Prosecutors Try to Limit Milken’s Damage

Prosecutors in the securities fraud trial of a former Drexel Burnham Lambert executive tried Monday to limit the damage wreaked by their own witness--jailed junk-bond king Michael Milken.

Milken, in an effort to get his 10-year prison sentence reduced, took the witness stand last week against Alan Rosenthal, a longtime friend and colleague.

But Milken’s testimony appeared to hurt more than help the government’s case against Rosenthal, forcing prosecutors to contend in closing arguments that Milken had been too busy at Drexel to know who was carrying out illegal trades.

Milken, in his testimony, portrayed Rosenthal as a bookkeeper who recorded illegal trades at his request. He said he did not know whether Rosenthal was the one who executed the transactions.

Legal experts said Milken may have actually helped his former colleague. Indeed, the judge dismissed one of the 11 counts against Rosenthal after Milken’s testimony.

“Michael Milken was a busy man. He delegates. He might not know who executed trades,” Assistant U.S. Atty. Karen Patton said during closing arguments.

Rosenthal is former head of convertible securities in Drexel’s high-yield bond department. The charges against Rosenthal stem from crimes Milken admitted to in his 1990 guilty plea.

Patton alleged that Rosenthal committed crimes out of loyalty to Milken--who took him away from selling dresses in New Jersey to a prestigious job in Beverly Hills--and in order to protect his lucrative position.

“Alan Rosenthal had a very strong desire to keep Michael Milken happy . . . even if it meant breaking the law,” she said.

Prosecutors allege that Rosenthal helped Milken arrange illegal trades with money manager David Solomon, once one of Drexel’s biggest clients, to create $1.6 million in phony tax losses for the year 1985.

Milken testified last week that he asked Rosenthal to help identify securities owned by Drexel that could be used to generate losses for Solomon. He said Rosenthal identified three or four securities.

But asked whether Rosenthal executed the trades, Milken said he did not know.

Patton told the jury, however, that Milken had implicated Rosenthal and showed his involvement in the alleged crimes.

“Did Alan Rosenthal know there was a benefit to David Solomon? Of course he did,” Patton said.

Peter Fleming, Rosenthal’s lawyer, tried to discredit Milken by telling the jury that the junk-bond king had to testify against Rosenthal in order to win a reduction in his own sentence.