Drexel Burnham Lambert Inc., responding to reports that the Securities and Exchange Commission staff would recommend civil charges against the firm, said yesterday it is not holding settlement negotiations with government investigators and expects its battle with the SEC to continue for several months.

Drexel issued the statement following press reports that the firm has been notified by the SEC that the commission's staff intends to recommend civil charges against the firm and the head of its Beverly Hills, Calif., "junk bond" operation, Michael Milken. Since November 1986, Drexel, Milken and others have been the subjects of major civil investigations by the SEC and a criminal investigation by the Manhattan U.S. attorney's office concerning possible securities law violations in connection with numerous corporate takeovers.

"From the start, the Wall Street investigation has been the subject of monumental leaks," Drexel spokesman Steve Anredder said yesterday in response to a story in The Wall Street Journal. "It has been reported that after 14 months of investigation, and sifting through over a million pages of documents, the SEC's staff has indicated that it may seek permission to pursue enforcement actions with respect to a limited number of transactions, virtually all of which appear to be based on information provided by the convicted felon {Ivan F.} Boesky.

"Our review of these transactions, and that of our lawyers, have not turned up any wrongdoing," Anredder said. "The firm has entered into no negotiations and has no determination to do so. We do not expect to resolve these issues for several months."

Any SEC charges against Drexel would have to be approved by the agency's five commissioners. Normally, they could decide whether to pursue charges only after considering arguments made by the SEC enforcement division staff and opposing arguments made by Drexel.

Drexel declined to comment on reports that the firm and some of its employees, including Milken and his brother Lowell Milken, have been invited by the SEC to submit their defenses. Sources familiar with the ongoing investigation said that legal considerations concerning the related criminal investigation made it unlikely that the SEC matter would be resolved anytime soon.

Sources said it was possible that Drexel would respond to the SEC's request for its defense by stating that it was impossible for the firm to defend itself adequately while it was still the subject of an ongoing criminal investigation.

However, sources said that Drexel could gain certain advantages if the SEC moved ahead and filed civil charges, since it would be able to question witnesses who had cooperated in the investigation of the firm and learn valuable information that could be used to fight possible criminal charges.

In response to press reports that the SEC civil charges focus on Drexel's role in three deals, including a merger involving Lorimar Inc. and Telepictures Corp., Lorimar said, "We are not the subject of this investigation. This is a Drexel investigation. We have not had any request from the government since last January."

Sources familiar with the SEC probe said government investigators have continued to examine Drexel's role in the buyout of Safeway Stores Corp. in 1986, another of the deals about which the SEC's staff apparently intends to seek charges.

Safeway officials were unavailable for comment yesterday.

The possible violations involved in civil and criminal investigations of Drexel and some of its key employees revolve around the firm's role in negotiating, financing and facilitating corporate takeovers in recent years. Sources said government investigators are examining possible stock price manipulation, false filings in connection with purchases of major stakes in public companies and other possible violations, including "stock parking."

Parking involves a scheme to conceal the true ownership of shares. Also under review is a $5.3 million payment made by former stock speculator Boesky to Drexel in 1986, which Drexel has said was a legitimate fee for investment services.

Sources said attorneys for Drexel and some of its key employees have held recent meetings with officials in the Manhattan U.S. attorney's office. While no final determination has been made, sources said, officials in the U.S. attorney's office are actively evaluating evidence to decide whether it could be used to support possible charges against Drexel under the Racketeer Influenced and Corrupt Organizations (RICO) statute.

Before filing any RICO charges, Manhattan U.S. Attorney Rudolph W. Giuliani's office would need the approval of a federal grand jury, as well as Justice Department officials in Washington.

Sources said no formal approach has been made to Justice Department officials in Washington about using the RICO statute in the Drexel case.

A threat of RICO charges has been used by prosecutors in the past to force targets of investigations to reach a negotiated settlement. The RICO statute can be used to extract considerable monetary damages.

While declining to comment on specific cases under investigation, Giuliani said last Friday that his office and other federal prosecutors should consider using the RICO statute in securities cases.