NEW YORK -- U.S. District Court Judge Milton Pollack approved a final $1.3 billion agreement Monday aimed at settling the flood of civil suits against Drexel Burham Lambert Inc. and its jailed junk-bond chief Michael R. Milken.
The suits arose out of the 1898 collapse of Drexel, once among the richest and most powerful investment firms on Wall Street.
After more than a hour of closed-door negotiations in the judge's chambers in federal court in Manhattan, Pollack emerged and said all parties agreed to the settlement, including the Federal Deposit Insurance Corp., which last week balked at signing onto the deal.
The FDIC then had objected that the original deal did not require Milken or other Drexel high rollers to fully disclose information about their assets.
When the details of the deal were initially disclosed last week, there was some criticism that even after the settlement Milken still would have a fortune of at least $125 million in his own name and could have access to several hundred million in other assets technically owned by his wife and children.
Under the revised terms hammered out in the judge's chambers, Milken and other settling participants would make full financial disclosure within 30 days. That information would be given to Pollack, who would then review it along with a court-appointed monitor, the heads of the FDIC and the Resolution Trust Corp. or their representatives, the attorney for the two government agencies and another attorney representing other major plaintiffs in the case.
Once that last legal roadblock was overcome, the proceedings moved swiftly.
An hour late, Pollack convened a scheduled hearing on the settlement, the revised terms were read aloud, and RTC Director Albert Casey and an FDIC attorney publicly endorsed it.
The various attorneys involved in negotiating the arrangement all took turns elaborately congratulating and praising the judge and one another for their efforts.
'What started as a mission impossible has evolved into a probable success,' Pollack exulted. The judge called the settlement 'an unprecedented show of cooperation and agreement.'
Pollack then asked whether there were any objections to the deal, but when several lawyers popped up to offer them, he swatted their complaints aside like tennis balls, declaring that he would not jeopardize the months of negotiations that went into the global agreement for the sake of gripes from individual plaintiffs and defendants.
'You want to be somebody who rewrites the whole plan,' he told one, and told another that if his client was unhappy with the settlement, he could 'take his claim, put it on the wall like a souveinir' and walk away from the deal.
Under the terms of the agreement, Milken is to kick in $900 million, 200 other Drexel partners -- mostly Milken's former colleagues in the junk-bond and corporate financing department -- will pay a total of $300 million. Drexel's liability insurance carriers will pay the final $100 million.
In return for a share of that money, some 9,000 plaintiffs in 170 suits against Drexel, Milken or other company employees will agree to drop their claims.
Drexel and Milken will also each drop their own lawsuits against one another.
The judge set next Monday as the deadline for plaintiffs and defendants to decide whether they want to participate in the agreement. Plaintiffs opting out may continue to pursue their claims -- but with no guarantee of seeing any money any time soon. Defendants among the Drexel partners who choose not to go along remain liable to creditor suits.
Pollack and the attorneys continually stressed the global agreement will avoid literally years of threatened litigation resulting from Drexel's demise, saving the courts millions of dollars in costs.
At the same time, they said, it would benefit the FDIC, RTC and other plaintiffs by assuring them of substantial money quickly. The two government agencies are to split $500 million to cover costs from bank and thrift losses linked to the collpase of Drexel's junk-bond market.
He also said the accord would enhance the value of Drexel's bankruptcy estate by disposing of hundreds of millions of dollars in potential liabilities.
Drexel, which has been under Chapter 11 protection from its creditors since Feb. 13, 1990, last week formally moved to emerge from bankruptcy, presenting its reorganization plan for court approval.
U.S. Bankruptcy Judge Francis G. Conrad held a day-long hearing on the plan last Thursday, which was approved by more than 97 percent of its creditors. At Monday's hearing, Pollack indicated that Conrad would formally approve the plan that day, and that Pollack himself would also sign off on it.
Drexel filed for bankruptcy after the collapse of the high-yielding, junk-bond market the company had dominated in the 1980s under Milken's aggressive leadership.
Milken, meanwhile, was ousted from his position, ultimately convicted of securities fraud, and is serving a 10-year prison term.