THE DREXEL CASE : Office Tension : Informant Disciplined as Anger Splits Milken Team

Tension is mounting in the Beverly Hills offices of Drexel Burnham Lambert, home to the embattled securities firm’s “junk bond” operation and a staff whose loyalties have been divided sharply in recent days.

Information provided to federal prosecutors by at least three key employees continuing to work in the office was instrumental in persuading Drexel to agree to plead guilty to criminal charges and was damaging to their once-exalted leader, Michael Milken.

The degree of stress surfaced Thursday when one cooperating employee was ordered to take several days off following an incident near the legendary trading desk from which Milken turned junk bonds into instruments of financial terror and enormous wealth in the 1980s.

Accounts over precisely what occurred differ, but there is no dispute that the emotions that led to the disciplining of Terren S. Peizer, a bond trader, had been simmering for days.

The split reportedly reflects anger over the cooperation by colleagues and the feeling among Milken loyalists that the firm betrayed him. Others reportedly believe that Milken’s activities have jeopardized the firm.

On Thursday, the day after Drexel agreed to plead guilty, a supervisor asked Peizer to do something related to his job, and Peizer replied, “Go to hell,” according to a Drexel official.

He was told to take several days off, left the office in a rage and telephoned his lawyer in Washington, Plato Cacheris.

Cacheris did not characterize what occurred, but he said he was angered and telephoned a Drexel executive.

“It was bad judgment and a big mistake on their part because they should not be doing this to a guy when he is under the immunity grant from the government,” said Cacheris in a telephone interview Friday. “That is not the right thing to do.”

Cacheris said the firm agreed to shorten the time off, but a Drexel spokesman refused to say when Peizer will return to work.

Peizer is one of three Beverly Hills employees known to be cooperating with prosecutors. The others are James Dahl, a leading junk bond salesman, and Charles Thurnher, an accountant who is an administrator of the Beverly Hills office.

Some office staff members have been uncomfortable working alongside people cooperating with the government, according to a Drexel official.

At least until this incident, the firm has been extremely careful to avoid taking steps against employees cooperating with the government in exchange for immunity. Any form of retaliation could be interpreted by prosecutors as obstruction of justice.

Steven S. Anreder, a spokesman for Drexel, refused to disclose the reasons for disciplining Peizer.

“We have informed the U.S. attorney of the reasons for our action, which we believe was fully justified and in no way represents retaliation against an individual cooperating with the government,” said Anreder.

The incident reflects the deep divisions that threaten to result in widespread defections from Drexel, although no one is expected to leave before year-end bonuses are handed out.

Two key Drexel executives in the Beverly Hills office strongly objected to any settlement by the firm that would jeopardize the defense of Milken. The loyalists were Peter Ackerman, a key aide to Milken, and John Kissick, a director of the firm who was deemed most likely to run the Beverly Hills office if Milken is forced to leave.

Drexel officials believe that the divisions would have existed even if the firm had chosen to fight the charges because some employees would have opposed the move as an unjustified risk.

“We would have started losing people no matter which way we went,” one official said.

Another source of turmoil is the effort to install Howard H. Baker Jr., the former White House chief of staff and ex-senator, as chairman, according to a Drexel official.

He said a faction opposes Baker because he has no experience in the securities field and is reportedly insisting that he be allowed to appoint several directors to Drexel’s 22-member board.

Scot J. Paltrow reported from New York and Douglas Frantz from Los Angeles.