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Sobbing Milken Pleads Guilty to Six Felonies

April 25, 1990|SCOT J. PALTROW | TIMES STAFF WRITER

NEW YORK — Michael Milken, who once brought mighty corporations to their knees in ferocious junk bond-financed takeover battles, was reduced to sobbing uncontrollably Tuesday as he pleaded guilty to six felony counts.

Milken, 43, Drexel Burnham Lambert's former junk bond chief, admitted guilt to a range of criminal violations, including three charges that weren't in the original 98-count indictment brought against him over a year ago.

In a courtroom jammed with more than 200 spectators, journalists and family members, including his wife and mother, Milken stood tall throughout most of the 50-minute proceeding. Wearing a navy blue suit, white shirt and blue tie, he answered questions from U.S. District Judge Kimba M. Wood in a firm voice. He acknowledged that he will pay $600 million in penalties and may well go to prison.

But later, as he read aloud an 11-page document admitting specific wrongdoing, Milken choked up. When he reached the final paragraph, in which he was to apologize to his family and friends for the pain he had caused them, he began to sob and wasn't able to resume reading. Finally, the judge told him to sit down.

After years of maintaining that he was being persecuted by the government and unfairly accused, Milken told Judge Wood: "I transgressed certain of the laws and regulations that govern our industry. I was wrong in doing so and knew that at the time."

He was allowed to remain free on bail until he is sentenced Oct. 1. He faces a maximum of 28 years in prison. The government said it will ask for "substantial" prison time but won't specify how much. Most legal experts were betting that he won't get more than five years.

The guilty plea and simultaneous settlement of separate civil charges filed by the Securities and Exchange Commission prompted SEC Chairman Richard C. Breeden to claim victory in the biggest securities fraud investigation ever undertaken by the federal government. In a Washington press conference, Breeden said: "Mr. Milken has been portrayed as wrongly accused." But he added that "despite the efforts to mold public opinion, Mr. Milken's admissions today demonstrate that he stood at the center of a network of manipulation, fraud and deceit."

The $600 million in penalties will still leave Milken an extremely wealthy man. He is believed to be worth well over $1 billion. In one year, 1987, he had earned $550 million at Drexel.

Milken's guilty plea was the culmination of months of negotiations among his lawyers, federal prosecutors and the Securities and Exchange Commission. It wipes out all other criminal charges pending against him and enabled him to avoid a new indictment on a long list of additional charges.

The settlement prompted some public concern Tuesday from Rep. John D. Dingell (D.-Mich.), chairman of the House Committee on Energy and Commerce, and others that the settlement might prevent the public from ever finding out the true extent of Milken's alleged crimes.

But even though Milken will be exempt from further charges, prosecutors said Tuesday that they intend to reveal the extensive evidence they gathered of wide-ranging lawbreaking. John K. Carroll, the lead prosecutor in the case, said Milken's plea agreement specifically permits the government to spell out all the evidence in a memorandum that will be given to Judge Wood before sentencing. He said the memo will be filed publicly. "We expect to make a full report to the court of what we found," Carroll said.

One of the bigger surprises in the plea agreement, released for the first time Tuesday, is that it requires far broader cooperation by Milken in government investigations than expected. Sources in the Milken camp had indicated over the weekend that Milken would be required to give only limited cooperation and wouldn't be forced to implicate others. But the accord states that once Milken is sentenced, he must appear whenever summoned before grand juries and federal investigators and "fully and truthfully disclose all information with respect to Drexel-related activities."

He may also be called to testify against former colleagues and clients in criminal trials. Carroll noted in court that if Milken fails to tell the whole truth, he may face severe penalties, including perjury charges and contempt of court proceedings.

Still, as reported, Milken wasn't required to submit a "proffer," legally committing himself in advance to the specific facts and individuals he would testify about. Others who pleaded guilty in recent celebrated securities fraud cases, including former stock speculator Ivan F. Boesky, were required to sign proffers.

A Milken spokesman declined to comment Tuesday.

Federal investigators are known to be particularly interested in Milkens' dealings with several failed or troubled savings and loan associations, including the troubled Beverly Hills-based Columbia Savings & Loan. The thrift was one of Drexel's biggest buyers of junk bonds.

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