Milken Associate Convicted of Taking Bribe to Invest : Finance: The former fund manager spent $86 million of her clients’ money on junk bonds. Her personal investment with Milken turned a huge profit.

NEW YORK —  A federal jury Tuesday convicted a former Fidelity Investments mutual fund manager of taking a bribe in exchange for investing $86 million of her customers’ money in risky junk bonds sold by Drexel Burnham Lambert.

Former fund manager Patricia Ostrander was convicted on all three counts against her. The conviction came despite testimony on her behalf by Drexel’s imprisoned former junk bond chief, Michael Milken, who denied that he had ever offered her any type of payoff or gratuity.

Milken, an involuntary witness, had been subpoenaed by Ostrander’s lawyers.

The jury in federal court in Manhattan deliberated for less than eight hours over two days before convicting Ostrander on two bribery counts and one count of violating securities laws. Prosecutors charged that she had accepted an offer to make a highly lucrative personal investment in a partnership Milken controlled in exchange for investing some of the mutual fund’s assets in high-risk, high-yield securities. The securities were bonds Drexel sold in connection with Kohlberg Kravis Roberts & Co.’s 1985 leveraged buyout of Storer Communications.

Ostrander’s personal investment of $13,200 in the Milken partnership brought her a profit of more than $736,000 in 1986.

She faces a maximum penalty of 13 years in prison and fines of up to $750,000. U.S. District Judge Richard Owen scheduled sentencing for Oct. 5.

Ostrander’s defense lawyer, Harry L. Manion, could not immediately be reached for comment but is expected to appeal the conviction.

The conviction presumably clears away the last obstacle for another federal judge in New York to rule on Milken’s longstanding request for a reduction of his 10-year prison sentence. Prosecutors last week asked U.S. District Judge Kimba M. Wood to delay her ruling to avoid publicity that might influence the jury in the Ostrander case.

Milken based his request on cooperation with prosecutors since his sentencing. But in the Ostrander trial he testified against the government, and Assistant U.S. Atty. Kenneth Vianale had cross-examined him harshly in an effort to shake his story that the partnership investment wasn’t a bribe.

Ostrander testified in her own behalf during the trial, contending that her partnership investment had nothing to do with her decision to invest the fund’s assets in the Storer bonds. Ostrander left Fidelity in 1987 and is on leave as president of Ostrander Capital Management in Boston.

A Fidelity spokeswoman said the conviction should clear the way for a civil lawsuit Fidelity filed in Boston against Ostrander to proceed. The spokeswoman said the company also is asking federal prosecutors to recommend to Judge Owen that he require Ostrander to return her ill-gotten profits to Fidelity.