Former Credit Suisse First Boston banker Frank Quattrone has been granted a new trial on charges that he obstructed an SEC inquiry during the dot.com boom, reports the New York Times. While generally giving the trial judge high marks, the United States 2nd Circuit Court of Appeals ruled that his jury instructions did not make it clear enough that Quattrone had to intend to obstruct the inquiry.

The government was inquiring into allegations that favored clients were paying kickbacks to bankers on high-flying IPOs to ensure they got an allocation of shares in high-tech IPOs. That stock typically rose very quickly on the market and guaranteed an almost risk-free profit for those who were allocated stock in the offering.

Quattrone has already had one deadlocked jury and now a second trial has gone down the tubes. Some lawyers tell the paper that the government is in danger of showing that it is nearly impossible to prosecute this kind of crime.

The fact is that the underlying crime that was being investigated was never prosecuted and so the government pushed ahead with an obstruction charge. And their case turned on whether a routine email telling people to clean up files was indeed a routine email or an explicit instruction to destroy evidence.

However unsavory Quattrone’s banking practices and how well rewarded he was for them (he earned $120 million one year), the government seems to pushing a flawed case here. The dot.com excesses again seems to show that no securities law can be free enough to encourage legitimate business activity without also leaving loopholes for the most aggressive to exploit.

Or, put the other way, if we had an iron-clad securities law, it would really hurt business. And the government is pursuing a law of diminishing returns if it tries to prosecute Quattrone a third time.