CSFB Official Set Quota for Repayment Of IPO Profits in Form of Commissions
A Credit Suisse First Boston trading executive told some institutional investors that the big securities firm expected them to pay a set percentage of their IPO profits in the form of stock-trading commissions, according to Wall Street traders.
George Coleman, a senior CSFB global stock-trading executive, held meetings with clients detailing how much of their profits from initial public offerings of stock from CSFB were to be paid back to the firm in trading commissions, the traders say.
In one meeting early in 2000, Mr. Coleman told a hedge-fund manager: "You get $3 -- we get $1," according to a person familiar with the events. In other words, the firm expected the manager to pay commissions to CSFB equal to 33% of his profits on the CSFB-led new stock issues that he received.
Mr. Coleman referred questions to a spokesman for CSFB, a unit of Credit Suisse Group, who declined to comment.
The U.S. attorney's office in Manhattan, the Securities and Exchange Commission and the National Association of Securities Dealers have launched investigations examining whether Wall Street firms sought what amounted to kickbacks in the form of unusually large trading commissions in exchange for IPO shares. Regulators are seeking evidence of any quid pro quo arrangements that included specific formulas tied to profits on IPOs.
The probes have cast a spotlight on CSFB's technology group in San Francisco led by technology banking star Frank Quattrone. In June, CSFB fired three brokers in Mr. Quattrone's group, in an acknowledgment that there were abuses in the way the firm allocated shares of IPOs. CSFB has denied wrongdoing, and said Mr. Quattrone bore no responsibility for IPO allocations; Mr. Quattrone has declined to comment.
But now, information is surfacing that suggests that Mr. Coleman and other senior executives in New York were both aware of and participated in the IPO allocation practices being examined by regulators. Mr. Coleman, for instance, is among several employees who have been notified by the NASD's regulatory arm that they could face administrative charges of rule violations in the case; Mr. Coleman and the others have denied any wrongdoing.
Other CSFB trading executives held one-on-one meetings with clients spelling out formulas regarding IPO allocations and trading commissions, according to a former CSFB salesman with knowledge of the firm's operations and whose clients were visited by the executives.
"They all had the same sheets" tracking investors' IPO allocations and short-term profits, the former CSFB salesman said. The firm executives "would say the account got X number of shares, made X million in profits after 10 days, 30 days and 90 days. They would say this was your profit, and we want to maintain a ratio" of commissions to IPO profits. CSFB declined to comment on this assertion.
Meanwhile, questions remain about who will take responsibility for the IPO allocation practices being scrutinized by regulators. New information bolsters the view that CSFB executives outside Mr. Quattrone's group had some responsibility for the brokers' allocations.
An e-mail "term sheet" dated Nov. 3, 1999, outlining management oversight of the tech-group brokers who were fired in June says Andrew Benjamin, then head of the firm's private-client-services brokers, was responsible for reviewing matters including new brokerage accounts, IPO allocations and daily trade runs, as well as "any other supervisory functions regularly associated with the PCS business."
The term sheet adds that John Schmidt -- one of the fired CSFB brokers -- would report directly to Mr. Quattrone on questions of staffing-level changes that affected the small group of fewer than a dozen brokers, with Mr. Benjamin having indirect responsibility as well. It was sent by Neil Moskowitz, chief operating officer of the CSFB equity division. Mr. Moskowitz referred questions to CSFB's press office. Mr. Benjamin's lawyer, Steven A. Reiss of Weil Gotshal & Manges, said his client didn't have any comment.
Mr. Benjamin is one of a half dozen or more CSFB employees who have received notices from NASDR Inc., the NASD's regulatory unit, that they may be charged with rule violations in linking the payment of big commissions to hot IPOs. Mr. Benjamin has denied wrongdoing. (Mr. Quattrone hasn't received such a notice.)
The three brokers -- Mr. Schmidt, Michael Grunwald and Scott Bushley -- were placed on administrative leave in April and later fired after the firm found evidence they had violated firm policy in allocating IPOs. Messrs. Schmidt, Grunwald and Bushley have denied wrongdoing.
