For years since 1986, the news department of the Wall Street Journal continuously reported illegal leaks from Giuliani that the government had “unearthed substantial evidence to support charges of criminal violations of securities laws by Michael Milken and Drexel Burnham Lambert Inc.” Week after week, reporters James Stewart, Daniel Hertzberg, and Laurie Cohen wrote one front-page story after another that read like prosecutorial briefs explaining to the public why Drexel and Mr. Milken were guilty of major crimes. In April, 1988, New York Congressman John Dingell convened a congressional hearing for the sole objective of embarrassing Drexel and Mr. Milken. Dingell knew that Mr. Milken was under grand jury investigation and that his lawyer had informed the committee that he would take the Fifth Amendment and would refuse to answer questions. Dingell compelled him to appear anyway, so Mr. Milken was forced to listen to the Congressman’s tirade against junk bonds and hostile takeovers. When Drexel’s CEO, Fred Joseph, was grilled about the “evils” of takeovers and junk bonds, he did not defend the good. Joseph opted to appease Dingell. His decision to cave was widely interpreted as a public admission of guilt. By June of 1988, the Wall Street Journal was reporting that the Securities and Exchange Commission or SEC had decided to file a massive securities-fraud action against Drexel and Mr. Milken. Though they had been tried and convicted in the press, Drexel and Mr. Milken could not defend themselves because no charges had been filed. This repugnant government strategy was never questioned by the press. Instead, the presses, with almost no exceptions, were eager participants in the destruction of pure greatness. In September, 1988, the SEC filed a 183-page securities-fraud suit against Drexel, Mr. Milken, and others. Judge Milton Pollack immediately ordered that Drexel would not be allowed to defend itself against the SEC’s charges by subpoenaing witnesses or documents. Drexel and Milken, once again, had no ability to respond to the charges. With so much advance buildup from the never-ending leaks, the SEC’s suit was a big anticlimax. The SEC simply could muster no evidence that Drexel and Mr. Milken had injured anybody. The press should have been filled with stories about how the suit showed the emperor has no clothes. Instead, the Washington Post reported that the SEC had filed ‘the most sweeping securities fraud case against a major Wall Street firm in the agency’s history.’ Similarly, the New York Times reported that the government’s accusations were ‘stronger than expected.’ Others, including the Wall Street Journal, reported that the suit had exposed widespread corruption on Wall Street and it was
Posted on: Sun, 23 Jun 2013 18:58:17 +0000
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