Lawyers Dicker Over Evidence, Witness Rules in Drexel Case

In the first court hearing in the Securities and Exchange Commission’s insider trading lawsuit against Drexel Burnham Lambert Inc., lawyers in U.S. District Court in Manhattan on Thursday haggled over rules for interviewing witnesses and gathering documents.

Lawyers for the investment firm indicated that they would reluctantly accept Judge Milton Pollack’s suggestion to coordinate pretrial “discovery,” or evidence gathering, with lawyers in 13 private lawsuits pending against former stock speculator Ivan F. Boesky. A lawyer for the SEC said it would take the government until Dec. 15 to turn over about 1.2 million documents subpoenaed by lawyers for Drexel and the others named in the SEC suit.

In a separate development, the U.S. 2nd Circuit Court of Appeals in New York raised the possibility that an order freezing the assets of an investment firm known as Princeton/Newport Partners might be lifted. Five executives of the firm have been indicted on racketeering charges in a case related to the government investigation of Drexel.

Last month, a district court judge had ordered much of the firm’s assets frozen because some belonged to the defendants in the case who, if convicted, might be required to forfeit the property to the government.

The appeals court sent the case back for a new hearing before the lower court and raised the possibility that instead of freezing the actual assets, the defendants might post a bond of the same value instead.

The issue has some bearing on Drexel, since several of Drexel’s employees are widely expected to be named in a criminal indictment next month. The freezing of assets in the Princeton/Newport case raised the possibility that a large portion of Drexel’s assets might also be frozen once an indictment is returned.