Michael Milken is either a consciousless crook who bilked investors and companies of billions of dollars -- or he's a white-knight philanthropist who revolutionized the modern capital marketplace and funds enormous research and charitable programs.
The Real Michael Milken is most likely to be found somewhere in between the two extremes of those characterizations. Born in California on July 4, 1946, Milken helped his accountant father to prepare clients' tax returns. Marrying his high school girlfriend in 1968 after graduating summa cum laude from the University of California in Berkeley, Milken joined Drexel, Burnham, Lambert in 1970, becoming head of Drexel's bond trading department in 1971. He received an MBA from Wharton School of Finance while at Drexel.
At Drexel, Milken was largely responsible for bringing the firm into the computer age, creating a computer network that allowed traders to link customers and sales in a fashion then unprecedented in the securities field. Milken used the network to channel $26 billion of investor's money into such companies as MCI, Viacom, TCI, Time Warner, Turner, CablevisionSystems, News Corp. and other cable, telecom, wireless, publishing and entertainment companies. These companies had previously been unable to raise such substantial funds due to their lack of collateral acceptable to bank financing.
Using high-risk, high-yield bonds, which came to be known as "junk bonds" due to their lack of security, Milken funded corporate takeovers and helped fuel the 1980's "merger mania," growing Drexel's to a leading position in the $150 billion bond market by the end of the 80's. Milken became the highest paid executive in the US in 1987, accounting for nearly half of Drexel's profits and receiving a salary of $550 million.
However, the Securities and Exchange Commission didn't find Milken's activities nearly so praise-worthy, and when Drexel client Ivan Boesky was convicted in 1987 of insider trading, implicating Milken and Drexel in the deal, the SEC moved to charge both Drexel and Milken with securities fraud. Drexel settled with the government in 1988, paying over $650 million in fines, and Milken was forced to leave the company in 1989. On his departure, the junk-bond market collapsed, and Drexel was forced to file bankruptcy in 1990.
Milken was charged with securities fraud, insider trading and racketeering, eventually pleading guilty in 1990 to six counts of securities fraud and receiving a sentence of 10 years after the government dropped the other charges. He was also required to pay over $1 billion in fines and was permanently barred from the securities business. Milken served only two years in jail at the Pleasanton Federal Correctional Facility near San Francisco, and left prison in 1993 with his reputation and business destroyed.
A further blow in 1993 was the discovery that he suffered from prostate cancer and that doctors felt he had only eighteen months to live. Using funding from philanthropic ventures such as the Milken Family Foundation, which Milken co-founded in 1982, Milken began CaP CURE (the Association for the Cure of Cancer of the Prostate) to help fund research into finding a cure. The association has become the world's larges private source of prostate cancer research.
In 1998 Milken again faced trouble with the securities industry, charged with violating his permanent ban from the business by taking a consultancy role in MCI's acquisition of News Corp. as well as another undisclosed transaction. Milken eventually agreed to pay $47 million in fines without admitting wrongdoing in the case. Analysts pointed out at the time that Milken's probation for the 1990 conviction had been extended a number of times while the SEC investigated him for violations of probation in regards to his consultancy work. The probation could not be extended after March 1, 1998, and analysts felt that the timing of the new charges was set to allow the government to hold the threat of prison over Milken. The government agreed to accept the $47 million in lieu of seeking a new prison term for Milken.
In 1996 Milken co-founded with computer tycoon Larry Ellison Knowledge Universe, an incubator of Internet technology. He now divides his time between CaP CURE, Knowledge Universe and the Milken Institute, an economic think tank founded as a non-profit organization in 1991.
