Milken Testifies in Trial of Former Drexel Associate

Imprisoned financier Michael Milken, minus the toupee he wore in his heyday as junk-bond king, began testifying in open court for the first time Monday in an acknowledged effort to win a reduced sentence.

The 45-year-old Milken took the stand as a prosecution witness in the securities fraud and conspiracy trial of his friend and former associate, Alan E. Rosenthal.

Milken didn’t say much, but his 25-minute appearance before a packed courtroom was dramatic anyway since the disgraced financier had never before testified in court about his activities as head of Drexel Burnham Lambert’s Beverly Hills-based high-yield bond division.

Milken’s remarks consisted mainly of his age, family status and educational and work background, as well as the details of his plea bargain with government prosecutors in April, 1990.

Milken also gave cursory descriptions of the crimes for which he was sentenced to 10 years in prison, including under-the-table financial arrangements with arbitrageur Ivan F. Boesky and money manager David Solomon.

Prosecutors said Milken, who once earned $550 million from Drexel in a single year, will resume testifying today. Agreed Milken attorney Arthur Liman: “This is just the beginning.”

In his testimony Monday, Milken disclosed that since his plea bargain, he has “met more than 30 times” with government prosecutors and officials of regulatory agencies who are still trying to unravel the great financial scandals of the 1980s.

Asked by Assistant U.S. Atty. Nelson Cunningham what he expected as a result of his testimony in Rosenthal’s trial, Milken replied: “After the last five years, I’m not sure what expectation I have. Obviously, I hope that I get a reduction in sentence.”

His wife and children were in the hot, humid courtroom when Milken, wearing a white button-down shirt, maroon tie and blue pin-striped suit, was led in and sworn in late in the afternoon.

He was hardly his old self. Federal rules bar his trademark toupee in prison, and Milken was without it Monday in court, looking more a mild-mannered accountant than the swaggering titan who once made corporate chieftains quake by bankrolling hostile takeovers of their companies.

Rosenthal, a former haberdasher, met Milken in the early 1970s when the two lived across the hall from each other in an apartment building in Cherry Hill, N.J. Milken, then fresh out of business school, persuaded his friend to join him in the securities business.

Rosenthal, who followed Milken to Beverly Hills and moved his family into a home near Milken’s in Encino, thrived in the business, earning $1 million in 1984, $1.8 million in 1985, $3.8 million in 1986 and $2.1 million in 1987.

Prosecutors charge that during those years Rosenthal, Milken and others at Drexel and outside the firm conspired to defraud tax collectors, Drexel clients and others through a complicated series of financial transactions involving the purchase and sale of bonds.

Rosenthal, who has pleaded innocent to all the charges, faces 11 criminal counts, including securities fraud, mail fraud, conspiracy and embezzlement from a pension fund.