WASHINGTON — When "junk bond" king Michael M. Milken appears before a congressional committee this week, members will have more on their minds than the role of high-risk, high-yield bonds in the nation's economy.
Milken of Drexel Burnham Lambert Inc., a pioneer in the use of so-called junk bonds in corporate takeovers, is a key figure in the government's investigation of insider trading on Wall Street. He would be the first central player linked to the insider trading scandal to testify publicly.
A staff member for the House Energy and Commerce subcommittee said the panel has steered clear of attempting to learn the direction of insider trading probes by the Securities and Exchange Commission and the U.S. attorney's office in Manhattan.
"We've done that deliberately so Drexel could not say at a later date that we were using the congressional process to squeeze them," the aide said, speaking on condition of anonymity.
Because of that, the aide said, problems associated with junk bond financing--not insider trading--will be the focus of this week's hearings.
Even so, Milken's attorneys have indicated to the subcommittee "there is a good chance he will claim the Fifth Amendment," the staffer said.
Drexel disclosed in February that the SEC had notified the firm that its staff planned to recommend civil charges against the firm and some of its employees for securities law violations. The firm repeatedly has denied any wrongdoing and has not been charged with anything.
Drexel has been under a cloud since the indictment nearly a year and a half ago of speculator Ivan F. Boesky, who agreed to pay a $100-million penalty to settle charges of trading on insider information and cooperate with investigators. Boesky is serving a three-year prison term for pleading guilty to one count of conspiring to lie to the SEC.
Since Boesky's agreement, members of Congress have been hungry for news about the progress or lack of progress in the SEC probe.
They've gotten little to allay their curiosity. Last May, John S. R. Shad, then SEC chairman, told senators that they could expect to see "succession of shoes dropping through the summer."
No shoes fell, and in December, Sen. Donald W. Riegle Jr. (D-Mich.), chairman of the Senate Banking subcommittee on securities, pressed Shad's successor, David S. Ruder, for an explanation.
Ruder said he expected additional "major cases," but said the cases were "exceedingly complicated" and their completion was months away.
May Call Boesky
The House Energy and Commerce subcommittee on investigations, which subpoenaed Milken to appear Wednesday, also has been examining the insider trading scandal. Drexel Chief Executive Frederick Joseph is scheduled to appear Thursday.
The investigations subcommittee met behind closed doors last June to hear from Dennis B. Levine, a merger specialist at Drexel who was convicted of securities fraud and is now serving a sentence at federal prison in Lewisburg, Pa.
Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee and its investigations subcommittee, has said he also would like to call Boesky, who is in federal prison at Lompoc, Calif.
Milken is the architect of Drexel's Beverly Hills-based business in junk bonds, which have been frequently used to help finance corporate takeovers like those in which Boesky speculated.