NEW YORK (AP) - Prosecutors are seeking staggering prison terms and more than $12 billion in penalties against junk bond wizard Michael R. Milken and two others in the largest criminal action against a Wall Street trader.

The Drexel Burnham Lambert Inc. executive was indicted by a federal grand jury Wednesday along with his 40-year-old brother, Lowell J. Milken, and Bruce Lee Newberg, a former trader for Drexel, the nation's fifth-largest securities firm.The long-expected indictment charged the three with turning Drexel into a billion dollar racketeering enterprise that used Drexel's junk bond department for a series of securities frauds with various unindicted co-conspirators. Among them are the imprisoned Ivan Boesky and members of the defunct investment partnership, Princeton-Newport Partners.

Among other things, the indictment accused Milken of using illegal inside information about merger proposals to arrange deals and manipulate stocks.

U.S. Attorney Benito Romano said the racketeering penalties were the most ever sought against individuals under the 19-year-old federal Racketeer Influenced, Corrupt Organizations Act.

But defense lawyers attacked the 98-count indictment as an abuse of prosecutorial power and a tool to wrench cooperation from other Drexel employees.

They called the charges a "perversion" of the racketeering act, which was established principally to combat organized crime but is used increasingly to prosecute white-collar criminals.

"I think it is outrageous to use RICO in a circumstance like this," said Michael Armstrong, an attorney for Lowell Milken.

The three defendants denied wrongdoing and said they would plead innocent.