal, saw his conviction reversed nearly five years after going to prison. And after the late-'80s insider-trading Wall Street sweep that, among other things, sent Michael Milken and Ivan Boesky to prison, a number of convictions were overturned, including that of onetime Boesky associate John Mulheren. "When you're more aggressive, you're going to wind up with more losses," says Peter Henning, a law professor at Wayne State University.

And when it's all over, you often end up with new laws, like the Sarbanes-Oxley reforms, which have made illegal much of the unsavory behavior of the go-go years. New laws aren't retroactive, of course, and what was on the books didn't seem sufficient to convict Quattrone. "I am very pleased that the case will be concluded," he said, emerging from the courthouse last week. "I plan to resume my business career." Northern California's tech investors, many of whom wrote letters of support during Quattrone's two trials, seem poised to embrace him. It is the clearest sign yet that while the world may have changed, it has also moved on.

With reporting by Kathleen Kingsbury, Jyoti Thottam

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