Yesterday, a federal appeals court overturned (subscription required) the May 2004 conviction of Wall Street uber-banker Frank Quattrone on obstruction of justice charges. At issue was not Quattrone’s actual guilt or innocence, but rather the instructions that the judge gave to the jury, which were too restrictive and which could have prejudiced the jury against Mr. Quattrone.
Like the Arthur Andersen and the Martha Stewart cases before it, Quattrone’s conviction hinged not on whether he actually committed a crime, but whether he lied by trying to cover it up after the fact. Since his first trial ended in a mistrial and the second, a conviction, has now been set aside, the Federal Government must now decide whether to bring a third case against him. It’s a tough call, because the mood appears to have shifted away from the pro-regulation foment of the post-Enron era to a sense that it’s time to move on. The markets are booming again, Wall Street profits are hitting record highs, and many companies are complaining that the Sarbanes-Oxley regulations are so onerous as to threaten their businesses.
But regardless of what prosecutors decide in the Quattrone case, it’s a mistake, in my opinion, to assume that the era of corporate excess that we lived through in the 1990s is gone for good. While much has changed since then, much hasn’t. Banks and companies still put undue pressure on analysts, bonuses are still tied to investment banking, albeit indirectly, and the pressure to bring in the fees hasn’t loosened up one bit. Quattrone may end up exonerated, but the culture he helped create is still alive and well.