SEC Said to Probe Milken’s Guggenheim Links for Ban Violation

The U.S. Securities and Exchange Commission is investigating whether junk-bond pioneer Michael Milken acted as an adviser to Guggenheim Partners LLC in violation of a lifetime ban from the securities industry, a person with knowledge of the matter said.

Investigators are reviewing whether Milken, an investor in the $170 billion asset-management firm, has in effect managed other clients’ money by playing an active advisory role to the firm, said the person, who asked not to be named because the matter isn’t public. Neither Milken nor Guggenheim has been accused of wrongdoing.

Milken, the former head of junk-bond trading at Drexel Burnham Lambert Inc. in the 1980s, served 22 months in prison after pleading guilty to securities fraud in 1990 and was permanently barred from serving as a broker or investment adviser. In 1998, Milken agreed to pay $47 million to settle SEC claims he had violated the ban; he didn’t admit or deny wrongdoing.

Guggenheim gained attention last year after it joined a group that bought the Los Angeles Dodgers baseball team for $2.15 billion. The firm in September agreed to buy Dick Clark Productions, which produces television programs including “New Year’s Rockin’ Eve” and “The Golden Globes,” along with Mandalay Entertainment and Mosaic Media Investment Partners LLC.

According to Fortune magazine, which reported the investigation yesterday, the firm has handed over documents including trading records and e-mails in response to an SEC subpoena. Investigators are reviewing transactions that Milken has done jointly with Guggenheim, Fortune said.

Guggenheim Statement

Guggenheim said in a statement yesterday that it received an inquiry from the SEC during an examination that began two years ago with respect to the firm’s relationship with Milken, and is fully cooperating with the agency.

“As Guggenheim has stated publicly, Mr. Milken, while a valued client, does not have an ownership or managerial role in the firm in any way, shape or form,” Torie von Alt, director of public relations at Guggenheim, said in an e-mailed statement.

John Nester, an SEC spokesman, declined to comment.

In the two decades since his release from prison, Milken has become known for high-profile philanthropy, funding research on prostate cancer and epilepsy and providing college scholarships through the Milken Family Foundation.

In response to a request for comment, Geoffrey Moore, a senior adviser to Milken, provided a link to a statement given to Fortune. In that statement, Milken said he discusses his and his family’s investments with advisers and money managers from time to time, but only as an investor. He has had no desire to be in the securities business in any capacity and has strictly avoided doing anything that could be interpreted otherwise, according to the statement.

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