Newspaper article THE JOURNAL RECORD

Officials near Agreement to Settle Largest Fraud Cause on Wall Street

Newspaper article THE JOURNAL RECORD

Officials near Agreement to Settle Largest Fraud Cause on Wall Street

Article excerpt

NEW YORK (AP) - After more than two months of negotiations, Drexel Burnham Lambert Inc. and federal securities regulators are nearing an agreement aimed at settling the largest Wall Street fraud case in history, sources said Monday.

The sides are said to be still haggling over whether the investment firm must move part of its high-profile and big-money ``junk bond'' financing division run by trader Michael Milken from Beverly Hills, Calif., to New York.

But Drexel has agreed to tighten internal controls to prevent future securities law violations, hire a consultant to monitor the changes and increase the size of its board, sources familiar with the negotiations said.

Drexel already has agreed to plead guilty to six felony counts and pay a record $650 million to settle criminal securities fraud charges with the Justice Department.

But the plea deal cannot proceed until the firm resolves civil claims brought last September by the Securities and Exchange Commission, the federal regulatory agency that polices U.S. financial markets.

The SEC accused Drexel and four officials, including Milken, of insider trading, defrauding clients, securities fraud, stock manipulation and other violations in September.

Drexel and the SEC have been negotiating regularly since December, when the U.S. attorney's office in New York announced the criminal plea bargain that followed a massive two-year probe based on information supplied by imprisoned speculator Ivan Boesky.

The SEC settlement, which sources said should be completed within two weeks, must be approved by a federal court judge.

Drexel then would enter a guilty plea to the felony counts and immediately fork over $300 million in fines to the government. …

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