Milken Probation to Continue Amid Probe
On the eve of being freed from the criminal justice system, Michael R. Milken agreed Thursday to remain on probation for at least 90 more days while the Securities and Exchange Commission investigates whether he violated terms of a court settlement.
In a hearing before U.S. District Judge Kimba M. Wood in New York, the former junk bond financier’s lawyers agreed to federal prosecutors’ request for the extension. Richard V. Sandler, Milken’s lead lawyer, confirmed that the SEC launched a formal investigation several weeks ago into whether he had violated an SEC consent decree that banned him for life from the securities industry.
The SEC investigation was sparked by reports that Milken recently has earned huge fees for giving advice in large corporate acquisitions. These reportedly include $50 million he is to receive for advising Ted Turner on the $7.5-billion sale of his company, Turner Broadcasting System Inc., to Time Warner Inc. He was also reportedly paid for advice to financier Ronald O. Perelman and News Corp. Chairman Rupert Murdoch.
Sandler forcefully denied that Milken has violated the 1990 consent decree and said he is confident that Milken will be exonerated.
“I think everything Mr. Milken has done for the last three years is consistent with fulfilling all of his obligations,” Sandler said. He added that before Milken took on the jobs, his lawyers analyzed the tasks he was to perform “to be sure we were safer than safe.”
Milken pleaded guilty in 1990 to six felony counts of securities fraud and was originally sentenced to 10 years in prison. The term was later reduced. His probation was due to expire today. His sentence requires him to comply with the SEC consent decree.
Sandler said Milken is cooperating with the SEC investigation and had agreed to the extended probation because “we understand it has to run its course.”
However, the SEC has said its investigation might take at least six months. After the hearing, Sandler said no decision had been made on whether Milken would agree to extend his probation again after the 90 days.
Although Milken will continue to be on probation, Wood lifted most restrictions on him. For example, he will no longer be required to meet with a probation officer once a month or seek permission to travel outside Los Angeles County.
The SEC investigation is understood to focus on whether the advice or other services for which Milken was paid amounted to the types of work performed by investment bankers in the securities industry.
Sandler contended that Milken had spent only “a very small amount of time” advising on corporate acquisitions and had spent more time as a volunteer teacher in inner-city schools. He also noted that Milken is fighting prostate cancer, which is in remission.
Milken had to pay more than $1 billion in fines, penalties and legal settlements stemming from charges that he violated securities laws while heading the junk bond department of the defunct Drexel Burnham Lambert. Nevertheless, he reportedly still has a net worth of more than $500 million and has made significant amounts of money from recent investments.
