MILKEN’S GUILTY PLEA : Milken Plea Deal Will Force Him to Name Names : Probe: The junk bond king will cooperate with an ongoing federal investigation into securities violations.

Federal prosecutors said Tuesday that they were angered by press reports over the weekend that former Drexel Burnham Lambert junk bond chief Michael Milken would have to give only very limited cooperation to prosecutors in continuing investigations.

In fact, Milken’s plea agreement, made public for the first time Tuesday, apparently requires nearly unlimited cooperation. In pleading guilty to six charges, Milken formally agreed Tuesday that, once he is sentenced, he will appear whenever asked before grand juries and government investigators and “fully and truthfully disclose all information with respect to Drexel-related activities.”

The plea agreement contains no limit on the individuals or specific events that the government may call him to testify about. In addition, the agreement will subject Milken to stiff penalties if he doesn’t cooperate fully, including possible perjury charges and contempt of court proceedings. He is also required to turn over documents when asked.

Based on information from sources in the Milken camp, several major newspapers, including the Los Angeles Times, reported over the weekend that Milken’s cooperation would be limited. Some articles suggested, erroneously, that he would only be required to corroborate evidence the government already had, and that he might not be required to testify under oath.

One senior federal prosecutor complained Tuesday that “it was incredible the way the press was manipulated.”

Another official, Assistant U.S. Atty. John K. Carroll, the lead prosecutor in the Milken case, said: “The deal is that he’s got to cooperate fully.”

Milken’s spokesman refused to comment on the controversy.

The cooperation issue is known to have been extremely sensitive in Milken’s negotiations with the government over the plea agreement. He wanted to avoid having to testify against former colleagues and clients. And he strongly wanted to avoid any appearance of following in the footsteps of former stock speculator Ivan F. Boesky, who turned in more than a dozen of his former business associates, including Milken, after Boesky pleaded guilty to a single felony charge in 1986.

In court Tuesday, Arthur L. Liman, Milken’s lead defense lawyer, asserted that if his client had gone to trial, he would have testified in his own behalf. Liman said Milken now will testify fully in continuing investigations. “He has been waiting for that opportunity in many ways,” Liman said.

Another lawyer close to the Milken defense said Milken intends to testify truthfully. But, the lawyer said, “he doesn’t consider that the truth is going to make cases against anybody.”

GUILTY ON SIX COUNTS

* COUNT ONE: Conspiracy. The government said Milken, former stock speculator Ivan F. Boesky, Drexel client David B. Solomon of Solomon Asset Management and others conspired to violate federal tax and securities laws.

The conspiracy, detailed in the five other counts, included illegal stock trades, secret records kept separate from Drexel’s official books, tax evasion and federal securities violations. The government said Milken and the others profited while investors were cheated.

* COUNT TWO: Aiding and abetting the filing of false documents with the Securities and Exchange Commission. The government said the violation was designed to help Boesky by concealing his holdings in Fischbach Corp., a construction business that was the subject of a takeover attempt by Pennsylvania Engineering Corp.

Milken admitted failing to record a deal compensating Boesky for trading losses in Fischbach from April, 1984, to February, 1985. Boesky had acquired more than 10% of Fischbach on Milken’s recommendation, and Milken promised to cover any trading losses.

The government said Boesky lost several million dollars on the deal, but that Drexel more than made up for the losses under the secret arrangement.

* COUNT THREE: Securities fraud. Milken admitted arranging Boesky’s secret purchase of MCA Inc. stock held by Drexel client Golden Nugget Inc. from March to November, 1984.

Golden Nugget, a Las Vegas-based casino operator, had purchased $99 million in MCA stock during a planned takeover of the entertainment giant. The government said Milken got Boesky to buy about 875,000 shares of MCA to hide from the market that Golden Nugget was dumping its position.

The goal was to support the price of MCA shares, which would have fallen if Golden Nugget’s big selling became public. Boesky’s illegal buying created the appearance of demand, the U.S. said.

* COUNT FOUR: Aiding and abetting the violation of SEC reporting requirements for broker-dealers. The government said that in 1985, Drexel bought about 1 million shares of Helmerich & Payne Corp. stock--worth more than $20 million--from Boesky, and agreed to hold it for him. Boesky in turn promised to make up any losses suffered by Drexel, the government said. Drexel later sold some of the stock back to Boesky.

The deal allowed Boesky to cheat on his taxes, free his cash to buy more stock and overstate the net capital in his Seemala Corp., the government said, adding that by failing to report the stock sales, Milken helped Boesky violate federal laws.

* COUNT FIVE: Mail fraud. Milken said he persuaded Solomon to become a manager for Finsbury Group Ltd., a Drexel-organized international investment fund.

Drexel’s junk bond department in Beverly Hills paid fees to salesmen selling the Finsbury shares, and Solomon then funneled money back to the junk bond department by setting up deals between Drexel and Solomon’s clients.

The government said Milken adjusted transaction prices to provide cash that could go back to Drexel, but Solomon’s clients were kept in the dark about the arrangement. The transactions occurred from 1984 to 1986.

* COUNT SIX: Aiding and abetting the filing of a false tax return. Milken admitted setting up prearranged trades that allowed Solomon to claim short-term capital losses and reduce his 1985 tax liability.

Milken and Solomon set up the deal with an understanding that Milken would reimburse Solomon for his losses the following year, the government said. Sure enough, in 1986 Milken let Solomon acquire a limited partnership interest that Solomon sold for a profit exceeding the bogus losses, the government said.

Source: Associated Press

MAIN STORY, A1