Former Broker at Drexel Sues Firm

A former Drexel Burnham Lambert broker and shareholder has filed a class-action suit against the firm, alleging that it failed to disclose its legal difficulties in connection with insider trading charges.

The suit, filed Friday in Los Angeles Superior Court, is believed to be the first legal action by a Drexel employee-shareholder seeking damages stemming from the insider trading allegations, according to Richard D. Greenfield, an attorney filing the action.

The plaintiff, Lewis J. Bair, a broker who left Drexel last February, alleges that the value of Drexel stock he bought was reduced substantially as a result of the large financial reserves that Drexel will need to satisfy potential fines, legal judgments and related expenses, Greenfield said. Drexel failed to disclose its allegedly illegal activities and potential legal liabilities to employees who bought the firm’s stock, he said. Drexel stock is not publicly traded.

Also named as defendant in the suit is Michael Milken, Drexel’s “junk bond” chief who is at the center of a Securities and Exchange Commission civil suit alleging various insider trading and securities law violations at Drexel. Milken is also expected to face criminal charges.

The suit seeks unspecified damages from Drexel. Drexel has denied that it committed any wrongdoing. A Drexel spokesman could not be reached late Monday for comment.