Unpardoned

Meet Michael Milken, the man the ex-president deemed unworthy of clemency.

BY DOROTHY RABINOWITZ

Tuesday, February 13, 2001 12:01 a.m. EST

(from The Wall Street Journal)

Two days after the publication of the long and by now notorious list of those receiving presidential pardons, Michael Milken went off to Yale to deliver a lecture. Unlike Marc Rich (among the FBI's most-wanted fugitives) or Almon G. Braswell (convicted of perjury and mail fraud in 1983, and currently the object of another criminal investigation), Mr. Milken had been refused a pardon. At Yale, a young woman student wanted to know what it was he had done, anyway.

"I was eight years old," she explained. She meant in the 1980s, the time of RICO, Ivan Boesky, and a high-profile prosecution that would transform financier Michael Milken into a prime symbol of the greed decade--as the era was known in the selfless '90s--causing him to spend two years in a federal prison.

It was a story for another day, he told the student, curious about all the talk of his pardon, or lack of one.

Recalling the moment while in New York last week, he observed: "I had the greatest pardon of all--eight years of additional life. I got to see my three children grow up. That, to me, is my pardon."

He refers, of course, to the 1993 diagnosis of his advanced prostate cancer, at which time doctors informed him he had little more than a year to live. By then cancer had claimed seven members of his family, among them his father, whose 1979 death from melanoma had been particularly devastating to a son confronting--perhaps for the first time in a bountifully successful life--a sense of hopelessness and defeat.

"For all my skill and capacity to solve problems it was clear I wasn't going to be able to find a way to save my father's life."

They are a far cry from the feelings he exudes these days as he goes about promoting cancer research, buoyant, determined and, from all appearances, a man unburdened by resentments. Some close to him are less serene, especially about the Securities and Exchange Commission's campaign against his pardon.

"The attack the SEC mounted against Mike far exceeded anything the FBI did against a pardon for [Leonard] Peltier, accused of murdering two FBI agents," says attorney Richard Sandler, a longtime Milken associate. The SEC claimed, in a letter to the pardons office, that Mr. Milken had after his release "secretly" violated orders preventing him from engaging in activity as a securities broker.

In the mid-1990s the agency began an investigation into three transactions in which Michael Milken had given strategic consulting advice, upon being advised by counsel, that he could do so.

"Some secret activities," Mr. Sandler observes. "Those transactions were public, written about in all the papers, with Mike's name included."

And when the SEC finished its year-and-a-half-long investigation, it agreed it would impose no fine or penalty and would not allege willful violation of the court order. Mr. Milken in turn would give back some $47 million in fees and interest. In the midst of his struggle with cancer, Michael Milken had, Mr. Sandler says, no interest in a prolonged legal war and had therefore signed a consent agreement neither admitting nor denying any of the allegations.

At the same time, the U.S. attorney's office, which had also investigated the matter, concluded, in a report to the judge, that on the basis of its own investigation, the fact that the law was unclear on the issue involved, and the fact that Mr. Milken in no way misled the court, it would recommend no action.

To claim, now, that Mike Milken had willfully violated the court order and that he had given false testimony when even a U.S. attorney found he had done no such thing, Mr. Sander avers, is pure misrepresentation.

To all queries about matters of this kind--attacks on his character and motives, references to his alleged great crimes--Mr. Milken himself responds with what can only be described as a clinician's interest. He has clearly decided to regard these things as phenomena, curiosities of human behavior to understand. "People have certain biases and beliefs they have to maintain," he explains, with some patience.

The tone can change, to be sure, when he is pressed to consider the way in which the press described him in its coverage of those alleged great criminal conspiracies, and even today. He recalls, with a thin smile, a person in the newspaper business years back, a man who knew about writing and reporters.

"If you're unsuccessful as a reporter on the sports page, he told me, they generally moved you to the financial pages. On the sports page you had to be precise. Someone won, someone lost, someone had a certain batting average. In financial writing you could say almost anything."

That he has his mind on matters very different from these old battles, no one can doubt. He has his focus, namely the war on cancer, and it is consuming--an enterprise driven by the same energies he once applied to the study of financial structures. This can't be surprising, he points out: Life is a continuum.

In New York on behalf of CapCURE, his foundation for the cure of prostate cancer, he found time for a talk, though he has of late declined all requests for interviews. In the small room at a Sloan-Kettering facility, phones ring, people pop in to deliver messages, others have wandered into the wrong office, usually in the middle of one of his more complicated thoughts. None of this appears to perturb him. He is uninterruptible, he is focused.

