Hung up on Frank Frank Quattrone's mistrial says more about the Valley than the man.
By Mark Gimein

(FORTUNE Magazine) – The obstruction of justice trial of Frank Quattrone, the preeminent investment banker of the Internet era, ended with a hung jury in late October. That is the story of the IPO frenzy in a nutshell: Billions were made and lost in a fevered rush for IPO favors, but we have still not figured out how to apportion the blame. The irony of the trial is that the files Quattrone stood accused of encouraging his employees to "clean up" may be less damaging to Quattrone--whose reputation is already in tatters--than to the rest of Silicon Valley's aristocracy. It did not take Quattrone to lure them into an ethical morass: When money is being given away, people will come running. Of all the favors Quattrone did for his clients, it's hard to imagine one bigger than shouldering so much of the blame himself.

At the trial, prosecutors submitted a list of 203 Credit Suisse First Boston account holders who got IPO shares from Quattrone's technology group. After years of rumors about this "Friends of Frank" list, it has elicited surprisingly little interest: Did anyone even notice eBay's Meg Whitman on the fourth page? Put together, Silicon Valley types on the list, like Whitman and Verisign chief Stratton Sclavos, got 3% to 5% of the stock in Quattrone's IPOs--not insignificant.

But what the Friends got was dwarfed by how much was given to some notable venture capitalists and technology moguls who weren't on the list. This group didn't just get small allocations as favors from Quattrone's brokers. The trial showed some of them demanded--and received--a lot more.

Take Dell Computer's Michael Dell. As is now known, after lunching with Quattrone in July 2000, Dell e-mailed him to request 250,000 shares of Corvis for Dell Ventures, the company's investing arm. A week later Quattrone e-mailed back to ask how much of the stock should go to Dell Ventures, and how much to MSD Capital Ventures, Michael Dell's personal investment vehicle. Quattrone, rather than running the process, was clearly trying to balance demands from Dell himself and from Dell's personal investment manager. "The last thing I want to do," Quattrone wrote, "is offend anybody as a result of this." Ultimately MSD got 50,000 Corvis shares; they gained $48 on the first day of trading.

Another example: In late 1999 a broker in Quattrone's group e-mailed Andy Fisher, Quattrone's IPO allocation expert, to request 25,000 shares of Interwoven, a software company, for a venture capital firm called Foundation Capital. The shares, the broker noted, should be "earmarked for the GPs [general partners] and not for the fund." Translation: Foundation's partners wanted the IPO shares for their personal kitties. Fisher said he would see what he could do but told the broker, "There are a lot of pigs at this trough."

In the end, Quattrone appears to be no more than a man extraordinarily adept at navigating a world of blurred ethical boundaries--a world in which virtually everyone does the wrong thing. Obstruction charges aside, how different was he from, say, Goldman Sachs's investment bankers? The list of Goldman's IPO gimmes released last year by Congress--which included Ken Lay, Bill Ford, Yahoo's Jerry Filo, and again Meg Whitman--is far more substantial than the Friends of Frank. And how different were the bankers giving away money from the people taking it? "It's not a shame on a single group," says a competing banker. "It's a shame on everyone." --Mark Gimein