A federal judge on Friday rejected attempts by jailed junk bond king Michael Milken to disqualify a prestigious New York law firm from representing the federal government in suits against Milken in connection with the failure of Columbia Savings & Loan.
U.S. District Judge Stephen V. Wilson, speaking in a Los Angeles courtroom jam-packed with high-priced lawyers from some of the country’s biggest and best law firms, said he did not see that there had been an attorney-client relationship between Cravath Swaine & Moore and Milken or any of the other defendants in the Columbia case.
In the case, the Resolution Trust Corp., the liquidating arm of the Federal Deposit Insurance Corp. in the savings and loan bailout, is suing brothers Michael and Lowell Milken, several other former employees of Drexel Lambert and dozens of Drexel partnerships in an attempt to recoup losses of nearly $6 billion in depositors’ funds that the government contends Columbia lost by its participation in the junk bond market.
As part of the suit, the RTC contends that Milken and Drexel illegally manipulated the junk bond market.
Despite his finding, Wilson did say he would be willing to consider future motions to disqualify Cravath Swaine.
And Alan Dershowitz, one of several attorneys representing Milken and the others in the Columbia suit, vowed that he would soon bring such a motion. In one of many spirited arguments at the Friday hearing, Dershowitz told the judge that Cravath Swaine’s participation in the junk bond market, as an adviser to underwriters or issuers of about $15 billion in junk bonds--including six Drexel deals--would be a central point of the Milken defense.
After the judge’s ruling, Dershowitz said Milken’s attorneys intended to put the old-line Wall Street law firm “on trial.”
Cravath attorney Thomas D. Barr scoffed at the notion and called it “an act of desperation . . . huffing and puffing and nothing more.”
According to the attorneys, Wilson’s ruling will likely carry weight in a huge New York case against Milken and others, involving more than 40 failed savings institutions, in which Cravath Swaine is representing the RTC. Milken is also seeking to disqualify the firm in that case.