Milken plea bargain could spell trouble to Spiegel and Carr.

Milken plea bargain could spell trouble to Spiegel and Carr

Michael Milken's plea bargain agreement could spell trouble for Thomas

Spiegel, the former CEO of Beverly Hills-based Columbia Savings and Loan, and Fred Carr, the chairman and president of First Executive Corp. in West Los Angeles.

That is because Milken's cooperation with the SEC is probably crucial to any case the SEC may build against either Carr or Spiegel.

"It would be difficult to prove the charges against anybody who dealth with Milken without Milken's testimony because all these charges probably relate to motivation, and how else would you prove illicit motivation without the direct testimony of a party to the deal," explained Ernest Leff, of counsel at the Beverly Hills-based law firm of Weston & Sarno.

Both Spiegel's and Carr's companies were heavy buyers of junk bonds from Drexel, Burnham & Lambert, Milken's base of operation.

Although the SEC is investigating both Carr and Spiegel, there is no consensus how aggressive the SEC has been in its pursuit of the former high-rollers. "From everything I heard the smart money is that the pressure to pursue Tom Spiegel and Fred Carr is less than it was now that Milken has settled," said Norm Katz, managing partner of MCS Associates, a financial consulting firm based in Irvine. "The victory has been won, the point made and significant excesses punished, and from the sound of it, it doesn't seem Mike Milken will be forthcoming in fingering others," he explained.

According to Leff, however, Spiegel is attractive quarry to the SEC because of his high profile, his rich compensation package when he ran Columbia and his non-cooperation with the SEC. "If you don't cooperate with those guys, you find yourself dead," Leff commented.

Leff also noted the Office of Thrift Supervision, the federal agency charged with regulating S&Ls, may be goading the SEC in its pursuit of Spiegel.

Most attorneys are reluctant to go out on a limb speculating on the Carr or Spiegel investigations. Typical is the view of James A. Churchill, a partner at the downtown law firm of Lillick & McHose: "You can be sure there is something we don't know."

Milken pleaded guilty to only six felony counts out of the 98 counts contained in the indictment. The six crimes include:

* Conspiring with arbitrageur Ivan F. Boesky and David B. Solomon, the manager of a junk bond mutual fund, and others by falsely reporting the prices at which securities were bought and sold and keeping the difference.

* Mail fraud. Milken agreed with Solomon to overcharge his fund on bond transactions to compensate Drexel brokers who sold shares in the fund.

* Helping to file false information with the SEC. Milken concealed the nature of Boesky's large stake in Fischbach Corp., which enabled corporate raider Victor Posner to succeed in his hostile bid for the company.

* Defrauding investors by concealing the fact that Golden Nugget, a Drexel client, had sold a chunk of MCA stock after Golden Nugget had made a hostile bid for MCA.

* Helping Solomon falsely claim trading losses in one year to reduce his income taxes.

* Agreeing to buy Boesky's shares of Helmerich & Payne with the understanding Boesky would later take back the shares at no loss to Drexel. The transaction, called a "parking" arrangement, allowed Boesky to evade net capital rules.

Presumably the SEC investigation of Spiegel and Carr is looking for evidence of any secret arrangement between either of them and Milken which went beyond a plain vanilla purchase of junk bonds.

Based on news coverage, such crimes are not readily apparent.

"I don't see a connection between Milken and Fred Carr other than Fred Carr invested heavily in junk bonds, and investing in junk bonds is not a crime," said Barry Fink, a partner at Christensen, White, Miller, Fink & Jacobs, a Century City-based law firm.

"People are looking for a connection because of Fred Carr's controversial past, but they are trying too hard," Fink said.

Others expressed the same view with respect to Tom Spiegel.

However, Leff suggested what constitutes a crime under the securities law is open to question: "The securities laws are so broad; they prohibit any manipulation of the market, but any purchase or sale of stock has some influence on the market. The SEC can take a transaction that appears orthodox and make it illegal, although the party may not think he did anything wrong."

Leff said he could see the SEC trying to develop a parking theory against Carr or Spiegel. "Drexel may have sold junk bonds to an S&L with an understanding it would buy them back with no loss to itself, and this could be construed as manipulation of the market," Leff explained.