In prison, it helped, of course, to be able to concentrate. It is hard to detect any darkness in his reflections on that time, a period in which he tutored fellow inmates in math and other skills. He did what he had to do, he notes, nor did he ever feel demeaned by washing floors and windows.

Michael Milken washed a lot more floors and windows than most other prisoners of his education ever had to do in federal prison, Richard Sandler notes. Typically, a college-educated person performs orderly duties for a week or so, and then is allowed to tutor or do similar work.

"Basically, they had him cleaning up, doing floors, for a long, long time. It didn't bother him. He developed math games for guys in his cell, they could show off to their children on visiting days." Finally, Mr. Sandler says, after months doing cleanup, they allowed him to spend his time tutoring. Before Michael Milken went to prison, they had heard a hundred times that he would be treated like everyone else.

"He never was treated like everyone else. He was treated far worse." There was the prison to which he had been sent, for one thing--not the one recommended by Judge Kimba Wood, but Pleasanton, in Dublin, Calif., a desolate institution and one, said Mr. Sandler, that even a lead prosecutor in the Milken case had described as one of the worst federal prison camps he had ever seen.

He had driven Mike Milken there the day he was due to enter in March 1991, and it remains a bleak memory to Richard Sandler. He recalls the long ride with Mr. and Mrs. Milken, how all three had talked about absolutely everything but where they were headed. In fact, Michael Milken was at that point headed to the beginning of a 10-year incarceration, a term handed down by Judge Wood, who would later drastically cut the sentence.

He had come prepared, in a way, for the 22 months he did spend behind bars; he had after all seen his freedom curtailed long before he entered prison. At the height of all the furor and accusations and all the legal struggles, the symbol of the greed decade went off to do as he had been doing since his youth--that is, teaching inner-city children. Every day he went to St. Josephs School at 127th Street and Morningside Heights.

"That way I could live in the real world rather than what I saw as a world of unreality."

He is accustomed to charges, lately renewed by those passionately opposed to his pardon (they had not as yet had Marc Rich to worry about) that his philanthropic endeavors were mere public-relations efforts. It is a point of view, of course, that regularly ignores the history of Mr. Milken's social endeavors--the Milken Family Foundations devoted to medical research, education for minority children and the like, all of which were undertaken years before Michael Milken could have dreamed of legal troubles, government prosecutors, and the ruin it would all bring.

For a time, at least. Now, the past is the past, everything in his manner says, as he pauses, occasionally, to muse over allegations made about his greed, for example.

"By 1975," he says, "I was independently wealthy. I never needed to make money again."

He does not, indeed, live like a man devoted to wealth for what it can buy. He has lived, since 1978, in a comparatively modest house in the San Fernando Valley, decidedly not a neighborhood in which the very rich live.

He works 15 hours a day, and does it happily. He had made certain promises to himself to drive the effort to find cancer solutions, and he drives incessantly, with absolute belief. Every day he makes it a point to talk to five people with cancer--sometimes for five minutes, sometimes a half-hour.

"It helps me keep my focus," he explains.

It is hard to imagine him losing it, easy to see how he has come to this. It is, he says, difficult for him to hold on to grievances, not now and not before. He is, he recalls, the man who used to tell people working under him on Wall Street: "Revenge is not a productive emotion."

During the first large cancer march in 1998, which he chaired, he met a woman whose six-year-old daughter had died the day before. They had been looking forward to coming to the march together. Another daughter had died of the same disease 10 years earlier. When the march was over he had sat by the memorial wall looking at the notes parents had left children, sisters had left brothers.

"I might feel that what happened to me was unfair or worse" he says, with a rush of feeling, "but what is it compared to a child who has died of leukemia?"

The man without a pardon is off now, to plan the next conference, the next search for solutions.

Ms. Rabinowitz is a member of The Wall Street Journal's editorial board.

-- eve (eve_rebekah@yahoo.com), February 13, 2001

Answers

Hi eve,
Having read A License to Steal by Benjamin Stein, a painstaking acouunt about Milken's ruthlessness in promoting junk bonds, I am appalled by Milken's bewilderment at the idea that what he did was terrible. But I would concede that some who were recently issued pardons were even less deserving of one than he.

-- David L (bumpkin@dnet.net), February 13, 2001.

Boo-hoo, nice sob story.

Somebody please turn off that damn washing machine, the spin cycle is overflowing!!

-- (typical@repugnant.twist), February 13, 2001.