Mr. Quattrone's influence clearly was felt in cases when important tech-group clients, such as venture-capital firms, received large IPO allocations. For example, Technology Crossover Ventures, a longtime Quattrone client, received a large allocation of 50,000 shares of the hottest IPO ever, VA Linux Systems Inc., a provider of Linux-based computer systems and services. Shares of VA Linux soared to nearly eight times their offering price on the first day of trading, Dec. 9, 1999.
One factor in why the tech-group brokers were singled out for termination by CSFB is a series of e-mails sent by Messrs. Grunwald and Bushley, according to one person who has heard CSFB officials describe the situation internally. The officials said the e-mails indicated the brokers were "explicitly coercive" in demanding commissions as a condition to future IPO allocations, the same person said.
According to individuals who have seen e-mails sent by members of the group, the messages described commission targets needed from hedge funds to assure future IPO allocations, saying that if the targets weren't met, the customers would be cut off. Subsequently, at least one account was cut off, according to some CSFB employees and others familiar with the case.
CSFB Official Set Quota for Repayment Of IPO Profits in Form of Commissions
A Credit Suisse First Boston trading executive told some institutional investors that the big securities firm expected them to pay a set percentage of their IPO profits in the form of stock-trading commissions, according to Wall Street traders.
George Coleman, a senior CSFB global stock-trading executive, held meetings with clients detailing how much of their profits from initial public offerings of stock from CSFB were to be paid back to the firm in trading commissions, the traders say.
In one meeting early in 2000, Mr. Coleman told a hedge-fund manager: "You get $3 -- we get $1," according to a person familiar with the events. In other words, the firm expected the manager to pay commissions to CSFB equal to 33% of his profits on the CSFB-led new stock issues that he received.
Mr. Coleman referred questions to a spokesman for CSFB, a unit of Credit Suisse Group, who declined to comment.
The U.S. attorney's office in Manhattan, the Securities and Exchange Commission and the National Association of Securities Dealers have launched investigations examining whether Wall Street firms sought what amounted to kickbacks in the form of unusually large trading commissions in exchange for IPO shares. Regulators are seeking evidence of any quid pro quo arrangements that included specific formulas tied to profits on IPOs.
The probes have cast a spotlight on CSFB's technology group in San Francisco led by technology banking star Frank Quattrone. In June, CSFB fired three brokers in Mr. Quattrone's group, in an acknowledgment that there were abuses in the way the firm allocated shares of IPOs. CSFB has denied wrongdoing, and said Mr. Quattrone bore no responsibility for IPO allocations; Mr. Quattrone has declined to comment.
But now, information is surfacing that suggests that Mr. Coleman and other senior executives in New York were both aware of and participated in the IPO allocation practices being examined by regulators. Mr. Coleman, for instance, is among several employees who have been notified by the NASD's regulatory arm that they could face administrative charges of rule violations in the case; Mr. Coleman and the others have denied any wrongdoing.
Other CSFB trading executives held one-on-one meetings with clients spelling out formulas regarding IPO allocations and trading commissions, according to a former CSFB salesman with knowledge of the firm's operations and whose clients were visited by the executives.
"They all had the same sheets" tracking investors' IPO allocations and short-term profits, the former CSFB salesman said. The firm executives "would say the account got X number of shares, made X million in profits after 10 days, 30 days and 90 days. They would say this was your profit, and we want to maintain a ratio" of commissions to IPO profits. CSFB declined to comment on this assertion.
Meanwhile, questions remain about who will take responsibility for the IPO allocation practices being scrutinized by regulators. New information bolsters the view that CSFB executives outside Mr. Quattrone's group had some responsibility for the brokers' allocations.
An e-mail "term sheet" dated Nov. 3, 1999, outlining management oversight of the tech-group brokers who were fired in June says Andrew Benjamin, then head of the firm's private-client-services brokers, was responsible for reviewing matters including new brokerage accounts, IPO allocations and daily trade runs, as well as "any other supervisory functions regularly associated with the PCS business."
