JUDGE EXTENDS MILKEN'S TERM OF PROBATION.

Byline: Russ Britt Daily News Staff Writer

Michael Milken's probation for six counts of securities fraud was extended three months Thursday due to a Securities and Exchange Commission investigation over possible probation violations.

U.S. District Court Judge Kimba Wood in New York added time to Milken's term following questions over whether the former junk-bond financier - whose three years' probation was scheduled to end today at midnight - had acted as an investment adviser when he consulted for several media moguls on recent merger deals. The SEC's 1990 agreement with Milken prohibits him from offering securities advice.

SEC officials started an informal probe last year and recently began a formal investigation. Milken and government prosecutors agreed to extend his probation by 90 days, even though the SEC said the probe could take up to six months.

"Today's agreement is a logical and not surprising next step in that process, which it is hoped can be resolved as expeditiously as possible," Milken attorney Richard Sandler said in a statement.

Officials from the U.S. Attorney's Office in New York, which prosecuted Milken, did not return phone calls.

SEC officials would not confirm or deny the investigation, but Wood confirmed its existence by extending Milken's probation. SEC attorney Barry Goldsmith did say that it is not uncommon for informal probes to be converted into formal investigations.

But the probe prompted criticism from Milken supporters who say that the financial wizard, considered one of the most influential players in the high-flying 1980s, should never have been prosecuted.

"It sounds vindictive to me, frankly," said Daniel Fischel, author of "Payback," a pro-Milken book published last year. "Obviously, the basic point of my book is that he shouldn't have been prosecuted at all. I think any further punishment by definition is excessive."

Wood had sentenced Milken to 10 years in prison in 1990 but reduced the sentence to two years in 1992 based on his cooperation in government investigations.

On Thursday, Wood essentially returned Milken to a normal lifestyle by canceling requirements that he regularly report to his probation officer and that he check in before traveling outside Los Angeles. Wood, however, wanted to retain the right to impose further punishment if the SEC investigation were to produce results.

If Milken is found to have acted as an investment adviser, he could be in violation of his probation. Wood is empowered to return Milken to prison for up to the maximum 10-year sentence that she originally imposed.

The controversy centers around Milken's background role in advising several media executives on merger deals, including News Corp. chairman Rupert Murdoch, New World Communications Group chairman Ronald Perelman, MCI Communications Corp. chairman Bert Roberts and Turner Broadcasting System chairman Ted Turner.

Milken, who lives in Encino, will receive a $50 million fee from Turner for his advice on the company's $7.5 billion pending merger with Time Warner Inc. if the deal goes through.

Milken also consulted with Murdoch and Perelman on the $500 million deal to convert 12 New World stations into affiliates for News Corp.'s Fox Television Network in May 1994, and with Murdoch and Roberts on the $2 billion communications alliance the two formed in 1995. Murdoch representatives have said Milken received a "modest" retainer for his services.

SEC rules state that an investment adviser cannot advise others on securities investments but says nothing about corporate mergers. Several corporate mergers, however, involve the transfer of stock.

Michael Reese, Milken's spokesman, said the SEC informally has asked for information on those three deals. Milken also has consulted with several other executives, including Oracle Corp. chairman Lawrence Ellison on a proposed acquisition of Apple Computer Corp., in 1994. These consultations are not being investigated.

Milken already has completed the 3,000 hours of community service required under his probation terms, Reese said. But he continues to teach math to schoolchildren under the Drug Abuse Resistance Enforcement program, which was part of his community service work, Reese added.

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