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Quattrone fought the long odds ... and lost

Frank Quattrone was sentenced yesterday to 18 months in federal prison, the end — except for his appeal — of a long battle in which he and his myriad lawyers have been extremely unsuccessful.
Former investment banker Frank Quattrone, left, and his attorney are pictured in May as a jury deliberates retrial charges of obstructing justice. Quattrone, sentenced to 18 months, must rely on an appellate court to keep him out of jail.Kathy Willens / AP
/ Source: Forbes

Frank Quattrone was sentenced Wednesday to 18 months in federal prison, the end — except for his appeal — of a long battle in which he and his myriad lawyers have been extremely unsuccessful.

Many commentators have classified the Quattrone case as part of the "trend" in corporate prosecutions. But in a more significant way, the Quattrone case is a freak, an outlier, in that he faced a jury trial at all.

Despite the national mythology that the jury trial is at the center of the American way of justice, it is, in fact, disappearing. For those who do face a jury, the odds of victory have gotten dramatically worse. While Quattrone had every resource available at his trial — three law firms led by John Keker of San Francisco's Keker & Van Nest — his result was no better than most, even though the evidence against him was very slim.

In one sense, Quattrone beat the odds simply by going to trial. Indeed, he went to trial twice, as his first trial resulted in a hung jury. In the last 15 years, in the federal courts, the number of criminal defendants has gone up by 66 percent from about 50,040 to 83,530. At the same time, the number of criminal trials has actually decreased from 7,576 to 7,118. The number of criminal jury trials has declined even further from 4,205 to 3,500. While in 1988, 15 percent of defendants went to trial, today just 8.5 percent do so.

In the Southern District of New York, where Quattrone was tried, one of the busiest federal courts in the country, there were just 224 criminal trials (139 jury trials) last year.

The decline is not a function of criminal trials getting longer — their duration has on average stayed about the same. Nor is it a function of a busy civil docket, as the number of civil trials has been reduced by more than half.

Unlike his former employer, Credit Suisse First Boston, Quattrone chose to fight the charges rather than cut a deal. The other banks on top underwriters on Wall Street firms such as Citigroup, Morgan Stanley, JPMorgan Chase and Merrill Lynch, followed CSFB's lead, settling civil charges while avoiding criminal allegations altogether, whether for obstruction of justice or underlying wrongs.

With the entire case against him resting on a single e-mail, Quattrone and his lawyers undoubtedly thought they could beat the odds and win an acquittal. But those odds are long and getting longer. Over the last 15 years, the acquittal rate for all federal court cases (including dismissals and guilty pleas, not just trials) has fallen from 18 percent to 10 percent).

The odds of being acquitted by a jury are substantially better, 14.5 percent. (The odds of being acquitted after a judge-only bench trial are much better still.) The odds of being acquitted by a federal court jury in 1988 were 20 percent, which was just slightly better than the overall acquittal rate at the time.

Of course, every case is different, and Quattrone's lawyers have and will argue that their case was made particularly difficult by Judge Richard Owen, who presided at trial, and they may have a point. But overall, the odds of beating a securities case in the Southern District of New York are even harder. The securities unit of the U.S. Attorney's office there said at the time of the Quattrone conviction they have won 17 out of the last 18 cases they had tried. That their success rate is even better than the norm may be due to their skill, or it may be due to the fact that in securities (unlike, say, murder or bank robbery) that they have vast discretion to prosecute cases only they are confident they can win. The overall conviction rate in the SDNY is slightly higher than the national average as well.

While the odds against the defendants are long whether or not they go to trial, that they are better at trial should encourage more defendants to take their chances. Most don't. A few judges have bemoaned the trend. Most cases should result in pleas, argues Federal District Court Judge William Young, who sits in Boston. "But when you get down to such small numbers you have to wonder whether the right to a trial by jury really means something," Young says. If the defendants have no chance of acquittal, then the convictions too become suspect.

The reason for the trend away from jury trials is that prosecutors have so much power to determine the charges and judges have less and less power to determine sentences after a conviction, Young says. With juries on the sideline and judges having less discretion, the entire system has become more "administrative," Young says. Quattrone played against this trend and lost.

Quattrone still has recourse to the court of appeals. He has a new set of lawyers who say he has a strong case. But the odds of winning an appeal are even worse than winning at trial. Of the 8,078 criminal appeals terminated on the merits in federal courts last year, 92 percent were either affirmed or dismissed. In the Second Circuit, where Quattrone's appeal will be heard, the odds are a bit better. Statically he has about an 11 percent chance of winning a new trial. If he wins his appeal, he will get another chance to plea bargain. Or he can go to the jury again, perhaps with Judge Owen, perhaps with a new judge, and see if he can win one out of three.