P.M. BRIEFING : Judge Backs Case Against Drexel

The government is free to seek the indictment of Drexel Burnham Lambert for racketeering and securities fraud because the firm has failed to reach a required settlement with the Securities and Exchange Commission, a federal prosecutor said today.

Drexel agreed in December to plead guilty to six felonies and pay $650 million to avoid an indictment under the racketeering statute. Such an indictment, which would have to be made by a grand jury, would have dire consequences for Drexel because it would allow the government to seize assets even before a trial begins.

The agreement with the U.S. attorney’s office cannot become final unless Drexel reaches a settlement with the SEC in a separate civil case brought against the investment banker. Talks on settling these charges have been going on for months without success.