Drexel Pleads Guilty, to Pay Record Fine : $650-Million Accord Closes Boesky Chapter
Drexel Burnham Lambert Inc. today pleaded guilty to six felonies and agreed to pay a record amount of more than $650 million to settle criminal charges in the largest securities fraud case ever.
The plea closes a chapter in a Wall Street corruption saga that stemmed from the Ivan Boesky inside-trading scandal of three years ago.
A lawyer for the New York investment firm, which grew into a financial powerhouse in the 1980s, entered the plea.
The plea had been expected since Drexel and the government reached an agreement in January after months of negotiations and legal challenges.
It clears the way for implementation of a separate settlement between Drexel and the Securities and Exchange Commission reached in April that places Drexel under unprecedented government supervision for three years and revamps its management.
Charges Date to ’84
Drexel pleaded guilty to four counts of securities fraud and two of mail fraud and agreed to pay $650 million plus interest and $15.15 million in civil insider trading fines to resolve charges dating to 1984. More than $500 million of the amount was due immediately.
“Based upon the information before me, Drexel is in no position to dispute the government’s charges,” Drexel attorney Thomas F. Curnin said in court.
The charges involve six stock transactions involving Drexel, its top bond trader Michael Milken and often Boesky, who provided the government much of the information used in the case after he agreed to cooperate in 1986. He is now in prison.
The schemes included stock manipulation, failure to make required financial disclosures to the SEC and stock “parking,” a means of concealing ownership of stock.
Under the agreement, Drexel was ordered to pay $300 million in criminal fines and penalties, plus interest, and set aside $350 million in a fund for paying claims of damages.
Milken and his brother Lowell have been indicted separately on charges of racketeering and fraud.
Last week, the government dropped a requirement that Drexel withhold Michael Milken’s 1988 compensation of more than $100 million and half his brother’s pay for last year. The Milkens had fought the requirement as unconstitutional.
