Judge Tells Justice Dept. to Probe Press Leaks About Milken Case

A federal judge Monday directed the Justice Department to launch an investigation into leaks of confidential grand jury information in the criminal case against former Drexel Burnham Lambert junk bond chief Michael Milken.

U.S. District Judge Kimba M. Wood, who is presiding over the case against Milken, asked during a hearing that the U.S. Attorney’s Office in Manhattan and the Justice Department’s Office of Professional Responsibility in Washington begin an inquiry into leaks to the press.

During the hearing, Assistant U.S. Atty. Jess Fardella, one of the lead prosecutors in the Milken case, told the judge that he had already made a similar request for an investigation of the leaks.

The hearing followed a request last week by lawyers for Milken and his brother, Lowell. In a motion filed with the court, they had asserted that prosecutors or the Securities and Exchange Commission had deliberately leaked information about the case to the Washington Post, the Wall Street Journal, the Los Angeles Times and the New York Times. The Milkens’ lawyers had asserted that the leaks were part of a deliberate plot to apply pressure on potential witnesses to cooperate with the government.

The judge, however, said that at least for the moment she wouldn’t grant the defense lawyers’ request for an evidentiary hearing before the trial, in which they could cross-examine witnesses in court about the source of the leaks. Instead, Judge Wood said she probably would hold such a hearing after the trial, which is tentatively scheduled for March, 1990. She said that, in the meantime, she would ask Justice Department officials to report to her periodically in closed proceedings in her chambers about the progress of the investigation.

It wasn’t clear if the investigators would attempt to interrogate or subpoena reporters.

98-Count Indictment

David Runkel, special assistant to Atty. Gen. Dick Thornburgh, said: “If the judge has ordered us to investigate the leaks, we certainly will.” Runkel said reporters generally haven’t been subpoenaed in past investigations of leaks, and he said it would be premature to say what techniques may be used in the investigation. But he said Thornburgh feels “it would be helpful if they came forward and cooperated in such investigations,” adding that “Thornburgh feels that they’re not beyond the scope of subpoenas in cases such as this.”

The Milken brothers and former Drexel trader Bruce L. Newberg were named in a 98-count racketeering and securities fraud indictment in March. Since then, the grand jury investigation has continued, and a new, “superseding” indictment with additional charges is expected in the case. The three have denied the allegations and said they will fight the charges.

It is illegal for government officials to disclose information that is before a grand jury.

In a telephone interview, Fardella said the inquiry would be conducted by Victor Pohorelsky, the deputy chief of the criminal division in the U.S. Attorney’s Office in Manhattan, under the supervision of the Office of Professional Responsibility. The latter office is charged with ensuring the integrity of Justice Department employees, including federal prosecutors.

Scot J. Paltrow reported from New York and Robert L. Jackson from Washington.