Drexel Settlement Gets Formal OK From Judge

A federal judge gave formal approval Tuesday to Drexel Burnham Lambert’s settlement of civil insider trading and securities fraud charges brought nine months ago by the Securities and Exchange Commission.

The settlement, which Drexel agreed to in April, provides for the strictest outside supervision ever imposed on a major Wall Street securities firm. The settlement also clears the way for Drexel to carry out its announced plan of pleading guilty to separate pending criminal charges. Under an agreement with federal prosecutors, the guilty plea on the criminal charges depended on the SEC settlement being approved first.

Final approval of the SEC settlement had been delayed for months while lawyers for former Drexel “junk bond” chief Michael Milken, and his brother, Lowell Milken, who were also named as defendants in the SEC lawsuit, tried to have U.S. District Judge Milton Pollack removed from the case. They claimed that he had a conflict of interest. But two weeks ago the Supreme Court refused to hear an appeal on the issue, leaving Pollack in charge.

Pollack on Tuesday approved the settlement without comment after a brief court hearing. Thomas F. Curnin, a lawyer who led Drexel’s negotiations with the SEC, said in court that “this settlement will bring to a close 2 1/2 difficult years for Drexel, its employees and clients.” He said he thought that the provisions of the settlement “would be beneficial to the firm.”

Under the settlement, Drexel accepted the entry of a judgment without admitting or denying the civil charges contained in the SEC’s 184-page lawsuit. The firm will be placed on “administrative probation” for three years, and it has been required to hire new outside directors acceptable to the SEC, as well as hiring outside accountants and lawyers to monitor the firm’s compliance with securities laws. The firm has also reorganized the Beverly Hills-based high-yield, high-risk junk bonds department that Milken formerly headed.