Drexel Makes Settlement With 10 States

Drexel Burnham Lambert Inc., the embattled investment banker that agreed to plead guilty to federal securities fraud charges, said Monday that it reached settlements to keep operating in 10 states.

Drexel’s agreement to plead guilty to securities crimes leaves it open to actions by states that can now claim that the investment banker broke their laws.

States can move to revoke Drexel’s license and some have the authority to ask for heavy fines, reimbursement costs and for funds to finance investor education programs.

Although the firm is negotiating with a majority of states, some say they may still revoke its license.

Under the agreements reached so far, Drexel has paid a total of $975,000 in fines and penalties to keep operating. The firm hopes to reach settlements with other states and expects that it will end up paying about $11.5 million in all.

However, Drexel is still not out of the woods, said Susan Bryant who heads a committee of securities regulators that developed a draft agreement for states to follow in their negotiations with Drexel.

“Three (states) have told me directly they are still contemplating revoking Drexel’s license,” Bryant said. Bryant is administrator of the Oklahoma Department of Securities.

Bryant would not name the states because of ongoing negotiations.