Michael Milken, the junk bond king who once made mighty corporations tremble, wept and pleaded guilty today to six criminal charges and agreed to pay $600 million to settle the biggest Wall Street fraud case ever against an individual.
“I realize by my acts I have hurt those who are closest to me. I am truly sorry,” Milken said, breaking down and crying as he read a statement in court.
Included were guilty pleas for aiding speculator Ivan Boesky in several securities law violations, for aiding another trader in filing false income tax returns and for conspiring to violate securities laws.
Milken did not plead to any charges of insider trading or racketeering, which were the most serious in the government’s original broad indictment of him.
Sentencing was set for Oct. 1. Milken faces a possible maximum total of up to 28 years in prison.
Milken, 43, entered his guilty plea at 12:42 p.m. before U.S. District Judge Kimba Wood in a courtroom packed with about 250 people in lower Manhattan.
The move capped the stunning decline of the former head of Drexel Burnham Lambert Inc.'s high-yield bond department, who gained notoriety for engineering financing for some of the biggest corporate takeovers of the 1980s and then for allegations of widespread wrongdoing.
Milken was the main target of the government’s lengthy investigation of Wall Street crime that resulted in more than 30 convictions, and he was the last to fall.
Milken was linked to a large insider trading network headed by Boesky, who paid $100 million and was sentenced to three years in prison in exchange for providing information against Milken, Drexel and others.
After three years of rumors and press leaks, the Justice Department in March, 1989, indicted Milken, his brother, Lowell, and former Drexel trader Bruce Newberg on an unprecedented 98 counts of fraud and racketeering.
Under the plea deal, all charges were dropped against Lowell Milken, a lawyer and key aide to his brother at Drexel. The case against Newberg was not resolved.
Milken pleaded guilty to counts of conspiracy; aiding and abetting failure to meet federal securities disclosure regulations; securities fraud; aiding and abetting a regulated broker-dealer to violate securities reporting requirements; mail fraud, and assisting in filing a false tax return.
The first five counts carry a maximum five years each in prison, and the tax count has a maximum three year sentence, for a possible total of 28 years.
Milken agreed to pay $200 million in penalties to the government and $400 million to set up a fund for reimbursing investors defrauded by his actions.
Milken, wearing a blue suit, white shirt and blue polka-dot tie, read a lengthy statement detailing the crimes that he pleaded guilty to. He summarized his work as head of Drexel’s high-yield bond department, which helped reshape corporate America by pioneering the wide use of its so-called “junk bonds” to raise money for small companies and to finance corporate takeovers.
The original indictment had charged the defendants with illegal securities trading, stock manipulation and other fraudulent activity, some in connection with a series of corporate mergers and acquisitions.
Milken had pleaded innocent and repeatedly said he would fight the charges at trial, but reversed his position after months of negotiations between the government and his attorneys.
He had faced a much longer prison term and possible forfeiture of his wealth--said to be more than $1 billion--under the original charges.
The plea deal was reached Friday after the U.S. attorney’s office said it would bring a broader indictment, as it had been threatening to do for nearly a year, if Milken did not settle.