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
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
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 Justice
Department is approved. …