Fiery words on why Michael Milken should be jailed for a long time filled much of the 196 pages of prosecutors’ presentencing memorandums made public Wednesday for the first time.
But the long-awaited documents contained relatively few details of alleged additional crimes by the former junk bond king beyond what was disclosed Tuesday in defense papers and in an indictment that was dropped when Milken agreed to plead guilty to six felonies.
Of the alleged Milken crimes never made public before, the most tantalizing details apparently were contained in an additional 88 pages that were edited out of the prosecutors’ memos before the documents were distributed to the press Wednesday. U.S. District Judge Kimba M. Wood is reviewing the deletions to determine if the material should be released or permanently sealed.
Some of the material was withheld because it relates to continuing investigations.
In one section of the prosecutors’ report, the government discloses for the first time that it secretly taped a meeting in a Beverly Hills Hotel room between Milken and former stock speculator Ivan F. Boesky in October, 1986. Milken allegedly was unaware then that Boesky, now an admitted inside trader, was cooperating with the government. The government says the two talked about falsifying records to explain an illegal $5.3-million payment made to Drexel by Boesky.
They also allegedly agreed that “their subordinates would be reliable in the face of a governmental investigation.”
But details of that conversation--as well as of alleged obstruction of justice by Milken afterwards, including destruction of documents--apparently is contained in a 40-page section of the memo that was edited out in the public version.
Milken’s lawyers have strongly denied that he destroyed documents or obstructed justice.
Milken, 44, the former head of Drexel Burnham Lambert’s Beverly Hills-based junk bond department, is due to be sentenced Monday on the six felony counts to which he pleaded guilty in April. They include conspiracy, filing false statements with the Securities and Exchange Commission, mail fraud and securities fraud. He faces a maximum of 28 years in prison. Milken already has agreed to pay $600 million in fines and other penalties.
On Tuesday, defense lawyers disclosed that they had asked for probation for Milken, as well as a requirement that he perform community service under the supervision of the Los Angeles Police Department. They claimed that Milken’s crimes were isolated incidents and said he is basically a decent, idealistic individual who had done major charitable work for years before the investigation began.
But prosecutors painted a very different portrait:
“Contrary to Milken’s persistent efforts to minimize the nature and scope of his criminal conduct, the six charges to which Milken pleaded guilty provide but a sampling of the large pattern of criminal activity that permeated Milken’s operation of the (junk bond) department. Even these six crimes, however, demonstrate that his criminal activity was systematic and pervasive, not aberrational and isolated.”
Prosecutors also said: “Milken’s proposal that he be sentenced to a probationary term and community service is absurd.”
The government documents did, as expected, allege involvement in additional crimes, including insider trading, bribing managers of mutual funds to buy securities from Drexel, and aiding in tax law violations.
Defense papers, however, appear to raise substantial questions about whether prosecutors really have firm evidence for these charges. The government, for example, charges that Milken participated in an illegal stock “parking” and market manipulation scheme involving Princeton/Newport Limited Partners, a now-defunct firm whose principals have been convicted of tax and securities fraud.
A detailed rebuttal by defense lawyer Arthur L. Liman, however, concludes that trial and grand jury testimony contain no allegations that Milken had any role in the Princeton/Newport wrongdoing. Liman wrote that “Instead of presenting facts, the government urges this Court to ‘assume’ Mr. Milken’s involvement ‘based upon the pattern and practice of the High Yield Department’s other corrupt arrangements.’ ”
The government memo admits that evidence of a Milken role in the violations “is circumstantial.”
Liman also strongly took issue with a table in the government’s memo that showed not only how much Milken earned during his last years with Drexel, but the percentage of Drexel’s entire annual operating earnings the government claims Milken’s income amounted to. They show that in 1984, when Milken earned more than $135 million, his pay amounted to 75% of Drexel’s total operating profit for the year. In 1987, the $315 million he received amounted to almost 82% of Drexel’s operating profit.
As previously reported, Milken’s peak earnings were $550 million in 1986, although that year his earnings apparently took up only 46% of the operating earnings.
Liman pointed out, however, that prosecutors determined the percentages after deducting from operating income all of the bonuses paid by the firm, including that of Milken. He claims that the correct percentages are vastly lower.