Sources close to Drexel Burnham Lambert said Tuesday that there are clear indications that, after a lull of more than two months, prosecutors once again are moving swiftly to obtain the long-expected indictment of the firm’s “junk bond” chief, Michael Milken.
One defense lawyer in the case said he believed it was probable that an indictment would be returned within a week, possibly as early as today.
The sources acknowledged that repeated rumors of Milken’s imminent indictment have been wrong before. But the sources now say there are stronger indications than before that the indictment of Milken and several other Drexel employees is about to be handed up in U.S. District Court in New York.
The indications include notification by prosecutors to defense lawyers that their clients are likely to be indicted soon.
The defense lawyer interviewed by phone Tuesday, who spoke on condition that he not be identified, said discussions with prosecutors over the past two days convinced him that they are finally about to act. “Everybody’s talking about it,” he said.
The decision to indict Milken and the other employees now would mark a shift in strategy for the U.S. Attorney’s Office in Manhattan. Until this week, the office had been concentrating on first completing the already announced settlement of criminal charges against Drexel itself.
But that settlement, which would involve a guilty plea by the firm to six criminal counts, has been repeatedly delayed. It is contingent on Drexel being able to settle separate pending civil charges filed against the firm by the Securities and Exchange Commission.
The settlement talks with the SEC have bogged down, apparently over the SEC’s insistence that Drexel immediately fire Milken. And Milken and his brother, Lowell Milken, also expected to be indicted, have filed a court challenge to Drexel’s planned settlement of the criminal charges. They object to provisions that require them to be dismissed or suspended and that would withhold much of the compensation owed them for 1988. The combined amount is said to exceed $200 million.
Legal observers note that an indictment of the Milkens now would take some of the heat off the prosecutors, who have been criticized for inserting the punitive measures against the Milkens in the Drexel settlement even though the brothers haven’t been charged with any crime.
The Milkens deny that they have broken any laws.
The three assistant U.S. attorneys directly involved in the Drexel investigation were said to be huddled together in a meeting late Tuesday and couldn’t be reached for comment. In the past, they have consistently refused to talk about the timing of an indictment.
A Drexel spokesman also declined to comment on the possibility of an indictment within the next few days.
Mondays and Wednesdays are considered the most likely days of the week for an indictment to be returned because the grand jury that has been hearing evidence in the case meets on those days. The investigation of Drexel and its employees has been under way for more than two years.
The firm, which in the tentative settlement with prosecutors would also have to pay $650 million in financial penalties, is accused of securities fraud, insider trading and stock market manipulation.