Federal prosecutors trying to clean up Wall Street's sleaziest practices suffered a big setback last month when a mistrial was declared in the case against former investment banker Frank Quattrone.
No doubt about it: The obstruction of justice and witness-tampering case does demonstrate why it's so hard to put white-collar defendants behind bars.
But the lesson isn't that prosecutors shouldn't try, it's that they should try harder -- and more often.
Most securities cases are pursued as civil cases by regulators such as the Securities and Exchange Commission and the NASD, formerly the National Association of Securities Dealers.
If the defendant loses, the worst that can happen is a big fine and a lifetime ban from the industry. Often, these cases are settled with the defendant neither admitting nor denying guilt. Fines and restitution sometimes leave the crook with part of his winnings, occasionally with the lion's share.
Just about any kind of securities case -- cheating investors, bribery, taking kickbacks -- also could be prosecuted as a criminal case with the threat of prison time. But that's rare.
As a society, we consider crimes of violence, or the threat of violence, more serious. The bank robber who holds a gun on a teller and runs off with a few thousand dollars is thought a greater menace than the middle-aged man in a suit who steals millions with a computer keyboard.
Of course, bank robbers don't have lobbyists; rich corporations and their trade groups do. Look back at any proposal to toughen penalties for corporate malfeasance and you'll find opposition from business groups that claim it's unnecessary and will lead to costly litigation of frivolous cases.
But the most important factor behind the dearth of criminal prosecutions is that these cases are just so hard to win.
Historically, prosecutors have been reluctant to sully their win-loss records or wreck their budgets with likely-to-lose cases that can drag on for months or years.
These cases often involve complex business dealings that are baffling to jurors.
And the proof required in a criminal case -- guilt beyond a reasonable doubt -- is harder to achieve that the mere preponderance of evidence required in civil cases. It's not enough to prove a defendant did something wrong, prosecutors must convince jurors he intended to do it.
A look at the case
How would you have judged the Quattrone case?
It involves his actions in December 2000, after a grand jury had subpoenaed records for an investigation of whether his firm, Credit Suisse First Boston, had improperly directed blocks of newly issued stock -- initial public offerings -- to favored clients in exchange for kickbacks.
Evidence produced at the trial shows that the bank's general counsel told Quattrone about the subpoena on Dec. 3, according to news reports.
The next day, a bank employee sent a number of key people an e-mail saying the threat of litigation made it important they abide by the bank's policy on which documents should be kept and which destroyed.
The e-mail said, in part, "Today, it's administrative housekeeping. In January, it could be improper destruction of evidence," according to an account in New York Law Journal.
On Dec. 5, the original employee sent another e-mail urging file cleaning. This time, Quattrone added his own note: "Having been a key witness in a securities litigation case ... I strongly recommend you follow this advice."
It's easy to interpret this the way prosecutors did -- as urging the destruction of incriminating evidence.
But the defense argued that Quattrone was merely following a longstanding company policy requiring that old documents be destroyed. In fact, it was not until Dec. 7, two days later, that the lawyer who had spoken to Quattrone on Dec. 3 sent a memo saying the document-destruction policy had been suspended and that all documents should be preserved.
But the lawyer testified he sent the Dec. 7 note because Quattrone's message conflicted with bank policy and the grand jury subpoena. Prosecutors said Quattrone received official notice documents were to be preserved in the conversation with the lawyer Dec. 3.
To decide, you have to think about what was in Quattrone's mind at the time. You'd expect a brilliant executive, who made $120 million in 2000, would know a grand jury would want evidence preserved. It does seem he was urging that evidence be destroyed. But are you certain beyond a reasonable doubt -- certain enough to put him in prison? Could Quattrone really have thought the old document-destruction policy had to be followed until he got the Dec. 7 note?
There's no smoking gun. You can understand why some jurors would think the evidence was too weak.
But prosecutors were right to bring the case; the evidence was solid enough to put to a jury.
And even if Quattrone has dodged a bullet, the case puts would-be white collar crooks on notice: Play too close to the edge and you risk a lot more than a slap on the wrist.
Prosecutors should ram this lesson home by bringing more cases like this. After all, we prosecute accused bank robbers, even though some beat the rap.