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As a result of the investigations, in December 1988, the SEC
commenced a civil action against Drexel, members of its High
Yield Bond Department, and other related persons alleging that
those persons engaged in fraudulent conduct with respect to
various securities transactions. Subsequently, the Justice
Department informed Drexel that it intended to seek an indictment
against Drexel unless Drexel agreed to settle the proposed
charges. During that time, Drexel made frequent disclosures to
its employees regarding the potential criminal charges, denying
that it was guilty of any wrongdoing.
In December 1988, as a result of the investigations and
potential indictment, Drexel agreed to pay $650 million in fines
and restitution, $350 million of which was to provide a civil
disgorgement fund to be distributed in accordance with a court-
approved plan.
In January 1989, Drexel entered into a formal plea agreement
with the Justice Department, agreeing to plead guilty to six
criminal charges. Thereafter, during April 1989, Michael Milken,
head of Drexel’s High Yield Bond Department, was indicted on 98
counts of securities fraud and related charges. Mr. Milken
resigned all positions that he held with Drexel on June 15, 1989.
In September 1989, Drexel paid $500 million of the fines and
restitution.
The investigations and related negative publicity, market
developments, and the cost associated with the sale of its retail
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Last modified: May 25, 2011