Hi eve, I dunno if you posted this because you agree with it, or just find it provocative, but it gets my dander up.

According to this writer, a presidential pardon for Michael Milken would reward an outward and visible demonstration of an inward and spiritual grace, which she presumes to judge that Milken has achieved.

Not that *I* can vouch for the inner journey Milken has taken in his life - I have an opinion but who am I to really judge that? For that matter who would the president be to judge that, by means of a pardon?

I fail to see what relevance "the King's pardon" would have here -- on ANY level. Certainly not to the spiritual life - which this writer works so hard to attribute to Milken. Self-responsibility is its OWN reward.

And if not relevant to the spiritual or moral life, how would a pardon be any more than an outward show of "honor among thieves in high places"?

Would a Milken pardon serve "public healing" in any way? (which I think is the core intent behind presidential pardons)? It would not. Many turn their lives around; pardon for him would be an insult to the millions of unsung common folk who travel at least an equally arduous and heroic path in everyday life. Different details, but the dynamics are not so different.

And beside all this, we have the cocaine convict Vignali pardon. This, in the same year that Peter McWilliams, terminally ill AIDS activist and proponent of medical marijuana, and author of many inspirational books, dies while awaiting sentencing on a minor marijuana offense, a casualty of the war on drugs. Shall I even go there?

No pardon for Milken - I don't know quite what to make of it except that maybe the institution of presidential pardon is not completely grotesque. [shrug]

-- Debbie (dbspence@usa.net), February 14, 2001.

Hi Dave and Debbie,

With all due respect, y'all, although I'm not privy to all the facts here, and can't vouch for the ones stated below ---- so far, my opinion doesn't stray very far from the following press release from the Ayn Rand Institute...

"Pardon for Milken: Clinton Should Do It!"

January 17, 2001

MARINA DEL REY, CALIF.—President Clinton should pardon Michael Milken, said the executive director of the Ayn Rand Institute.

"It would be an act of justice—one of the few of the Clinton administration—if Clinton pardoned the man truly responsible for the economic boom of the 1990s," said Yaron Brook. "Clinton's popularity over the last eight years is a consequence of the outstanding performance of the U.S. economy. And who, more than Milken, is responsible for this? Not Clinton—who at best can be said to have done little to interfere with economic growth, but is certainly not responsible for it."

Brook said that it was Milken's financial engineering that made possible the restructuring of American business in the 1980s, turning American corporations from the inefficient, bloated, and unfocused corporations of the 1970s to the efficient, lean, and focused ones of the 1990s. It is this transformation, and the reallocation of capital from old-line industry to the hi-tech industry that fueled the massive creation of new wealth, new jobs, and higher wages.

"Milken's prosecution for technical violations of securities laws was a classic case of hating a man because of his phenomenal ability," said Brook. "Milken did nothing immoral in any of his financial transactions and was targeted simply because he was successful. He should not be pardoned for his philanthropic contributions (as some have argued), but for his productive genius.

"If Clinton wants to redeem himself for all of his failings over the past eight years, which includes taking credit for the booming economy, he couldn't take a better first step than pardoning Michael Milken."

Ayn Rand Institute executive director Yaron Brook is available for interviews.

So...whatchy'all think?

(Eve turns 'round and ducks...):)

-- eve (eve_rebekah@yahoo.com), February 15, 2001.

Hi eve,
No need to duck. It seems to me that the phrase "technical violations of securities laws" rather misrepresents things. If I sell someone what I claim to be a full box and it turns out to be empty, that is fraud. Milken did the equivalent, and it netted him astronomical wealth. How the writer can imply that this is not immoral is beyond me.

-- David L (bumpkin@dnet.net), February 15, 2001.

It's not clear to me what use he'd make of a pardon anyway. He's rich as Croesus, he's finished serving his time, he leads a full and rewarding life. What more does he want?

-- Flint (flintc@mindspring.com), February 15, 2001.

(Eve turns 'round and ducks...):)

I'm not privy to all the facts here

I should say not!

No, no need to duck; I know you well enough Eve, to know you enjoy the "spirit" of a good controversy. But I don't feel like knocking myself out over something so misinformed as THIS article, either. The first was sentimental, and that's what I was reacting to, but this second article, it's pure self-deluded rhetoric: "Milken was the man responsible for the economic boom of the 90s." ...Well isn't it pretty to think so! Maybe in the sense of "I had a terminal disease, and that's responsible for my turning my health around!"

a classic case of hating a man because of his phenomenal ability ..... Milken was successful

He WASN'T successful, he got caught! (What do you think they put him in jail for?)

