Lawyers Ponder Milken Settlement Offer : Securities: The $1.5-billion package is aimed at settling scores of lawsuits against the former junk bond king.
Lawyers are mulling over a proposed settlement package of $1.5 billion that would end all civil suits against former junk bond financier Michael Milken, an amount that would include $500 million directly from him, sources said Tuesday.
The total would also include an additional $400 million already paid by Milken into a special Securities and Exchange Commission settlement fund, part of the $600 million in fines and penalties he paid when he pleaded guilty to six felony counts in 1990.
But the federal judge in New York who has been pushing for a global settlement declined to comment on details of the proposal and said many obstacles remain.
The talks are aimed at settling the scores of lawsuits pending against Milken, many of them class actions, involving hundreds of individual plaintiffs. The suits include big claims against Milken by the Federal Deposit Insurance Corp. and by his former company, Drexel Burnham Lambert, which is in bankruptcy proceedings.
The unusual attempt to settle numerous diverse lawsuits under a single accord is being pushed by U.S. District Judge Milton Pollack, who also is presiding over Drexel’s bankruptcy case.
Milken’s lawyers are known to favor the settlement to spare him litigation that would drag on for years in courts across the country. Milken is now serving a 10-year prison term. Individuals familiar with the talks said the large amount of money available makes the settlement attempt attractive to many plaintiffs, although a significant number haven’t yet agreed.
Sources said the settlement package would include a $500-million contribution from Milken himself. An additional $300 million would come from former associates of Milken at Drexel who are co-defendants in many of the suits. These individuals, said to number more than a dozen, include Milken’s brother, Lowell, and former executives Leon Black, Peter Ackerman and Warren Trepp.
The remaining $750 million would come from money in two “civil disgorgement” funds already set up by the Securities and Exchange Commission, including the $400 million already paid by Milken, and a total of $350 million from Drexel--$150 million of which is still owed. The funds were set up to help pay the civil claims of parties harmed by the illegal activities at Drexel.
Pollack has imposed a gag order on all parties in the case. As a result, Milken’s representatives and lawyers in the suits declined to comment on the status of the talks. It wasn’t clear, for example, if the FDIC was close to agreement on the package.
Other hurdles were said to include squabbling among the individuals supposed to contribute the $300 million. They are said to disagree over how much each should pay.
In an interview, Pollack said he wasn’t certain the settlement attempt will succeed. “I think it’s making progress,” he said, but added that there were still “too many discordant and diverse views.” He declined to elaborate.
Drexel’s bankruptcy reorganization plan is up for a vote by the firm’s creditors by the beginning of March. Some sources said the judge was attempting to pressure parties to settle quickly by making the settlement part of the bankruptcy case. They said he would use powers given under bankruptcy law to ban future lawsuits against Milken.
But Pollack in an interview denied a direct link between the settlement attempt and the bankruptcy case. He said any deadlines in the settlement effort are “self-imposed.”
