P.M. BRIEFING : Judge Backs Case Against Drexel

From Times wire services

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.