Somehow, I think you (and this Yaron Brook) must have missed the junk bond collapse of the late 80s and all the indictments; Milken brought the savings and loan industry down around him like a house of cards. (Perhaps successful is meant in the sense of "crime pays"?)

Milken did nothing immoral in any of his financial transactions

Sure! Nothing more than colluding to build huge schemes that bilked thousands of investors out of their entire life savings.... (But, perhaps Objectivism has a special definition for "moral" and "immoral" that I am not privy to.)

It is this transformation, and the reallocation of capital from old-line industry to the hi-tech industry that fueled the massive creation of new wealth, new jobs, and higher wages.

If anything, companies did better in the '90s NOT having the vulnerabilities that the junk-bond kings took advantage of. High tech is a huge development that has sprung from the coming to fruition of technology advances, over decades. (And there was this little matter of an early '90s recession before the "boom" got under way.) I'm no economist, but in retrospect it seems to me that the short-lived Milken junk bond fiasco was symptomatic of much larger changes that were underway.. Just as when a boil is the place where the systemic infection breaks out, the body is rallying to health and all kinds of temporary symptoms appear.

Well anyway, enough of MY rhetoric. I don't know why I bit on this one, but I did. Methinks you are in love with an idea; maybe you ought to study up better on the history of this and then see what you think. (But you don't need ME to tell you that!).

-- Debbie (dbspence@usa.net), February 16, 2001.

High tech is a huge development that has sprung from the coming to fruition of technology advances, over decades.

This is very true. I don't think it mattered who was president or what was happening with other industries, technology was ripe and ready to explode into fruitation.

What is a junk bond anyway?

-- Cherri (jessam5@home.com), February 16, 2001.

Mornin’ guys...

Dave and Debbie,

Yeah -- I admit my ignorance of most of the facts in the Milken case. I mainly put up these articles because I knew they’d be controversial. To the extent he (I almost typed "He" – LOL!) defrauded investors he absolutely deserved to be punished, regardless of the economic benefits of his scheme. At the risk of oversimplifying, if all a given investor had to do was to look up the bond rating prior to purchase to get an idea of the risk involved, well – that’s their responsibility – right? No problem for Milken so far – agreed?

So, specifically – what was the fraud?

By the way, fraud IS immoral in the philosophy of objectivism; so maybe the author thinks no real fraud occurred. If he's aware fraud occurred, yet assumes that overall the transactions were moral because the perceived economic gains outweighed this, he's dead wrong.

Cherri,

A junk bond is a high risk, high return corporate bond. They’re usually floated by companies that need financing, but that lack a history of earnings or have a poor credit record. In other words, they're essentially IOUs issued by high-risk companies (in return for the investor's loan) that may not pay off the debt -- so they offer a higher return to compensate for the increased risk.

-- Eve (eve_rebekah@yahoo.com), February 16, 2001.

Cherri, a junk bond is a vehicle for investing in auto recycling centers. 8^) Actually, "junk" is the lowest of the classifications given by investment rating services such as Moody's or Standard & Poor's. Bonds being classified as junk, indicates that their issuer has a high probability of defaulting on them.

eve, I'm not sure you ducked quickly enough. Maybe Peg will post an icebag.

-- David L (bumpkin@dnet.net), February 16, 2001.

eve, looks like we were composing our junk bond explanations at the same time.

Milken's fraud was to hoard information on the companies whose junk he was promoting, while grossly misrepresenting their financial picture to potential investors. It was impossible for anyone to "look up their ratings."

-- David L (bumpkin@dnet.net), February 16, 2001.

If he in fact defrauded them, he should pay the penalties -- as long as those infractions and penalties were clear to begin with. Were they? Of course, I find fraud to be immoral, regardless of the legal consequences.

But Dave, don’t you think the buyer should bear some of the responsibility? Assuming the offerings were public, the SEC would require an offering circular, prospectus, registration, background information, etc. that the buyer should have been aware of. And bond ratings are found in Standard and Poor’s, Moody’s, etc.

-- Eve (eve_rebekah@yahoo.com), February 16, 2001.

Eve, what I meant above was that Milken managed to avoid the standard disclosures to and scrutiny by the SEC, hence the lack of publicly available information (at the time) to corroborate or refute his representations. I don't recall how this was done, and since I cannot seem to locate my copy of Stein's book, I might be confused about it.

-- David L (bumpkin@dnet.net), February 16, 2001.