Dispute Erupts Over U.S. Memo Alleging More Milken Crimes

Federal prosecutors on Thursday filed a long pre-sentencing memorandum with a judge, outlining many additional crimes that former junk bond king Michael Milken allegedly committed. But a legal dispute erupted over whether at least part of the document should be made public before Milken is sentenced Oct. 1.

Milken pleaded guilty in April to six felony counts of conspiracy, securities fraud and mail fraud under an agreement with the government that spared him from being prosecuted on scores of additional charges, including racketeering.

Officials at Milken’s former firm, Drexel Burnham Lambert, have said they fear that the memorandum will severely hurt the firm’s efforts to emerge from bankruptcy proceedings. Drexel filed for Chapter 11 bankruptcy protection in February, less than a year after the firm pleaded guilty to six felonies. Current Drexel executives say the new information contained in the memorandum could lead to many additional lawsuits against the firm by people who believe that they were victimized by the wrongdoing.

Part of Milken’s formal plea agreement specifically gave the government the right to file publicly a memorandum spelling out the additional crimes that prosecutors believe he committed. By custom, however, such memorandums aren’t made public until immediately after the sentencing.

But U.S. District Judge Kimba M. Wood in Manhattan held a hearing Thursday after several representatives of the press asked that the document be made public immediately. The judge hinted strongly that she believes that the law requires that most of it be made public before the sentencing. But she gave both prosecutors and Milken’s defense lawyers time to file legal arguments on the subject. Lawyers said the earliest that the memorandum might be released would be Wednesday.

Milken’s lawyers strongly oppose releasing it. They said that it might have an unfair, prejudicial effect if it is made public before he is sentenced. Martin Flumenbaum, one of Milken’s lawyers, noted in court that it is standard practice for such memorandums to be kept under seal until after sentencing.

“We want to be treated the way any other defendant is treated in this court,” Flumenbaum said.

But the judge said recent Supreme Court decisions on the disclosure of court documents may make it necessary to end the custom of keeping them confidential until after sentencing.

Prosecutors also requested that, whenever the document is made available to the public, it be edited to blot out names of unindicted co-conspirators and references to matters that are still under investigation. The judge said she will consider that issue as well.

The government has said it was filing the memorandum in the hope that the judge will take into account the additional alleged crimes when she imposes sentence. Milken faces up to 28 years in prison. His lawyers are expected to ask her, however, to ignore the claims when she decides Milken’s fate.