NEW YORK (AP) - A federal judge Tuesday approved an unprecedented civil securities fraud settlement between the government and Drexel Burnham Lambert Inc., placing the Wall Street firm under strict supervision and barring it from dealing with its former junk bond financier Michael Milken.
Approval of the pact by U.S. District Judge Milton Pollack cleared the way for Drexel to plead guilty to six felonies and pay a record $650 million to settle separate criminal charges with the Justice Department.
The civil settlement was reached in April but was held up by legal challenges from Milken's attorneys that reached the Supreme Court. Milken alleged Pollack had a conflict of interest and should have been removed from the case.
In a brief hearing at federal court in lower Manhattan, Pollack said that after ``careful study'' he granted the joint request by Drexel and the SEC to approve the proposed settlement.
The SEC charged Drexel last fall with insider trading and other securities frauds involving more than 20 takeovers and other investment deals between 1984 and 1986.
Under its settlement, Drexel neither admitted nor denied having committed the alleged crimes.
The settlement does not include separate civil charges by the SEC against Milken, the former head of Drexel's junk bond division who resigned from the firm last week. Milken also has been indicted on criminal fraud and racketeering charges stemming from his activities at Drexel.
``This settlement will bring to a close 2 1/2 difficult years for Drexel, its employees and its clients,'' Drexel lawyer Thomas Curnin said in court.
Curnin said approval of the pact would allow Drexel ``to go forward and devote its time and energies to the service of its clients.''
Thomas Newkirk, the SEC's chief litigation counsel in the Drexel case, asked Pollack to approve the settlement quickly so Drexel could adopt the settlement provisions designed to ``protect investors'' and continue to cooperate with the government.
``This cooperation is essential not only to the commission's ongoing investigations but to investigations being conducted by the United States attorney,'' Newkirk said.
The settlement requires Drexel to overhaul its securities law compliance operations, top management and some trading departments and to submit to three years of close SEC scrutiny. It does not take effect until the criminal plea bargain with the …