Milken Posts $1 Million, Sets Aside $600 Million

NEW YORK —  Michael Milken agreed today to set aside more than $600 million in assets and post a $1-million bond in connection with wide-ranging racketeering and fraud charges against the former Drexel Burnham Lambert Inc. financier.

Saying Milken was not a threat to flee the country before an expected trial, U.S. District Judge Kimba M. Wood denied the government’s request that Milken post $250 million in bail money.

In addition, Milken’s brother, Lowell, who also faces fraud and racketeering charges, agreed to set aside $50 million in assets under racketeering statutes and was ordered to post a $1-million bond secured by other assets.

The ruling means the Milkens--who left the courthouse to applause from about 100 supporters--will be free pending a trial prosecutors say is expected to last more than six months and should mark a high point in the government’s nearly three-year crackdown on Wall Street fraud.

The Milkens and former Drexel trader Bruce Lee Newberg were charged in a 98-count racketeering and fraud indictment handed up March 29 that seeks about $1.8 billion in forfeitures.

Under the federal Racketeer Influenced and Corrupt Organizations act, the government could have sought to freeze all of the defendants’ assets before a trial as a guarantee they would not sell or otherwise dispose of them to avoid massive penalties if convicted.

The agreement announced at a Manhattan federal court hearing requires Michael Milken to place $300 million cash in an account to be monitored by the government and to sign a note securing $300 million more in less liquid assets.

Milken also will have to surrender the gains from his holdings in Drexel--which total 6% of the investment firm and are estimated at about $100 million--as soon as the firm’s settlement of separate civil charges with the Securities and Exchange Commission officially takes effect.

That deal, announced Thursday, resolves a range of separate civil charges against Drexel and requires the Wall Street giant to dismiss Milken, sever all business dealings with him and force him to give up his Drexel holdings.

“In substance, your honor, we expect the security for forfeiture in this case will amount to $700 million,” Assistant U.S. Atty. John K. Carroll said.

Flanked by a group of defense lawyers, Milken and his brother attended the hearing but did not address the judge.

“The defendants not only contest the indictment but they seriously, expressly contest the government’s theories on forfeiture,” said Arthur L. Liman, Michael Milken’s attorney.