NASD Suspends, Fines Quattrone

Former star investment banker Frank Quattrone was fined $30,000 on Friday and suspended from working in the securities industry for one year by a securities industry regulatory panel that said he interfered with an investigation.

The National Assn. of Securities Dealers had been investigating whether Quattrone encouraged employees in his Silicon Valley-based investment banking unit at Credit Suisse First Boston to destroy internal documents that were being sought as part of a broader probe into hot stock offerings.

Quattrone refused the NASD’s request for testimony in February, saying he should not have to appear because of the pending criminal case.

The NASD hearing panel Friday found that though Quattrone “did fail to testify, there were certain mitigating circumstances,” and gave him one year to provide information. If he does not, the panel said, he will be permanently barred from the securities industry.

Some, including the NASD’s head of enforcement, Barry Goldsmith, already had been calling for a lifetime ban against Quattrone. Goldsmith said in a statement that the panel’s ruling was too lenient and that he planned to appeal.

“Failure to cooperate in an NASD enforcement investigation impedes the ability of regulators to determine if investors and the markets have been harmed by improper behavior,” Goldsmith said.

“Anything less than a bar is inconsistent with the violations Frank Quattrone was found to have committed.”

Quattrone also was charged by federal prosecutors with obstruction of justice. His first trial on the charges ended with a hung jury.

John Keker, the attorney who represented Quattrone in his first trial, said the NASD panel’s “decision to sanction Mr. Quattrone at all for exercising his constitutional rights is unfair, unconstitutional and unjust.”

He also said “there can be no explanation” for attempts to bar Quattrone for life.

“We are pleased that the hearing panel recognized and rejected the NASD’s unfair treatment of Mr. Quattrone and its improper attempt to scapegoat him,” Keker said, adding that his client “looks forward to returning to the securities” industry.

Federal prosecutors have said they would pursue a new trial against Quattrone on obstruction-of-justice and witness-tampering charges. The second trial is set for March.

They charge that Quattrone interfered with investigations by the government when he forwarded a co-worker’s e-mail that urged staff to “clean up” investment banking files.

At the time he sent the e-mail, the Securities and Exchange Commission and a grand jury were looking at whether shares of the most popular initial public offerings had been handed to hedge funds in exchange for kickbacks to CSFB.