SEC Launches Administrative Action Against Milken Associate
WASHINGTON (AP) _ A month after prosecutors in New York dropped criminal charges against former Michael Milken associate Bruce Newberg, federal securities regulators are considering whether to bounce him from the industry.
The Securities and Exchange Commission, which oversees stock market professionals, said Wednesday it would conduct a hearing to determine what action, if any, to take against Newberg for his 1989 securities fraud conviction in a related case involving Princeton-Newport Partners LP.
The SEC also instituted administrative proceedings against another defendant in that case, Charles M. Zarzecki, a former Princeton-Newport executive.
In New York, Newberg’s attorney, Gerald Lefcourt, declined comment on the SEC action. Zarzecki’s lawyer, Paul Grand, was not immediately available for comment.
″These guys have been convicted of engaging in conduct that amounts to securities fraud and the commission has determined it ought to consider whether they should be sanctioned in some way,″ said William McLucas, director of the SEC’s Enforcement Division.
McLucas said the penalties the pair faces range from a permanent bar from the business to an SEC-ordered limitation on their activities.
Newberg, a former Drexel Burnham Lambert Inc. trader, was indicted in 1989 along with Milken, the head of Drexel’s high yield ″junk″ bond department on racketeering and securities fraud charges.
Milken eventually pleaded guilty in 1990 to six lesser felony counts and was sentenced to serve 10 years in prison. He also agreed to pay $200 million in fines and place $400 million in a fund to compensate investors.
Last month, the U.S. attorney’s office in New York announced it was dropping charges against Newberg in the Milken case because they were essentially the same as the ones he was convicted of in the Princeton-Newport case.
That case, one in a series brought during the 1980s Wall Street scandals, was the first time federal prosecutors used the fearsome racketeering laws against white collar criminals on Wall Street.
A federal appeals court in New York, however, threw out tax counts that made up the bulk of the racketeering allegations against Newberg and five former Princeton-Newport executives.
But the appeals court let stand securities fraud counts against Newberg and Zarzecki. Both were sentenced to three months in prison.
A day after dropping the Milken-related charges against Newberg, prosecutors decided not to retry the others in the Princeton-Newport case, saying their resources should be spent pursuing more recent activity.