Drexel Set to Expel Milken, Sources Say

Drexel Burnham Lambert Inc. will expel junk-bond financier Michael Milken from the firm and withhold his 1988 compensation as part of its record settlement of federal securities fraud charges, sources said today.

The sources, who were familiar with the Drexel-government negotiations but who declined to be further identified, said the terms regarding Milken’s departure were seen as a pressure tactic to force him into negotiating his own plea-bargain with U.S. prosecutors.

The expulsion without pay of Milken, one of the most dynamic financiers of the decade, from a firm he helped nurture would mark one of the most dramatic results yet to emerge from Drexel’s long-running legal ordeal.

Drexel agreed two weeks ago to settle the biggest securities fraud case in history by paying a record $650 million in fines and restitution and pleading guilty to six felonies stemming from its relationship with Ivan Boesky, the now-imprisoned speculator who turned state’s evidence in late 1986.

The Drexel settlement of criminal charges intensified pressure on Milken, another key target of a massive federal inquiry into Wall Street wrongdoing that was suggested by Boesky’s revelations.

Milken has maintained that he is innocent. Barring a settlement, he is expected to be indicted soon on racketeering and fraud counts.