Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, April 25, 1990 TAG: 9004250574
SECTION: BUSINESS PAGE: B7 EDITION: EVENING
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
An emotional guilty plea in federal court Tuesday by the former head of Drexel Burnham Lambert Inc.'s junk bond department was the Holy Grail in the government's crusade to weed out financial crime.
Milken, 43, admitted to six counts of violating securities and tax laws and agreed to pay $600 million in penalties. He faces up to 28 years in prison at sentencing Oct. 1.
The admissions "demonstrate that he stood at the center of a network of manipulation, fraud and deceit," Securities and Exchange Commission Chairman Richard Breeden said.
After Boesky pleaded guilty on Nov. 14, 1986, the ex-speculator provided information that led to Milken as well as to several Wall Street investment bankers, takeover artists, arbitragers, bond dealers and trading assistants.
But with the exception of one case widely considered ironclad - the fraud conviction and four-year prison term for Florida investor Paul Bilzerian - the government has been criticized for bringing weak prosecutions on technical violations.
Now the government has succeeded in getting its main target, a man who built a $200 billion market for high-risk paper and used to feed a takeover boom. His plea included a record fine against an individual.
"They put an end to a criticism that probably was bothering them a good deal," Columbia University securities law professor John Coffee said. "The idea that this was a witch hunt tends to fade pretty quickly when the witch pleads guilty."
Milken supporters had maintained he was persecuted because of the enormous power he wielded over the nation's financial markets from his X-shaped trading desk at Drexel's Beverly Hills, Calif., office.
Milken pleaded guilty before U.S. District Judge Kimba Wood to conspiracy, securities fraud, mail fraud, helping others violate federal securities regulations and assisting in the filing of a false tax return.
He broke down as he read an 11-page statement detailing the charges and apologizing over his actions. His voice cracked as he admitted, "Guilty, your honor."
The charges were lighter than the most serious allegations in the 98-count indictment handed up in March 1989.
"The charges are a far cry from the lurid, irresponsible and prejudicial accusations against Michael that have been made by anonymous sources to the press for the past 3 1/2 years," Milken attorney Arthur Liman said.
"The charges do not involve [racketeering] or insider trading, nor do they reflect the fundamentals of the junk bond market. They involve instances in which Michael went too far in helping clients . . . which is not to minimize the plea."
Milken told the court his plea was an admission of personal responsibility "and not a reflection of the underlying soundness and integrity" of the junk bond market.
The plea bargain bars Milken from the securities industry forever and requires him to assist the continuing investigations related to the insider trading scandal.
Milken is regarded widely as the most important American financier since J.P. Morgan Jr. in the early 1900s. He came to symbolize the bounty and excesses of a booming Wall Street and amassed a personal fortune believed to exceed $1 billion.
His downfall began after he was linked to an insider trading network by Boesky, who received a three-year prison term and was fined $100 million in 1986 to settle his own case.
The Milken plea comes two months after Drexel began liquidating when its parent company filed for bankruptcy protection. Drexel itself pleaded guilty to six felonies and agreed to pay $650 million to settle related charges.
by CNB