CNBC Exclusive: Quattrone Talks About IPO Rules--And His Future
Frank Quattrone, once the top investment banker in Silicon Valley until he was charged in 2003 with covering up IPO abuses, is planting the seeds of his comeback.
Quattrone, who was cleared last year, spoke exclusively with CNBC Senior Correspondent Scott Cohn, his first interview in nearly four years. Quattrone is vowing to resume his business career, but is concerned about regulations that are sending business overseas
Quattrone spoke of his concerns over "disturbing" trends on the shrinking U.S. initial public offering (IPO) market. In the six years ended 2000, about 100 to 200 tech companies, on average, went public, riasing about $5 billion a year, Quattrone said. In the six years ended 2006, that dropped to about 25 to 50 tech IPOs a year, raising about $2 billion per year.
Previously, it would take a company three to four years to go from the venture capital stage to either being bought out or going public. Today, that has doubled to around six years and many blame that on post-Enron reforms.
Quattrone says he is worried that, "if the pendulum's swung too far, it would choke off the entrepreneurial spirit that makes our country great".
But he is encouraged that business and political leaders are starting to recognize there's a problem. Last week, New York Governor Eliot Spitzer called for changes to be made with regards to the Sarbanes-Oxley Act.
Sarbanes-Oxley establishes new or enhanced standards for all U.S. public company boards, management, and public accounting firms. Supporters believe the legislation to be necessary and useful. Critics believe it does more economic damage than it prevents.
Commenting on Governor Spitzer's stance on Sarbanes-Oxley, Quattrone recalls Spitzer's crackdown on Wall Street as New York's former Attorney General. "A lot of the rules the investment banking community has to live with could be why there are fewer IPOs.", Quattrone said.
But Quattrone subsequently e-mailed CNBC to say he does not "exclusively or even primarily" blame the decline in IPOs on new investment banking regulations.
Quattrone was the top investment banker in Silicon Valley -- responsible for bringing companies like Cisco and Netscape public. He was charged in 2003 with obstructing two federal investigations into IPO abuses at his firm, Credit Suisse First Boston.
The first trial ended in a hung jury -- he was convicted in his 2004 retrial and sentenced to 18 months in prison. But the Second U.S. Circuit Court of Appeals overturned Quattrone's conviction based on erroneous jury instructions.
Last August, he reached a deferred prosecution deal with the Feds: as long as he stays clean for one year, all charges would be dropped. It's been previously reported that Quattrone will receive $100 million to $550 million in overdue compensation if he abides by the deal. Credit Suisse paid for Quattrone’s legal costs.
Quattrone has not decided what he will do next, but it will likely involve starting a business that joins technology and financial services. Quattrone is bullish on technology. Specifically, he likes wireless; voice over internet; and the "whole environmental thrust".
Whatever path he takes, Quattrone is determined to continue helping wrongly accused people prove their innocence.