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Tech Industry

Scapegoats on trial

The spectacle of super-connected Silicon Valley investment banker Frank Quattrone on the receiving end of public defenestration is too little, too late.

Any day now Frank Quattrone's future will get decided by a New York jury. The former Credit Suisse First Boston banker is charged with obstructing a federal investigation into the securities firm's practices. The government claims Quattrone ordered the destruction of evidence relating to a kickback investigation at CSFB. I have no idea whether he is guilty or whether Quattrone's old firm accepted kickbacks from hedge funds in exchange for hot stock offerings in 1999 and 2000.

But this much is clear: The spectacle of a super-connected Silicon Valley investment banker on the receiving end of public defenestration is too little, too late.

You can't blame prosecutors, who were simply on the lookout to grab low-hanging fruit. Quattrone was too juicy a target to resist. He represented the power and the privilege that was so prominently on display before the bubble burst.

No doubt the trial is meant to send a message about justice being served and all that. However, the reality is less exhilarating. Whatever the magnitude his sins, Quattrone is only a scapegoat for the broader hypocrisy that infected the tech industry during the go-go days.

All throughout that era the business press chronicled the outsized paydays awarded to now-fallen CEOs like WorldCom's Bernie Ebbers or Joe Nacchio of Qwest. Treated as divine monarchs and compensated as such, much of the industry's corporate elite gave into the temptation to act like pigs at the trough.

While that may say something about the frailties of human nature, it's still only part of the story.

A serious investigation into the corporate failings of our best and brightest should begin by probing into why regulators failed their charge. Why did so many boards of directors function like drug-induced zombies? The sad fact is that nobody in positions of (seeming) authority got particularly agitated when shady favor-trading got mixed in with insider stock allocations and other sordid practices that failed the smell test.

That same hands-off approach coincided with the rise of a nexus of insidious relationships that would later astonish corporate governance experts. Some companies were sufficiently emboldened to veto the appointment of stock analysts deemed insufficiently bullish. Even a Michael Dell, an otherwise solid corporate citizen, was not above applying heavy pressure when it suited his company's self-interest.

"We would like 250K shares of Corvis," he told Quattrone in a July 2000 e-mail, referring to an IPO then managed by CSFB. "I know there have been efforts on both sides to build the relationship and an offering like this would certainly help."

That's the biggest understatement since Noah said, "Hmm, looks like rain."

Dell followed by suggesting that CSFB not assign an analyst named Charlie Wolf to cover his company.

"Not sure he has credibility anymore with the street," Dell wrote. "You might be better off with a fresh new talent."

When I first broke in as a tech reporter in the 1980s, Wolf was one of the first Wall Street analysts I got to know. Back then he knew the business better than most and that assessment holds equally true today. You have to wonder whether Dell's opinion was colored more by Wolf's less-than-gushing appraisals of the company's stock than by his reputation with colleagues. (A spokesman for Dell told me the e-mail exchange was "regrettable" but declined further comment.)

It's an e-mail thread that now reads like a period piece. Do things still work this way or have lessons been learned that will prevent folks from suspending their better judgment. I'd like to think it's the latter, though we'll have to wait until some bright bulb claims to have invented the "next big thing."

In the meantime, there's Quattrone, the ex-rainmaker, now counting upon the kindness of strangers to give him a break. Judging by the public's mood, that may not be enough.