The term sheet adds that John Schmidt -- one of the fired CSFB brokers -- would report directly to Mr. Quattrone on questions of staffing-level changes that affected the small group of fewer than a dozen brokers, with Mr. Benjamin having indirect responsibility as well. It was sent by Neil Moskowitz, chief operating officer of the CSFB equity division. Mr. Moskowitz referred questions to CSFB's press office. Mr. Benjamin's lawyer, Steven A. Reiss of Weil Gotshal & Manges, said his client didn't have any comment.
Mr. Benjamin is one of a half dozen or more CSFB employees who have received notices from NASDR Inc., the NASD's regulatory unit, that they may be charged with rule violations in linking the payment of big commissions to hot IPOs. Mr. Benjamin has denied wrongdoing. (Mr. Quattrone hasn't received such a notice.)
The three brokers -- Mr. Schmidt, Michael Grunwald and Scott Bushley -- were placed on administrative leave in April and later fired after the firm found evidence they had violated firm policy in allocating IPOs. Messrs. Schmidt, Grunwald and Bushley have denied wrongdoing.
Mr. Quattrone's influence clearly was felt in cases when important tech-group clients, such as venture-capital firms, received large IPO allocations. For example, Technology Crossover Ventures, a longtime Quattrone client, received a large allocation of 50,000 shares of the hottest IPO ever, VA Linux Systems Inc., a provider of Linux-based computer systems and services. Shares of VA Linux soared to nearly eight times their offering price on the first day of trading, Dec. 9, 1999.
One factor in why the tech-group brokers were singled out for termination by CSFB is a series of e-mails sent by Messrs. Grunwald and Bushley, according to one person who has heard CSFB officials describe the situation internally. The officials said the e-mails indicated the brokers were "explicitly coercive" in demanding commissions as a condition to future IPO allocations, the same person said.
According to individuals who have seen e-mails sent by members of the group, the messages described commission targets needed from hedge funds to assure future IPO allocations, saying that if the targets weren't met, the customers would be cut off. Subsequently, at least one account was cut off, according to some CSFB employees and others familiar with the case.
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Can I have a Y server?
A Credit Suisse First Boston trading executive told some institutional investors that the big securities firm expected them to pay a set percentage of their IPO profits in the form of stock-trading commissions, according to Wall Street traders.
George Coleman, a senior CSFB global stock-trading executive, held meetings with clients detailing how much of their profits from initial public offerings of stock from CSFB were to be paid back to the firm in trading commissions, the traders say.
In one meeting early in 2000, Mr. Coleman told a hedge-fund manager: "You get $3 -- we get $1," according to a person familiar with the events. In other words, the firm expected the manager to pay commissions to CSFB equal to 33% of his profits on the CSFB-led new stock issues that he received.
Mr. Coleman referred questions to a spokesman for CSFB, a unit of Credit Suisse Group, who declined to comment.
The U.S. attorney's office in Manhattan, the Securities and Exchange Commission and the National Association of Securities Dealers have launched investigations examining whether Wall Street firms sought what amounted to kickbacks in the form of unusually large trading commissions in exchange for IPO shares. Regulators are seeking evidence of any quid pro quo arrangements that included specific formulas tied to profits on IPOs.
The probes have cast a spotlight on CSFB's technology group in San Francisco led by technology banking star Frank Quattrone. In June, CSFB fired three brokers in Mr. Quattrone's group, in an acknowledgment that there were abuses in the way the firm allocated shares of IPOs. CSFB has denied wrongdoing, and said Mr. Quattrone bore no responsibility for IPO allocations; Mr. Quattrone has declined to comment.
But now, information is surfacing that suggests that Mr. Coleman and other senior executives in New York were both aware of and participated in the IPO allocation practices being examined by regulators. Mr. Coleman, for instance, is among several employees who have been notified by the NASD's regulatory arm that they could face administrative charges of rule violations in the case; Mr. Coleman and the others have denied any wrongdoing.
Other CSFB trading executives held one-on-one meetings with clients spelling out formulas regarding IPO allocations and trading commissions, according to a former CSFB salesman with knowledge of the firm's operations and whose clients were visited by the executives.
