Bel-Air Accounting Firm Subpoenaed in Milken Probe

A congressional subcommittee issued a wide-ranging subpoena to a Bel-Air accounting firm in an effort to pierce the secrecy surrounding dozens of private partnerships established by former Drexel Burnham Lambert junk bond chief Michael Milken and associates.

Sources said the House subcommittee on oversight and investigations, chaired by Rep. John D. Dingell (D-Mich.), issued the subpoena last week to the accounting firm of Bergman, Knox & Green.

Details of the Milken partnerships have never been disclosed. Investigators are believed to be interested in possible improprieties in the extremely lucrative deals that some of the partnerships obtained in their dealings with Drexel. They are also curious about whether political and entertainment figures invested in the partnerships.

The subcommittee already has conducted several hearings on fraud and abuse on Wall Street. Dingell hopes to question convicted stock speculator Ivan F. Boesky in a session this summer, and the panel is contemplating extending limited immunity to Milken to compel his testimony.

Sources said Bergman, Knox & Green is the main accounting firm for partnerships that Milken and his brother, Lowell, set up for their own benefit and for that of selected employees of the Drexel junk bond department. The private partnerships, with assets worth many tens of millions of dollars, reportedly received pieces of Drexel deals on favorable terms, including parts of hot new issues of junk bonds.

The accounting firm formerly had its headquarters in the Milken-owned building in Beverly Hills that housed Drexel’s junk bond operations. It is now listed at an address on Moraga Drive.

The extensive subpoena asks for records of all partnerships and other investment entities that had dealings with Drexel and for which Bergman, Knox & Green were the accountants. It also asks for records of Drexel-related partnerships in which the accounting firm itself or its principals had an interest.

The sources said Richard Bergman, one of the accounting firm’s principals, also is listed as a partner in several of the Milken partnerships.

The subpoena requires the firm to deliver the documents by June 22 or appear before the subcommittee on June 25.

Dan Murdock, an attorney in New York said to represent the accounting firm, failed to return a telephone call for comment Monday. A woman who answered the phone at the offices of Bergman, Knox & Green said the principals were unavailable. A spokesman for Milken declined to comment on the subpoena.

Although the subpoena was issued last week, sources said, federal marshals in Los Angeles may not yet have served it on the accounting firm.

Sources said the subpoena was issued after three subcommittee staff members, Chief Counsel Michael F. Barrett Jr. and investigators Bruce F. Chafin and Peter Stockton, were rebuffed in an attempt to interview the accounting firm’s principals during a trip to Los Angeles in May. They were turned away by a security guard at the entrance to the building after the principals declined to see them, the sources said.

Based on information unearthed by the Dingell subcommittee more than a year ago, the Securities and Exchange Commission reportedly has been examining the relationship between Drexel and the partnerships. The favorable deals that the partnerships reportedly received from Drexel never figured in the SEC or criminal charges filed against Drexel and Milken.

Both Drexel and Milken have pleaded guilty to securities fraud counts. Milken is due to be sentenced in October.