SEC Examining Milken's Possible Role in MCI Deal


The Securities and Exchange Commission, questioning whether former junk bond king Michael R. Milken is honoring an agreement to stay out of the securities business, has asked MCI Communications Corp. for information on the any role Milken played in advising the long-distance carrier.

The request comes amid recent reports that Milken has been paid tens of millions of dollars for his advice in a number of recent mega-deals.

The former Los Angeles-based financier--whose promotion of junk bonds helped finance the expansions of MCI, cable giant Tele-Communications Inc. and other start-ups in the 1980s--was paid several million dollars in consulting fees by News Corp. to advise it this summer in its $2-billion joint venture with MCI, according to a source familiar with the deal. Milken is close friends with the heads of both companies.

More recently, Milken was paid a reported $50 million for advising friend and cable TV mogul Ted Turner in the planned acquisition of Turner Broadcasting System by Time Warner Inc.

Robert Stewart, a spokesman for MCI, would not comment on Milken's relationship with the phone company but said it is cooperating with the SEC inquiry.

"MCI is fully cooperating with the agency as it does in all such cases," Stewart said. "Further questions should be directed toward Mr. Milken." Neither Milken nor SEC enforcement director William McLucas could be reached for comment Thursday.

But Milken's lawyer, Richard V. Sandler of Los Angeles, said his client has nothing to fear from the SEC's inquiry.

"We have nothing to hide," Sandler said. "We were aware that this activity might draw attention. But I welcome this inquiry. The settlement agreement prohibits [Milken] from engaging in certain activity . . . [such as] being associated with an investment advisement firm or broker-dealer. And he has not violated that."

The SEC has not disclosed whether its query is aimed at unearthing Milken's role with either the MCI-News Corp. or Turner-Time Warner deals.

Nevertheless, several analysts were quick to question Milken's dealings.

A Washington securities lawyer, who was a top official with the SEC in the early 1980s, said Milken's activities "fall in a gray area you would think somebody in his situation would stay clear of."

John Keefe, an independent analyst who worked at Drexel Burnham Lambert Inc. before it filed for bankruptcy protection five years ago, told Bloomberg Business News that Milken is "pressing the limits" in the aggressive style that plunged his old investment firm into hot water with federal regulators.

Still, little is publicly known about Milken's actual dealings with MCI or the other companies he has been said to have advised.

A source familiar with Milken's dealings with MCI said Milken provided "strategic input" to both News Corp. Chief Executive Rupert Murdoch and MCI Chief Executive Bert C. Roberts Jr. Milken was said to play an even more limited role advising Turner and reportedly did not even attend meetings that other financial advisers attended.

Milken spent two years in prison after pleading guilty to securities fraud and other violations. Milken was barred for life from securities dealings and investment advice as part of his settlement with the government in 1990.

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