Opinion ID: 201960
Heading Depth: 2
Heading Rank: 2

Heading: CSFB's Overarching Fraudulent Culture.

Text: 4 CSFB is a global financial services firm, dealing, among other things, in investment banking and investment research. At all times material hereto, defendant-appellee Frank P. Quattrone served as the head of CSFB's global technology group (the Tech Group). Although Quattrone was an investment banker, he had complete control over the Tech Group's research activities. In that capacity, he helped to determine the analysts' compensation and had the power to terminate their employment. 5 Quattrone's omnipotence within the Tech Group allowed him free rein to set up a system in which the analysts were pressured, from time to time, to issue unduly positive ratings on certain stocks in order to improve the chances of garnering investment banking business for CSFB. Quattrone promised potential clients favorable analyst reports and then used a carrot-and-stick technique with his analysts to redeem those promises. During Quattrone's reign, an analyst's bonus (which comprised a major portion of his or her remuneration) was likely to correlate positively to that analyst's support of the Tech Group's investment banking activity. Conversely, analysts who issued negative reports risked being reprimanded and passed over for choice assignments. 6 CSFB tied its analyst reports to a four-tiered ranking format, composed of strong buy, buy, hold, and sell ratings. The plaintiffs, based on information gleaned from a former CSFB employee, averred that the format was effectively condensed into three tiers (dropping out the sell rating) and was jiggled for the benefit of investment banking clients. Allegedly, common practices included issuing a hold rating if the analyst actually believed stockholders should sell, affording a buy rating to virtually all investment banking clients or prospective clients, and using the strong buy rating only when the analyst actually believed that investors should purchase the stock. 7 The analysts attached to the Tech Group sometimes attended investment banking sales presentations, at which they would distribute sample reports (invariably portraying the potential investment banking client in an attractive light). This participation was intended to assure prospective clients that they would receive the benefit of positive reinforcement from the analysts should they choose to retain CSFB for their investment banking needs. 8 Quattrone's system initially proved to be a howling success; in 1999, for example, CSFB managed more initial public offerings (IPOs) in the United States than any other investment banking house. In the year 2000, the Tech Group accounted for almost half of CSFB's revenue from equity investment banking in the United States. Shortly thereafter, Quattrone's persistent dismantling of the compulsory Chinese Wall between banking and research, required by the National Association of Securities Dealers (NASD), inspired a series of governmental and regulatory investigations. In a single six-month period, from the fall of 2002 through the following spring, Massachusetts state securities regulators, the New York Attorney General, the NASD, and the Securities and Exchange Commission all initiated proceedings against CSFB related to the internal conflicts of interest that allegedly had caused CSFB's analysts to view the stock of CSFB's present and potential investment banking clients through rose-colored glasses.