Michael Milken, 43, may go to prison. Lowell Milken, 41, will go home.
The government will drop two charges of racketeering and 11 counts of fraud against the unassuming family man who was indicted along with his famous older brother.
The fate of Lowell apparently played a central role in the final negotiations between Michael Milken and federal prosecutors. Michael, reportedly incensed that the government was using his brother as a bargaining chip, demanded that any plea agreement provide that all charges be dropped against Lowell.
Earlier this week, the government reportedly insisted that Lowell plead guilty to at least one misdemeanor. His brother stood firm: Lowell's record had to be clean.
Friends and associates of the Milkens believe that Lowell was indicted in the first place only to put pressure on his brother.
"Mike is a very loyal person and very family oriented," said one source. "He convinced his brother to leave a promising legal career and join him at Drexel (Burnham Lambert). He obviously feels somewhat responsible for what happened."
Another investment banker who worked with the brothers said he was "flabbergasted" that Michael Milken would agree to such stiff penalties. However, some said he might have been willing to pay more in order to get his brother's off.
"It is hard to know how much pain and exhaustion he and his family have suffered through," said another Milken friend.
Michael and Lowell Milken are very little alike. Michael has been the grand thinker, the creative genius, the one who brings in the clients. Lowell has remained in the background, working out the details that his brother left behind.
Lowell Milken, 41, graduated summa cum laude from UC Berkeley and was editor of the law review at UCLA law school. He went to work for the Los Angeles law firm of Irell & Manella in the early 1970s, where he specialized in business and tax law.
But in 1978, he left the law firm to join his brother at Drexel's fast growing Beverly Hills junk bond department. There he originally managed the investments that Michael had been making for himself, Lowell and other Drexel employees. He eventually became Michael's right-hand man, advising his better-known brother about the finances and the risks of potential deals.
"He was very important to Mike because he was somebody Mike trusted completely," said another investment banker.
However, Lowell never traded any securities; he wasn't licensed to do so. The government alleged in its indictment that Lowell was involved in racketeering and fraud in other ways.
According to the indictment, Lowell engaged in securities fraud by helping to conceal Drexel's interest in Mattel securities when the Hawthorne-based toy maker was involved in a financial overhaul.
He also participated in a "stock parking" scheme involving stock speculator Ivan Boesky, the government alleged. Stock parking is an illegal arrangement in which one party agrees to temporarily buy stock from another with the understanding that the seller will not only repurchase the shares, but will indemnify the buyer from loss on the transaction.
The government contended that Michael Milken "parked" 4 million shares of Phillips Petroleum stock for Boesky in order to inflate the level of capital Boesky was reporting. Lowell Milken was allegedly part of a 1986 conference call where the illegal arrangement was discussed, according to the indictment. Other charges against Lowell related to the Milken brothers allegedly meeting with Boesky to discuss ways to reconcile their losses on the stock parking arrangement. The indictment also charged that Lowell later lied to cover up the transaction.