Employees at Drexel Burnham Lambert in Beverly Hills expressed every emotion but surprise at the news that Michael and Lowell Milken were indicted Wednesday on securities fraud charges.
Most Drexel employees learned the details of the 98-count indictment by reading the Dow Jones ticker tape or by talking to colleagues, workers said. They said “Mike” had been in the office quite a bit in the past few days, but no one seemed to know how he got the news.
“We are all a bit numb,” said a Drexel executive who asked not to be identified. “After all, it’s been three years of this (the government investigation.)”
“It’s a terrible, terrible shame that they are doing this to Mike,” he said. “The tragedy is that he has helped so many people.”
When asked if he expected Milken to make a comeback, he said: “I would say a guy with Mike’s genius and creativity will still be around long after this.”
The Beverly Hills office of Drexel Burnham is the headquarters of Michael Milken’s “junk bond” operation, and it is here that he and intensely loyal associates worked to raise billions of dollars for corporate America.
Drexel and the Beverly Hills office will endure, the executive said. The firm continues “to do lots of deals and raise lots of money” despite the adverse publicity, he said.
Other workers echoed the executive’s deep feelings for Milken. “Everybody’s been expecting it for so long, but it’s sad because Mike Milken is so smart,” one employee said.
But to some, even though it was expected, the actual news was unnerving. A secretary to John Kissick, a Drexel director who has taken over most of Michael Milken’s duties, was so disturbed by the news and by a request to speak to Kissick that she abruptly hung up on a reporter.
Sources said Drexel has been preparing for the indictment by grooming other executives to take on Milken’s work. This is necessary because the company agreed that employees who are indicted will have to leave the firm.
Kissick and Peter Ackerman, a close associate of Michael Milken, have taken over the day-to-day bond operation. Sources said Ackerman is the one who has followed Milken’s footsteps in dreaming up creative financing ideas for clients. “It was Ackerman’s idea and structuring that raised $5 billion instead of $3 billion for RJR (Nabisco),” said one source, referring to the recent $24.5-billion leveraged buyout of the giant food and tobacco firm.
Several employees said they had been working hard and trying not to think about the impending charges.
“You wouldn’t know anything was different,” said a secretary. “It has been business as usual, and that’s what’s been funny.”
Sources inside Drexel suggested that workers tend to be divided over the Milkens’ troubles. One group, consisting of people who worked closely with Michael Milken and enjoyed substantial compensation, remain steadfastly loyal. Another group of generally younger, newer employees, tend to be somewhat embarrassed by the firm’s troubles and feel that the scandal has tarred the reputation of the firm.
Tensions within the company have been high since at least three employees have agreed to testify against Milken for the government’s case. One witness, Terren S. Peizer, a bond trader, was told to take several days off last December after an argument with a supervisor, according to his attorney.
Many employees felt a sense of relief that the indictment was finally issued. But one former Drexel investment banker was openly angry at Milken and felt that he deserved to be criminally charged.
‘Predators’ Ball’ Still Planned
“Here you are trying to do people a service and they think, ‘Drexel--oh, you’re a bunch of crooks,’ ” he said, adding that Milken has given Drexel a bad name in the investment community.
“We never had a reputation for being pretty, we just have a reputation for being able to perform,” countered one Drexel executive.
The indictment comes a week before Drexel’s annual institutional research conference in Beverly Hills. Thousands of Drexel employees and clients from around the world are expected to attend the gathering from next Wednesday through April 8 at the Beverly Hilton Hotel. The top-secret session climaxes with an elaborate dinner on April 7.
Dubbed the “Predators’ Ball” by the financial press--which is banned from the event--it has traditionally attracted Drexel’s most powerful clients.
“The conference is definitely going to happen,” said Steven Anreder, Drexel’s spokesman. “It will be the 11th one.”
Another insider said it appeared that the government intended to add insult to injury by indicting the Milken brothers just days before the company’s biggest public event.