Deferred Prosecution—Frank Quattrone

In a rather stunning turn of events, Frank Quattrone—who was convicted in 2004 on obstruction charges only to see his conviction, as we mentioned in March, overturned due to a faulty jury instruction—has “walk[ed] out of a New York courtroom today free to resume his career.”^[1] This is a stunning turn of events, because, until late March, it looked like Mr. Quattrone was going to face a lifetime ban from the banking industry.

US District Court Judge George B. Daniels has “approved a one-year deferred prosecution agreement, calling for the charges to be dismissed if Quattrone stays out of trouble for one year.”^[2]

Furthermore, Mr. Quattrone was not required to admit to any wrongdoing, and he is only required to report to pretrial services if he changes residences of leaves the country.^[3] The deal is seen as a “setback” for federal prosecutors, who have been trying for years to put Mr. Quattrone in jail.^[4]

Mr. Quattrone’s troubles all began with a “single December 2000 e-mail message written by a Credit Suisse colleague that prosecutors say [Mr.] Quattrone passed on after learning a grand jury was investigating the bank.”^[5] In the email, he “said his experience as a witness in a securities fraud case led him to ‘strongly advise’ Credit Suisse employees to follow the bank’s document-retention policy, which called for routine purging of some records.”^[6]

After previously discussing deferred prosecution agreements last August, we have seen the practice become quite commonplace, with a number of corporations across the country entering into such agreements in recent months.^[7] This is due, in part, to the destructive capacity of the United States when it brings criminal charges against corporations; Arthur Andersen has ceased to exist as a viable entity after having been convicted of obstructing the SEC’s investigation of Enron’s collapse,^[8] even though its conviction was subsequently overturned by the US Supreme Court.^[9] Deferred prosecution and nonprosecution agreements are “flexible and innovative approaches [which] can strike the right balance between diligent enforcement and deterrence on the one hand, and proper incentives for companies to self-report and cooperate on the other.”^[10]

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[1] David Glovin, et al., Quattrone May Leave Court Free to Resume Wall Street Career, Bloomberg, Aug. 22, 2006.
[2] Larry Neumeister, Former Star Banker Settles Case, AP (via Yahoo! Finance), Aug. 22, 2006.
[3] David Glovin, et al., Quattrone Deal to Avoid Prosecution Approved by Judge, Bloomberg, Aug. 22, 2006.
[4] Id.
[5] Id.
[6] Id.
[7] See, e.g., University of Medicine and Dentistry of New Jersey, Bank Atlantic, Bayerische Hypo- Und Vereinsbank Ag, and FirstEnergy Nuclear Operating Company.
[8] See USDOJ, Criminal Division Annual Report 2004 at 30 (2004).
[9] See Arthur Andersen v. United States, 544 U.S. 696 (2005).
[10] USDOJ, supra note 8.