"They all had the same sheets" tracking investors' IPO allocations and short-term profits, the former CSFB salesman said. The firm executives "would say the account got X number of shares, made X million in profits after 10 days, 30 days and 90 days. They would say this was your profit, and we want to maintain a ratio" of commissions to IPO profits. CSFB declined to comment on this assertion.
Meanwhile, questions remain about who will take responsibility for the IPO allocation practices being scrutinized by regulators. New information bolsters the view that CSFB executives outside Mr. Quattrone's group had some responsibility for the brokers' allocations.
An e-mail "term sheet" dated Nov. 3, 1999, outlining management oversight of the tech-group brokers who were fired in June says Andrew Benjamin, then head of the firm's private-client-services brokers, was responsible for reviewing matters including new brokerage accounts, IPO allocations and daily trade runs, as well as "any other supervisory functions regularly associated with the PCS business."
The term sheet adds that John Schmidt -- one of the fired CSFB brokers -- would report directly to Mr. Quattrone on questions of staffing-level changes that affected the small group of fewer than a dozen brokers, with Mr. Benjamin having indirect responsibility as well. It was sent by Neil Moskowitz, chief operating officer of the CSFB equity division. Mr. Moskowitz referred questions to CSFB's press office. Mr. Benjamin's lawyer, Steven A. Reiss of Weil Gotshal & Manges, said his client didn't have any comment.
Mr. Benjamin is one of a half dozen or more CSFB employees who have received notices from NASDR Inc., the NASD's regulatory unit, that they may be charged with rule violations in linking the payment of big commissions to hot IPOs. Mr. Benjamin has denied wrongdoing. (Mr. Quattrone hasn't received such a notice.)
The three brokers -- Mr. Schmidt, Michael Grunwald and Scott Bushley -- were placed on administrative leave in April and later fired after the firm found evidence they had violated firm policy in allocating IPOs. Messrs. Schmidt, Grunwald and Bushley have denied wrongdoing.
Mr. Quattrone's influence clearly was felt in cases when important tech-group clients, such as venture-capital firms, received large IPO allocations. For example, Technology Crossover Ventures, a longtime Quattrone client, received a large allocation of 50,000 shares of the hottest IPO ever, VA Linux Systems Inc., a provider of Linux-based computer systems and services. Shares of VA Linux soared to nearly eight times their offering price on the first day of trading, Dec. 9, 1999.
One factor in why the tech-group brokers were singled out for termination by CSFB is a series of e-mails sent by Messrs. Grunwald and Bushley, according to one person who has heard CSFB officials describe the situation internally. The officials said the e-mails indicated the brokers were "explicitly coercive" in demanding commissions as a condition to future IPO allocations, the same person said.
According to individuals who have seen e-mails sent by members of the group, the messages described commission targets needed from hedge funds to assure future IPO allocations, saying that if the targets weren't met, the customers would be cut off. Subsequently, at least one account was cut off, according to some CSFB employees and others familiar with the case.
A Credit Suisse First Boston trading executive told some institutional investors that the big securities firm expected them to pay a set percentage of their IPO profits in the form of stock-trading commissions, according to Wall Street traders.
George Coleman, a senior CSFB global stock-trading executive, held meetings with clients detailing how much of their profits from initial public offerings of stock from CSFB were to be paid back to the firm in trading commissions, the traders say.
In one meeting early in 2000, Mr. Coleman told a hedge-fund manager: "You get $3 -- we get $1," according to a person familiar with the events. In other words, the firm expected the manager to pay commissions to CSFB equal to 33% of his profits on the CSFB-led new stock issues that he received.
Mr. Coleman referred questions to a spokesman for CSFB, a unit of Credit Suisse Group, who declined to comment.
The U.S. attorney's office in Manhattan, the Securities and Exchange Commission and the National Association of Securities Dealers have launched investigations examining whether Wall Street firms sought what amounted to kickbacks in the form of unusually large trading commissions in exchange for IPO shares. Regulators are seeking evidence of any quid pro quo arrangements that included specific formulas tied to profits on IPOs.
