Business Notes Settlements

Michael Milken thought he had struck the deal of his life last week. But the idea that he might still command a fortune of up to $500 million even after paying out $900 million to victims of his crimes did not sit well with the Federal Deposit Insurance Corporation. The agency scuttled, at least temporarily, a $1.3 billion settlement of suits brought by thousands of investors who said they had been bilked by the jailed junk-bond king's schemes.

To be certain of wringing all it can from Milken and his co-defendants, the FDIC demanded to know his net worth, together with that of some 150 of his former colleagues at the firm Drexel Burnham Lambert who agreed to contribute $300 million to the settlement. (The firm's insurers would put up an additional $100 million.)

Yet with hearings resuming in Manhattan this week before U.S. Judge Milton Pollack, all sides have incentives to reach agreement. A settlement could strengthen Milken's plea for reduction of his 10-year sentence for securities fraud; he has already served a year. And the FDIC, which represents savings and loans that failed after loading up on junk bonds, stands to receive at least $500 million. The rest of the settlement would go to defrauded investors who participated in the suits.