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After hearings, the mystery of Milken remains

The biggest criminal investigation in Wall Street history couldn't do it. A shattered career and humbling six-count guilty plea couldn't do it either. So why should eight days of testimony on three transactions out of countless thousands over 20 years solve the mystery of Michael Milken, one of the most enigmatic figures in Wall Street history?

At a court hearing to help U.S. District Judge Kimba Wood determine punishment, the government failed to stick the fatal dagger in Milken's persona, but the junk-bond pioneer didn't emerge as the Boy Scout his admirers would have him.

The hearing was the first public clash of facts, ideas and opinions on Milken, who transformed Drexel into a powerhouse investment firm, now defunct, on the back of IOUs called junk bonds that reshaped high finance.

Prosecutors, who began investigating Milken in 1986, didn't decisively prove him guilty of the crimes alleged in three transactions. But they did demonstrate a pattern of impropriety based on strong suggestions of illegality.

One thing was clear: Drexel's junk bond offices on Wilshire Boulevard in Beverly Hills, Calif., were a place of intrigue, derring-do, outlandish pay and sometimes sleazy behavior in the tumultuous 1980s.

The witnesses themselves formed a sort of class picture of the ideals and attitudes of the decade _ Drexel trader James Dahl's $23-million take in 1988 (Milken made $550-million the previous year); $450,000-a-year trader Peter Gardiner's jealousy over a $1.5-million colleague; secret ledgers, lying to a grand jury, hints to destroy evidence and a symphony of water faucets drowning out clandestine conversations.

The government made three basic allegations against Milken: stock manipulation in Wickes Cos., insider trading in Caesars World Inc. and misappropriation and bribery in Storer Communications Inc.

As described, the alleged schemes ratcheted up the level of cheating by the 44-year-old Milken beyond his admitted crimes. That was the government's intent in requesting the special hearing. But the defense appeared to deflect the main allegations.

Prosecutors "have certainly shown suggestive testimony that may well convince future historians .

.

. Mr. Milken did everything the government has alleged, but they haven't proven it in court," said John Coffee Jr., a securities law professor at Columbia University.

"In terms of a gear shift that shows higher level involvement in more culpable crimes such as insider trading, I don't think the government can be very happy at the way the evidence looks in court," he said.

Milken's lawyers characterized the six felony counts to which he pleaded guilty as aberrations in an otherwise exemplary career. The government said they were the tip of an iceberg of illicit behavior. The common wisdom after the hearing was that neither picture was entirely accurate.

On Wickes, Drexel trader Cary Maultasch testified he manipulated the company's stock with speculator Ivan Boesky under orders from Gardiner. Gardiner blamed Milken, but couldn't offer any direct evidence beyond a shouted price and an inference of bad intent.

On Caesars World, again the link was hazy at best. Dahl said Milken ordered him to buy Caesars bonds at a time Milken might have had inside information. But it appeared the trades might have been part of a legitimate strategy requested by a customer.

The testimony on Storer may have been the most damning. Milken appeared to offer fund managers favors in the form of personal investments in Storer, which experts say is illegal. But no evidence supported the government's theory of bribery.

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