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Michael Milken pleaded innocent Friday to a 98-count federal indictment charging him with turning Drexel Burnham Lambert Inc., an investment banking house, into a racketeering enterprise. Milken's brother, Lowell, also pleaded not guilty. The arraignment of a third defendant, Bruce Newberg, was postponed until April 25 because Mr. Newberg was injured in a skiing accident.

The US District Court in lower Manhattan was packed with reporters, artists, lawyers, and Mr. Milken's friends. Outside the courtroom, Milken supporters wore white hats that said, ``Mike Milken we believe in you.''

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Although Milken and his brother were released without bail, the government said it had made ``substantial progress'' in coming to terms with Milken's lawyers over the size of the bond to be posted. The government is asking for $1.85 billion in penalties from the three men and wants them to post a bond of $1 billion to avoid pre-trial restraints on their assets.

Outside the courtroom, one of Milken's lawyers, Arthur Liman, said Milken was holding up well. ``Michael's been a target for two and a half years of leaks and innuendoes, so he is used to accusations,'' Mr. Liman said.

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