Milken Wants New Judge to Take SEC Suit

Attorneys for Michael Milken asked the U.S. Supreme Court on Wednesday to consider removing the judge in charge of the settlement of insider trading charges against the deposed bond financier and his former employer, Drexel Burnham Lambert Inc.

The petition asks the court to hear their appeal of a lower court decision allowing U.S. District Judge Milton Pollack to preside over the Securities and Exchange Commission’s lawsuit against Drexel and Milken.

Lawyers for Milken and his brother Lowell, who was also named in the SEC suit filed last September, claim Pollack should be disqualified because his wife stands to make $30 million from a leveraged buyout Drexel helped finance.

They allege that the transaction represents a conflict of interest for Pollack, who must approve any final settlement between Drexel and the SEC.

The Milkens were charged last week with a range of criminal securities law violations in a 98-count racketeering and fraud indictment that capped a two-year government investigation. A bond hearing on the charges, in which the government is seeking $1.8 billion in penalties, is set for Friday.

In a related matter, Chairman David S. Ruder said Wednesday that the SEC was earmarking $1 million a year to press the securities fraud case against Milken, who is expected to mount a defense costing tens of millions of dollars.

Securities lawyers said $1 million was piddling compared to the amount likely to be spent on Milken’s defense by Drexel, the nation’s fifth-largest investment bank.

“One million doesn’t go very far in terms of prosecuting a major case like this,” said Richard Phillips, former chairman of the American Bar Assn.’s Committee on Federal Regulation of Securities.