NEW YORK — "Junk bond" wizard Michael Milken officially ended his 20-year career at Drexel Burnham Lambert Inc. on Thursday and said he will launch his own financial consulting firm while he awaits trial on racketeering and securities fraud charges.
Milken, 42, who has been on a leave of absence from Drexel since March 29, on Thursday submitted his resignation. In a telephone interview, he said his new firm, International Capital Access Group, would offer a wide range of consulting services consistent with his personal interests and his previous work at Drexel. He claimed that one purpose of the firm will be to "address the major issues in society."
He said he would offer advice on subjects as diverse as the Third World debt crisis, helping unions, employees and minorities obtain ownership stakes in companies and advising financially troubled companies on how to raise new capital.
'Very Emotional Experience'
The timing of Milken's resignation appears to have been influenced by a Supreme Court decision last week that cleared the way for Drexel to complete its announced plan to settle civil insider-trading and securities fraud charges brought by the Securities and Exchange Commission. The settlement now is expected to go into effect within the next few weeks. It requires Drexel to terminate Milken's employment and also avoid any direct or indirect business dealings with him.
Milken's brother, Lowell Milken, 39, also resigned Thursday from Drexel. He said through his attorney that he plans to resume practicing law. Lowell Milken had been a lawyer with the Los Angeles firm of Irell & Manella before he left in 1978 to help his brother run Drexel's junk bond department. Michael Armstrong, Lowell Milken's lawyer, said his client hasn't decided yet where he will practice. Lowell Milken was also indicted in March on racketeering charges.
During the rare, on-the-record interview, Michael Milken said of the resignation: "After spending your whole life working for one company, it's a very emotional experience." But in a reference to the investigation and legal problems that have beset him, he added, "the last few years have been an emotional experience."
Milken said he decided to set up his own firm now because "to continue to help (people he has done business with or offered advice to), I need some vehicle to be able to help."
Milken started out in 1969 as a part-time employee at Drexel Harriman, a Philadelphia investment firm that was a precursor to Drexel Burnham Lambert, while attending the University of Pennsylvania's Wharton School of Business. Within a decade, his pioneering use of high-yield, high-risk junk bonds had transformed Drexel from a second-tier brokerage firm into one of Wall Street's most powerful investment banking houses.
In a written statement issued Thursday, Milken said:
"Drexel is the only company I've worked for since graduating from college. And it's the only one I ever expected to work for. I am naturally disappointed to be forced to leave Drexel as part of the firm's settlement with the government, but I look forward to the opportunity of helping people build companies."
Milken currently faces a 98-count federal criminal indictment. The government is also demanding that he forfeit $1.85 billion under the racketeering charges.
Steven Anreder, Drexel's spokesman, said: "Michael Milken made many important contributions to Drexel Burnham, and his resignation, although not unexpected, is a sad event." He added: "We wish him well in his new endeavor."
Milken was somewhat vague about exactly what the new firm will do or how many people it will employ. His personal spokesman, Ken Lerer, said it would start out with fewer than 10 employees. Tentative plans call for it to be based in West Los Angeles, and Lerer said it definitely won't be in the Beverly Hills building that houses Drexel's junk bond department. Milken, his brother and several other partners own that building.
Declined to Speculate
Milken said he isn't currently talking with any of his former colleagues at Drexel about coming to work for his new firm, but he didn't rule out that possibility. "I just can't tell you at this time," he said.
He also declined to speculate on whether he might try to expand the firm to offer full-scale investment banking services if he should succeed in overcoming the criminal and civil charges facing him. "The financial world changes all the time," he said. "Exactly what one would be interested in doing in the future I don't know."
For the time being, Milken's legal problems probably will prevent him from competing directly with Drexel, individuals involved in the legal cases said. Were he to branch out beyond consulting to underwriting or trading securities, he might run afoul of federal and state regulators who supervise the registration of securities broker-dealers. But sources said the potential exists nevertheless for conflicts with Drexel.