Silent Witness On the Hill

Like an Ollie North of the pinstripe set, Michael Milken was the biggest draw on Capitol Hill last week, even though he barely said a word. Eager for a rare glimpse of perhaps the most powerful financier in the U.S., a crowd began to gather at dawn outside the House hearing room where he was to appear. The spectacle, however, was short-lived. The hearing promptly adjourned after Milken, 41, refused three times to answer questions, claiming his Fifth Amendment right to protection from self-incrimination.

The Beverly Hills-based Milken, who built the junk-bond industry almost from scratch and amassed a personal fortune estimated at more than $500 million, is attracting plenty of attention these days -- much of it in the form of official probes. For 18 months, a federal grand jury in Manhattan has been investigating Milken and other executives of the Drexel Burnham Lambert investment firm, reportedly on charges that they helped Ivan Boesky carry out his insider-trading schemes. Milken and his employer have denied any such wrongdoing.

Now a House subcommittee is pursuing a separate suspicion -- that Milken and other Drexel Burnham employees may have taken huge profits at the expense of the firm's customers. Congressional documents show that on several occasions partnerships involving Drexel Burnham employees bought up large stakes in the firm's new junk-bond issues, then sold them at a profit. At the same time, some of the firm's clients reportedly found that their access to the issues was sharply limited.

Frederick Joseph, Drexel Burnham's chief executive, testified last week in defense of his firm. He insisted that Drexel Burnham did not give employee partnerships preferential treatment over the firm's clients. The House panel, however, plans to continue its probe.