Posted on 02/23/2020 6:26:49 AM PST by LibWhacker
President Trump has taken some criticisms for the pardons he recently issued, so let’s take a look at one of them: Michael Milken. In 1990, Milken pleaded guilty to a technical securities offense, for which he was pardoned on Tuesday. Milken was an outsider who took on a cozy establishment, beat them at their own game, and then was chewed up and spit out by a shameful criminal law system. His pardon was well-deserved.
Milken came from a humble background. As a nerdy Jewish teenager, he attended a public high school in Encino, California, and his rise was a great example of the American Dream. He wasn’t a member of the club, but he got a job at the white-shoe, Philadelphia-based Drexel Burnham Lambert investment firm, where he was quickly recognized as a whiz.
He ran his operations through a Wilshire Boulevard office in Beverly Hills, California, run as a quasi-independent firm. He’d arrive at work at 4:00 a.m. to be ready for the New York markets when they opened at 6:00 a.m. Pacific time and simply beat the competition in picking undervalued companies. Back east, investment bankers focused on a firm’s historical earnings and physical assets and ignored better predictors of future earnings, such as the quality of management and prospects for growth, things Milken saw as more important. As his reputation for picking winners grew, Milken attracted some of the wealthiest venture capitalists as clients, people such as T. Boone Pickens and Carl Icahn, and Drexel became known as a firm that could raise billions of dollars to finance a takeover of a company within a matter of hours.
Soon, the Beverley Hills office was the tail wagging the Philadelphia dog.
None of this won him any friends back east, however — not on Wall Street, in the legal academy, or on the Securities and Exchange Commission. The high-yield securities he was pushing were junk bonds, and worse still, he wasn’t sharing his profits with Wall Street underwriters. There had been a tradition that lead underwriters on a deal would pass on part of the securities to be sold to other underwriters, but Milken wasn’t having any of that. Drexel found it could raise billions of dollars to finance a takeover all by itself, and it did just that.
None of this went down well with the country’s opinion leaders: Time, the New York Times, the New York Review of Books, and other establishment journals. Milken’s junk bonds were portrayed as a plague that every decent person should condemn. What Milken was really doing was helping to break up the oversized fat-cat corporate behemoths. They had wastefully sat on piles of money, and splitting them apart released billions of dollars into the economy. As such, Milken was an important contributor to the economic recovery during the Reagan years.
It’s easy enough to ignore the New York Review of Books. It’s harder for a businessman to ignore populist criminal law and grandstanding, politically ambitious prosecutors such as Rudy Giuliani. Milken had revitalized the country’s economy, but for his pains was fined $600 million, sentenced to 10 years (later reduced to two) in prison, and required to perform three years of community service.
The state had used all the pressure at its command to force Milken to plead guilty to victimless offenses that had previously not been thought criminal. Prosecutors changed the rules in the middle of the game and radically expanded the scope of the criminal law to include harmless practices. It offered very lenient plea bargains to notorious liars such as Ivan Boesky (“greed is healthy”) in exchange for their promises to implicate Milken. Further, it threatened to prosecute Milken’s brother and sent FBI agents to visit his 93-year-old grandfather, using them as bargaining chips to get Milken to plead guilty. The state also waved the prospect of a Racketeering Influenced and Corrupt Organizations order at Drexel, securing a guilty plea from it as well as the firm’s cooperation in the prosecution’s pursuit of Milken.
Since his release from prison, Milken has led an exemplary life and is a huge philanthropist, and that alone would merit a pardon. His foundation tackles medical illnesses, especially prostate cancer, from which he suffers. But simply as an innovator who took on a financial establishment, helped turn our economy around, and was unfairly prosecuted for his efforts, Milken deserved the pardon.
The author misrepresents Milken’s case we badly as the Feds did when they prosecuted him.
Dang, I wish I could retweet that.
How so? Just a couple of points will be fine. I barely remember the case myself.
Reaganites who feign shock and disgust at Trump’s pardons, look at this.
Did Guiliani prosecute Milken?
The author misrepresents Milken’s case we badly as the Feds did when they prosecuted him.
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I don’t know much about this case but, based on our recent several years’ experience with federal prosecutors and their malfeasance, I’ll believe the author over the Feds who prosecuted/persecuted Milken.
Very interesting. Thanks for posting.
“Cigar Bill”! Hahaha.
So even under Reagan, the Justice Department was corrupt, threatening family members to cop a plea? Now we can understand why the feds stand at 96% conviction rate. Boy, has Trump thrown open the curtains or what?
Yes, got him under RICO after Boesky fingered him.
Well... that’s what Wiki says.
His real legal problem was the accusation that he was working with others to hide the nature of many of these transactions by using “cutout” transactions — like taking the proceeds of an illegal sale transaction and reporting it as a “consulting fee” to hide the real source of the revenue from SEC regulators.
I actually admire Milken — because I’m a big fan of people like him who are so good at their line of work that they can figure out legal ways to work around the futile attempts of legislators and regulators to stop them.
Milken’s problem was that he was literally TOO successful in his line of work (high-yield corporate bonds) ... to the point where he had to push the limits of the law just because he ran out of corporate bonds to underwrite. He was the equivalent of an institutional investor with $2 trillion in his pocket to invest in U.S. government bonds ... but the government doesn’t have $2 trillion in bonds to sell.
Correct, and that's an excellent reason for the pardon on its own. The "Racketeer-Influenced Corrupt Organizations" Act is a corrupt, nonsensical, non-law, "thingie" employed by corrupt organizations in law enforcement that can't prove a crime.
Possible usefulness against mobsters who had committed other offenses was never a justifiable excuse for creating a witch-hunt app for use against political enemies who had failed to commit actual crimes.
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While it’s true he was prosecuted under rules that were not in place when he did them, I think it’s unfair to say that he was engaged in insider trading.
Every prosecution that was done in the same grouping was overturned. His wasn’t because he’d pleaded guilty due to fighting cancer and to his family being threatened with prosecution. They dumped 98 charges on him or some other outrageous number, knowing that the jury would think he did “something” wrong if they charged him with that many.. not to mention a compliant press happily made him among the most reviled people in the country (all of that sound familiar?)
Much of what Milken did offended the “Thurston Howell the Third” crowd on wall-street, because he cut them out and went around them to fund businesses they didn’t like, AND because he took over companies they had run into the ground and either divested them or put new leadership into place.
He was using something called “stock parking”. The rules are that it can’t be used to avoid other regulations (usually more of a way to avoid unwanted attention or press in the middle of deals).
In any case, Daniel Fischel, a law and econ prof from the U of Chicago wrote a great book on this about 15 years ago.
“Fischel sums up the campaign against Michael Milken this way: “Milken’s downfall proves only that the government, with its unlimited ability to harass and change the rules in the middle of the game, is more powerful than any individual. . . . The unholy alliance of the displaced establishment and `decade of greed’ rich-haters, aided by ambitious but unscrupulous government lawyers . . . combined to destroy him. The whole episode is a national disgrace.”
Milken’ s prostate foundation is very educational for a non-fashionable disease.
Even transgender women, who happen to own a prostate, are eventually going to get prostate cancer.
Terminal prostate cancer is not a nice way to leave.
Have your PSA checked.
Milken got companies to issue risky "junk" bonds, then repackaged and sold them, hiding the riskiness of the final securities, and so was selling them for more than they were worth. Eventually, payments couldn't be made on the loans, and investors were scr#wed.
Thanks all. Concise, good points both sides. Sorry, didn’t mean to Freepmail you.
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