Drexel Burnham Lambert's employees have been warned to expect Securities and Exchange Commission charges to be filed against the investment banking firm at any time, a spokesman confirmed.
Sources close to the SEC investigation said, however, that it is unclear when the agency would actually move. As reported, Drexel confirmed last month that the SEC approved a lawsuit charging Drexel and certain employees with securities law violations. But the SEC decided not to file it immediately.
People close to the investigation and the company said Drexel so far has failed to reach a settlement with the SEC on the expected civil charges. Drexel consistently has denied any wrongdoing.
The sources continued to speculate Friday that the SEC may wait to file its civil lawsuit until the U.S. attorney's office in New York completes a criminal investigation of Drexel. The criminal inquiry is expected to continue at least until September. The SEC declined comment.
Based on information from convicted financier Ivan F. Boesky, Drexel and several employees have been under investigation for possible wide-ranging violations of securities laws. Among the employees said to be targeted in the inquiry are Michael Milken, who developed and runs the firm's extremely profitable "junk bonds" operation in Beverly Hills, his brother Lowell, who also works for the firm, and two Drexel traders.
Frederick W. Joseph, Drexel's chief executive, was said to have addressed the firm's employees via a public address system this week. He warned that charges could be filed with as little as 24 hours' notice.
Settlement talks were said to have failed because Drexel was opposed to agreeing to a large fine or other punitive measures that could be interpreted as an admission of guilt. Drexel officials on Friday dismissed rumors that the SEC was seeking a fine as large as $1 billion. But the firm's spokesman refused to say anything about what type of penalty the SEC may seek.