“Frank Quattrone became the most powerful Wall Street figure since Michael Milken to face criminal charges Wednesday, when he was arrested and charged by federal prosecutors with obstructing justice and tampering with witnesses,” writes Randall Smith in today’s Wall Street Journal.

“U.S. Attorney James Comey of Manhattan said he brought the charges against Mr. Quattrone to signal the importance of voluntary compliance with regulatory inquiries. Mr. Comey cited e-mail evidence that Mr. Quattrone, who had been among Silicon Valley’s most influential bankers during the technology boom of the 1990s, told colleagues to “clean up” their files in December 2000, despite knowing that some of them were being sought by subpoenas or document requests from three different regulators.”

“Noting that regulators don’t always have the resources to execute search warrants when they seek documents for investigations, Mr. Comey said, ‘we often rely on voluntary compliance of corporations’ with subpoenas, or requests for documents.”

” ‘It is an honor system, but one that must and will be guarded with an iron fist,’ Mr. Comey said. Unsealing a 25-page complaint, Mr. Comey said he planned to seek a grand jury indictment on the charges against Mr. Quattrone.”

“Just before Mr. Quattrone appeared briefly around 10:30 a.m. at the federal court house in lower Manhattan, his lawyer, John W. Keker, released a statement proclaiming his innocence: ‘Frank Quattrone is innocent. He never obstructed justice. Only prosecutors who see the world through dirty windows would take a one-sentence e-mail supporting company policy and try to turn it into a federal criminal case. These accusations are wrong and unfair.’ “

“The maximum penalties for the three charges are 10 years for obstructing a grand-jury investigation, five years for obstructing a Securities and Exchange Commission investigation, and 10 years for witness-tampering. Each count carries a maximum fine of $250,000. Under federal sentencing guidelines, if found guilty of all three charges, Mr. Quattrone would likely face one to two years jail time, defense lawyers say.”

“Mr. Quattrone was one of the most successful bankers in taking technology companies public during the Internet-stock boom of 1999 and 2000, earning $200 million personally between mid-1998 when he joined his former firm, Credit Suisse Group’s Credit Suisse First Boston, and the end of 2001, according to regulators. His group helped CSFB generate $5 billion in fees for underwriting and merger advice, according to Thomson Financial.”

“But the sheer volume of his business indirectly led CSFB afoul of regulators, which began probes in mid-2000 that CSFB had received inflated stock trading commissions from certain hedge-fund clients in exchange for hot initial public offerings. Although CSFB eventually paid $100 million to settle the charges that it improperly shared IPO profits with clients without admitting or denying wrongdoing, and several CSFB executives were disciplined by regulators and the firm, Mr. Quattrone himself wasn’t charged. But the e-mail he forwarded urging bankers in his group to clean up their files was sent within days of his receiving an update on the IPO case from a CSFB lawyer who told him of the federal grand-jury subpoena.”