Junk bond ‘king’ faces racketeering counts
NZPA-Reuter -> New York Mr Michael Milken, the head of Drexel Burnham Lambert, Inc.’s junk bond department, has been indicted by a grand jury on racketeering charges, the U.S. Attorney’s office said on Wednesday. Also charged in the case arising from Wall Street’s insider-trading scandal was his brother, Mr Lowell Milken, who works as a lawyer in the department, and Mr Bruce Newberg, a former trader in the junk bond department.
Mr Milken’s indictment was widely expected after he refused last year to co-operate with authorities investigating Wall Street’s landmark insider-trading scandal.
Drexel agreed in December to plead guilty to six felony counts and pay a record SUS6SO million (SNZIOS7M), but Mr Milken was not involved in the settlement. He has steadfastly denied that he has done anything wrong and believes the company should have fought the charges brought by the United States Government.
Mr Milken, aged 42, known as the junk bond king,'heads Drexel’s high-yield securities department in Beverly Hills, California, and is credited with practically inventing the market in junk bonds, securities that offer high returns but higher risk than investment-grade bonds.
Under the forfeiture provision of the Federal Racketeering, or RICO statute, the Federal grand jury said that the defendants must pay the United States about SUSI.B billion, constituting the proceeds of their unlawful scheme.
The indictment grows out of the Government’s investigation into the biggest insider-trading scheme in Wall Street’s history. The probe has focused on former top stock speculator, Mr Ivan Boesky, whose co-operation led to charges against Mr Milken, Drexel and other prominent financial figures. A key charge against Mr Milken stems from an alleged SUSS.3M payment that Mr Boesky made to Drexel in 1986. The payment, the Government alleged, resulted from
an illegal arrangement under which Drexel parked stock in a number of companies with Mr Boesky to conceal Its true ownership. Parking is when one party holds stock that is owned by another to disguise ownership. Mr Milken was named in a civil suit brought against Drexel last September by the Securities and Exchange Commission (SEC). In that case, the Government contends that he conspired with his brother , Lowell, Drexel, Florida financier, Mr Victor Posner, and others to illegally use insider information and commit other securities laws violations.
As part of its settlement on the criminal charges, Drexel must also settle the SEC’s civil charges. Sources close to the talks between Drexel and the SEC say that Mr Milken’s immediate ousting from Drexel is one of the conditions being demanded by the agency. His indictment could provide Drexel with a concrete reason to force him to leave.
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Press, 31 March 1989, Page 14
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440Junk bond ‘king’ faces racketeering counts Press, 31 March 1989, Page 14
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