President Trump’s recent grants of clemency once again thrust former Governor Rod Blagojevich into the spotlight while overshadowing a pardon that was long overdue. Michael Milken almost singlehandedly created an entire market which provided financial opportunities for business entrepreneurs that were otherwise shut out of the traditional lending routes – usually because traditional banks and could not accommodate the size and sophistication of the financing activities Mr. Milken created. Companies such as Time Warner, MGM, Safeway, KB Homes, Harrah’s Entertainment and Mattel were able to become industry leaders because of Mr. Milken’s assistance. During his career, it is estimated that Mr. Milken helped finance over 3,200 companies which led to job creation statistics well into the millions.
As is typical in America, politicians did not see the benefits Mr. Milken was imparting on this country and the world. Instead, the focus was on the monetary profits Mr. Milken and his firm, Drexel Burnham, were receiving. In a decade where society worshipped excessive wealth and extravagance, members of Congress felt Mr. Milken’s wealth was too much.
At the height of Mr. Milken’s success, U.S. Attorney Rudy Giuliani (yes, the same person that is now the President’s personal attorney) possessed grand political aspirations. Mr. Giuliani painted Wall Street’s immense wealth as a plague that needed to be cured and crafted himself an image as the savior. Mr. Giuliani’s strategy worked. Just months after his takedown of Drexel Burnham, Mr. Giuliani was elected Mayor of New York City.
An initial indictment against Mr. Milken contained ninety-eight counts but the hammer in the indictment was the government’s use of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), a federal statute that was created in 1970 to combat organized crime. The government’s “star” witness was to be Ivan Boesky, a self-admitted liar under oath, who had some minor business dealings with Mr. Milken. Mr. Boesky at the time was facing his own criminal indictments and naturally had an incentive to tell stories of others, regardless of the veracity of such stories.
Most legal experts agree that the federal case against Mr. Milken was flimsy and that if taken to a final verdict, he would have been acquitted or, at worst, been found guilty of some minor securities fraud violation. Like so many defendants facing criminal prosecution, the mental pressure became too much for Mr. Milken. The government upped its ante and indicted Mr. Milken’s brother, also on RICO violations. The government also engaged in extensive interrogations of Mr. Milken’s family, including questioning Mr. Milken’s then 92-year-old grandfather with two hearing aids about his knowledge of stock trades.
The threat of family members being persecuted and the always unknown outcome of a trial (especially a trial whereby RICO was to be used for the first time against someone that was not a mobster) led Mr. Milken to agree to plead guilty to six counts and pay a fine of $600 million. The six counts were general conspiracy, stock parking, unlawfully failing to disclose an adjustment in a trade confirmation and aiding and assisting the filing of a false tax return. The stock parking counts stemmed solely from an alleged business deal with Mr. Boesky and the other counts were related to a financing deal whereby Mr. Milken allegedly adjusted a commission downward when a transaction did not provide the rate of return Mr. Milken initially indicated.
The only crimes Mr. Milken were guilty of was earning too large of a salary and creating and monopolizing a market that became too large for Congress to control or understand. By 1987, Mr. Milken’s salary was over $550 million. Somehow in the 1980’s decade of greed and decadence, Mr. Milken was ultimately vilified for being too successful. Further, by the mid-1980’s, bond financing became an industry standard spearheaded by Drexel Burnham and Mr. Milken. As history has shown, the easiest way for politicians to control that for which they cannot is to eradicate it. Such was the fate of Mr. Milken.
President Trump made the right decision in issuing a pardon to Mr. Milken. I would like to think that Mr. Giuliani concurred in the decision. However, Mr. Milken deserves more than a pardon. He deserves gratitude. Mr. Milken help finance the start of industries that we take for granted today but were revolutionary forty years ago (cellular telephones, day care centers and cable television to name a few). His financing abilities helped save and/or create millions of jobs over two decades. Mr. Milken’s charitable works have gone unreported for decades but have helped thousands of children.
A year ago, I saw Mr. Milken at a Los Angeles Dodgers baseball game hosting about a dozen or so children for one of his charitable organizations. I heard from others that Mr. Milken is somewhat reclusive and does not like to be approached in public. To this day, I regret not introducing myself to Mr. Milken that day and personally thanking him for all he has done in his lifetime. Today I say to Mr. Milken – thank you.