A trading assistant in Drexel Burnham Lambert’s “junk bond” department in Beverly Hills was indicted Wednesday by a federal grand jury in New York on charges of perjury and obstruction of justice in connection with the continuing criminal investigation of the firm.
Lisa A. Jones, 29, a resident of Sherman Oaks, was accused of lying to the grand jury in January when she answered questions about possible illegal “parking” of securities by Drexel. The questions related to Drexel’s dealings with executives of an investment firm, Princeton/Newport Partners. Those executives were indicted on federal racketeering and securities fraud charges in August for a scheme in which they allegedly arranged sham sales of securities to Drexel to evade taxes.
One of the men indicted in August was Bruce L. Newberg, a former Drexel bond trader who had been Jones’ boss until he resigned from the firm in April.
In a statement, Drexel said Wednesday that following the indictment, Jones “requested a leave of absence and we granted it.” The firm said it had been told that she would plead innocent, “and therefore it is unfair for us to prejudge the situation.” But Drexel said: “We think this is a sad development.”
Jones was the second Drexel employee indicted this month. Ross S. Frankel, an employee in Drexel’s domestic arbitrage department, was indicted Nov. 2, along with employees of two Wall Street arbitrage firms, on securities fraud and insider trading charges. Unlike the Jones indictment, the case against the arbitragers doesn’t appear related to the main criminal investigation of Drexel.
Brian O’Neill, a Los Angeles lawyer representing Jones, said she would enter a not guilty plea at an arraignment scheduled for Nov. 17. He said he expected her to be “vindicated” in a trial. O’Neill accused Rudolph W. Giuliani, the U.S. attorney in Manhattan, of using scare tactics to apply pressure on witnesses and potential defendants in the criminal investigation of Drexel and other firms.
Drexel already has been named in a Securities and Exchange Commission civil lawsuit accusing it and certain employees, including Michael Milken, head of the junk bond department, with insider trading, market manipulation and fraud. As reported, Drexel, Milken and several other employees have received “target” letters from Giuliani’s office, informing them that a criminal indictment may be imminent.
Drexel lawyers were to have met Wednesday with high-level officials in the Justice Department in Washington in a last-ditch effort to persuade them not to authorize racketeering charges. Giuliani must receive approval from the Justice Department before he can include in an indictment any counts under the federal Racketeer Influenced and Corrupt Organizations Act, known as RICO. A Drexel spokesman said late Wednesday that he hadn’t received any word on how the talks had gone. The matter is expected to be decided by Atty. Gen. Dick Thornburgh.
O’Neill said Jones’ job at Drexel was mainly clerical. He said it involved taking information over the phone about securities to be bought or sold and then passing slips of paper with the information to a trader. According to the indictment, her yearly salary is $75,000 and she earned a $25,000 bonus in 1987. Jones had been employed in Drexel’s high-yield bond department since 1981.
According to the indictment, Jones lied when she told the grand jury that she wasn’t aware of any instances in which Drexel bought a security from a client with the understanding that the same client would later buy it back.
In one portion of her grand jury testimony quoted in the indictment, an assistant prosecutor asked her if she had ever heard of any such instance, and she replied, “No, I have not.” In her testimony, she confirmed that she had taken phone calls from several of the Princeton/Newport executives. But she also allegedly lied when she said she hadn’t helped make calculations of how much Drexel would charge Princeton/Newport for temporarily holding securities.
Jones faces a maximum penalty of five years in prison and a $250,000 fine on each of the eight counts in the indictment.