Drexel Sues Milken for Damage to Firm : Wall Street: The company seeks payment of fines it had to pay, plus the return of more than $1 billion in compensation.

Drexel Burnham Lambert Inc. asked a federal judge to force Michael Milken to effectively pay the firm’s fines stemming from his illegal conduct and return more than $1 billion in compensation and investment earnings.

Lawyers for the collapsed investment firm said Tuesday that the request amounts to more than Milken’s current estimated net worth. The former head of Drexel’s junk bond division is serving a 10-year prison term.

The action, in papers filed in Manhattan federal court Monday, is the latest step by Drexel in an unusual legal action against its former employee, who made the firm rich but also brought it down.

Drexel sued Milken and his brother, Lowell, who also worked at Drexel, in September. The firm said Milken’s guilty plea to securities law violations crippled the firm and he should now pay back Drexel.

In the new motion, Drexel asked U.S. District Judge Milton Pollack to force Milken to return the money without a trial. Such an order, known as a summary judgment, bypasses a trial on grounds that the facts of the case are not disputed.

Lawyers for Milken have said he will fight the claims. They have denied that Milken was responsible for Drexel’s collapse into bankruptcy court, which occurred more than a year after he left the firm.

A spokesman for Milken, Ken Lerer, said Milken’s attorneys would respond to the latest action in court papers due Dec. 10.

Milken pleaded guilty to six felonies related to illegal trading and paid $600 million in penalties. He entered federal prison in California in March. Drexel admitted six felonies and agreed to pay $650 million in fines and penalties. It is seeking to emerge from Chapter 11 bankruptcy court protection.

The motion for summary judgment was filed by lawyers representing Drexel and its creditors, including federal thrift regulators who have accused Milken of defrauding savings and loans.

The papers state that from 1984 through 1989, Milken “repeatedly and admittedly did the very opposite of what . . . he was legally obligated to do.”

The motion lists numerous Drexel policy directives dating to 1977 specifying employee responsibilities and barring illegal conduct. It recites Milken’s admitted crimes and says that he concealed his conduct from Drexel.

The papers state that Milken should pay back all compensation for the period, saying he made $1.295 billion from 1985 through 1988.

Thomas Barr, an attorney representing Drexel, said Milken also should return an estimated more than $1 billion in distributions he received from lucrative investment partnerships he established through Drexel.

The motion also seeks repayment of the portion of Drexel’s $650 million in fines and penalties directly related to admitted crimes by Milken.

The papers seek triple damages under federal racketeering laws.

Despite his penalties, Milken is estimated to be worth at least several hundred million dollars, if not more than $1 billion. He still faces dozens of civil lawsuits.