NEW YORK, OCT. 25 -- A former Drexel Burnham Lambert Inc. trader testified today that boss Michael Milken ordered him to buy Caesars World Inc. bonds at a time the government claims Milken had inside information about the company.
The trader, James Dahl, also said Milken and the Columbia Savings & Loan Association routinely engaged in secret securities "parking" arrangements from before 1983 until 1986, which the government contends was illegal.
Dahl further testified about a secret bathroom conversation with Milken after speculator Ivan F. Boesky's 1986 deal to cooperate with prosecutors. The government sought to suggest from Dahl's testimony that Milken may have wanted Dahl to destroy evidence.
Dahl said Milken called him to Drexel's Beverly Hills, Calif., high-yield bond department on Sunday, Nov. 16, 1986, two days after Boesky's decision to cooperate in a probe of Wall Street corruption. Boesky later became Milken's chief accuser.
Dahl said Milken took him into the men's room, turned on a faucet, washed his hands and said in hushed tones: "There haven't been any subpoenas issued. Whatever you need to do, do it." Asked what Milken meant, Dahl testified: "I wasn't sure what he was saying. 'Do whatever you have to do.' What does that mean? I didn't know." He also said Milken never ordered him to destroy documents or to not cooperate with investigators.
The developments came on the eighth and possibly final day of a hearing into unproven criminal charges beyond the six felony counts to which Milken has pleaded guilty.
The hearing is designed to help U.S. District Judge Kimba Wood gain greater insight into Milken's character so that she can appropriately sentence the 44-year-old former Drexel junk bond chief, who faces a maximum 28 years in prison. He already has agreed to pay $600 million in fines and penalties.
Regarding the Caesars claim, Dahl testified today that in early July 1983 Milken told him and other Drexel salesmen to purchase as much of Caesars securities as possible.
Milken had attended a meeting with Caesars and Drexel executives on June 29 where the government claims the possibility of Drexel managing a debt restructuring offer was discussed.
Dahl testified that on July 8 he purchased $2 million in Caesars bonds, then sold them to Columbia S&L, so it appeared as though Drexel no longer owned them. But Dahl said Columbia was actually "parking" the bonds, or holding them secretly for Drexel, which can be illegal.
Furthermore, Dahl testified, Drexel and Columbia had a longstanding arrangement in which Columbia would secretly hold securities for Drexel and return them later. Asked by prosecutors who initiated these transactions, Dahl said, "Mike."
Drexel on July 15 announced it was advising Caesars on a debt restructuring that sent the bonds soaring in value.
Dahl said he was unaware Drexel was negotiating with Caesars when he bought the bonds and was embarrassed when he had to cancel the trades with customers because of the obvious conflict of interest. "I looked like a jerk," Dahl said.
Today's testimony concluded the government's presentation. Wood said she would not order the government to grant Milken immunity, dashing any chance he would testify. Milken attorney Arthur Liman said he would not allow Milken to take the stand without protection from further prosecution.