The probes have cast a spotlight on CSFB's technology group in San Francisco led by technology banking star Frank Quattrone. In June, CSFB fired three brokers in Mr. Quattrone's group, in an acknowledgment that there were abuses in the way the firm allocated shares of IPOs. CSFB has denied wrongdoing, and said Mr. Quattrone bore no responsibility for IPO allocations; Mr. Quattrone has declined to comment.
But now, information is surfacing that suggests that Mr. Coleman and other senior executives in New York were both aware of and participated in the IPO allocation practices being examined by regulators. Mr. Coleman, for instance, is among several employees who have been notified by the NASD's regulatory arm that they could face administrative charges of rule violations in the case; Mr. Coleman and the others have denied any wrongdoing.
Other CSFB trading executives held one-on-one meetings with clients spelling out formulas regarding IPO allocations and trading commissions, according to a former CSFB salesman with knowledge of the firm's operations and whose clients were visited by the executives.
"They all had the same sheets" tracking investors' IPO allocations and short-term profits, the former CSFB salesman said. The firm executives "would say the account got X number of shares, made X million in profits after 10 days, 30 days and 90 days. They would say this was your profit, and we want to maintain a ratio" of commissions to IPO profits. CSFB declined to comment on this assertion.
Meanwhile, questions remain about who will take responsibility for the IPO allocation practices being scrutinized by regulators. New information bolsters the view that CSFB executives outside Mr. Quattrone's group had some responsibility for the brokers' allocations.
An e-mail "term sheet" dated Nov. 3, 1999, outlining management oversight of the tech-group brokers who were fired in June says Andrew Benjamin, then head of the firm's private-client-services brokers, was responsible for reviewing matters including new brokerage accounts, IPO allocations and daily trade runs, as well as "any other supervisory functions regularly associated with the PCS business."
The term sheet adds that John Schmidt -- one of the fired CSFB brokers -- would report directly to Mr. Quattrone on questions of staffing-level changes that affected the small group of fewer than a dozen brokers, with Mr. Benjamin having indirect responsibility as well. It was sent by Neil Moskowitz, chief operating officer of the CSFB equity division. Mr. Moskowitz referred questions to CSFB's press office. Mr. Benjamin's lawyer, Steven A. Reiss of Weil Gotshal & Manges, said his client didn't have any comment.
Mr. Benjamin is one of a half dozen or more CSFB employees who have received notices from NASDR Inc., the NASD's regulatory unit, that they may be charged with rule violations in linking the payment of big commissions to hot IPOs. Mr. Benjamin has denied wrongdoing. (Mr. Quattrone hasn't received such a notice.)
The three brokers -- Mr. Schmidt, Michael Grunwald and Scott Bushley -- were placed on administrative leave in April and later fired after the firm found evidence they had violated firm policy in allocating IPOs. Messrs. Schmidt, Grunwald and Bushley have denied wrongdoing.
Mr. Quattrone's influence clearly was felt in cases when important tech-group clients, such as venture-capital firms, received large IPO allocations. For example, Technology Crossover Ventures, a longtime Quattrone client, received a large allocation of 50,000 shares of the hottest IPO ever, VA Linux Systems Inc., a provider of Linux-based computer systems and services. Shares of VA Linux soared to nearly eight times their offering price on the first day of trading, Dec. 9, 1999.
One factor in why the tech-group brokers were singled out for termination by CSFB is a series of e-mails sent by Messrs. Grunwald and Bushley, according to one person who has heard CSFB officials describe the situation internally. The officials said the e-mails indicated the brokers were "explicitly coercive" in demanding commissions as a condition to future IPO allocations, the same person said.
According to individuals who have seen e-mails sent by members of the group, the messages described commission targets needed from hedge funds to assure future IPO allocations, saying that if the targets weren't met, the customers would be cut off. Subsequently, at least one account was cut off, according to some CSFB employees and others familiar with the case.
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Microsoft is cool.
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