DALLAS -- Southmark Corp. is suing former "junk" bond king Michael Milken and various associates at Drexel Burnham Lambert Inc. for more than $200 million, accusing them of orchestrating financial deals that pushed Southmark into bankruptcy.
Southmark's suit says Milken and others "saddled Southmark with a crushing burden of public debt, then encouraged Southmark to divert the proceeds of that debt from legitimate operating needs to highly speculative investments."
During much of the 1980s, Drexel, with Milken at the helm of its junk-bond business, underwrote numerous debt issues of Southmark and its subsidiaries. Drexel encouraged other transactions that financially strapped Southmark, the suit says.
Southmark filed for Chapter 11 protection from creditors in July 1989 after two years of financial strife. It has emerged from bankruptcy proceedings and is liquidating its remaining assets to pay creditors the more than $1 billion they are owed.