Key Milken Aide May Assist U.S. in Probe of Drexel
Last-minute negotiations are under way to determine whether a pivotal figure in the criminal investigation of Drexel Burnham Lambert Inc. will cooperate with federal prosecutors.
The individual is Cary J. Maultasch, 36, a New York-based trader for the investment firm who formerly was a key assistant to Drexel’s “junk bond” chief Michael Milken in Beverly Hills. Maultasch is under threat of indictment in both the Drexel investigation and a related case against a small securities firm, Princeton/Newport Partners.
His lawyers are known to be anxious to spare Maultasch from the indictments, which are expected to include counts under the federal racketeering law. For the moment, at least, the lawyers are insisting that Maultasch be given complete immunity from prosecution in exchange for his testimony, sources said. However, Rudolph W. Giuliani, the U.S. attorney in Manhattan, is said to be insisting that Maultasch agree to plead guilty to at least one criminal count.
Like ‘a Shadow’
Maultasch is thought to have intimate knowledge of many of Milken’s transactions under investigation by the prosecutors. He frequently handled trades made on behalf of partnerships controlled personally by Milken, his brother, Lowell Milken, and certain other Drexel employees. Lawyers associated with the case have said that Maultasch’s testimony could be devastating to Milken and Drexel.
“If (Maultasch) is cooperating, I can’t see how Milken can defend himself,” said a lawyer for a potential witness in the case. “He’s as close to Milken as his shadow.”
Maultasch, along with Milken and several other Drexel employees, was named as a defendant in a Securities and Exchange Commission insider trading lawsuit against Drexel filed Sept. 7. Maultasch and the others have denied any wrongdoing.
As reported, Drexel has been in negotiations to settle the expected criminal charges, although any settlement apparently wouldn’t include charges against Milken. An indictment is expected soon, possibly this week. The Washington Post reported Tuesday that Frederick H. Joseph, Drexel’s chief executive, was planning to meet with Giuliani to discuss a possible settlement.
Prosecutors are believed to be eager to get Maultasch to cooperate, in part so that they will have to rely less on the testimony of Ivan F. Boesky. A former stock speculator who pleaded guilty to a securities fraud charge and paid a $100-million penalty in 1986, Boesky gave prosecutors the information that led to the Drexel investigation.
Prosecutors have been worried about corroborating Boesky’s testimony. They are concerned about how a jury may react to him because he was at the center of the nation’s largest insider trading scandal and because he is a convicted criminal who received a relatively light prison sentence in exchange for his cooperation.
Declined Comment
The threat to indict Maultasch in both the Drexel and Princeton/Newport cases on racketeering charges that carry very stiff penalties is seen as an effort by prosecutors to apply intense pressure on him to cooperate. Princeton/Newport and several limited partners of the firm were indicted in August on racketeering and securities fraud charges in connection with an alleged scheme to create phony tax losses through securities transactions with Drexel. Prosecutors had said they would bring a new indictment in the case, naming an additional defendant--presumably Maultasch--by the end of last week. But no new indictment has been returned yet.
A lawyer for Maultasch on Tuesday refused to discuss either the Drexel or Princeton/Newport cases or to comment on any pending negotiations. Giuliani’s office also refused to comment.
