It
was surprising to read a letter to Crikey (07/07) from Geoffrey Moore, an
advisor of fallen junk bond king, Michael Milken.
Moore
took issue with Crikey’s Michael Pascoe, who noted that “Milken
served just 22 months and has devoted a lot of PR and money since his release in
1993 to trying to repair his reputation. In some circles, he’s succeeded. Having $2 billion to throw around
helps.”

Moore argued
that “over the past quarter century, the Milken Family Foundation has been one
of America’s most
innovative forces for the advancement of education and medical research. These
have been Mike’s lifelong passions and they have nothing to do with concern for
his reputation.”

Michael
Milken is without a doubt one of the most interesting and influential business
figures of the past 50 years. Not only did he almost personally develop a new
area of debt markets (the high yield or junk bond), in the process amassing a
fortune worth around US$3 billion, but he also created some of America’s
richest men. Revlon owner, Ronald Perelman (the
34th richest man in
America) owes
much of his wealth to Milken’s guidance and funding. Even more impressive was
Milken’s guiding hand in the meteoric rise of arbitrageur Nelson Peltz, who is
now worth US$1.1 billion according to Forbes. Peltz was just another struggling
financier before he, allegedly upon Milken’s instructions, acquired National Can
in 1985 to help out another Milken client, Victor Posner. Three years later,
Peltz sold National Can to Pechiney SA for a US$800 million profit. As explained
by Connie Bruck in The Predator’s Ball, Milken’s Machiavellian success with
Peltz was so pronounced that Drexel Burnham Lambert (the firm where Milken
worked) clients would plead to “make me a Nelson”.

But
despite the genius and the empire building, Milken will forever be known as one
of the most notorious
white collar criminals
America
has seen. Milken was charged by future New York Mayor, Rudy Giuliani, with, among
other things, 98 counts of racketeering and fraud. In the end, Milken ended up
pleading guilty to only a few of the charges. At sentencing, US federal judge
Kimba Wood was scathing, finding that Milken was “willing
to commit only crimes that were unlikely to be detected and that [when] a man of
[Milken’s] power in the financial world…repeatedly conspires to violate, and
violates, securities and tax business in order to achieve more power and wealth
for himself…a significant prison term is required.” Wood sentenced
Milken
to ten years jail (he only served 22 months). Milken also ended up paying US$900
million in fines and civil settlements.

Moore’s
defence of Milken may be correct in a sense. Milken may very well have commenced
his charitable activities before he was convicted, banned from the securities
industry for life and sent to jail. However, if, as alleged, a great deal of
Milken’s fortune was garnered alongside behaviour which was either illegal or
immoral, are Moore’s
arguments moot? Should Milken’s generosity (and to be fair, he has been a very
significant donor) resuscitate an otherwise comatose reputation? The answer is
probably not. Because in the end, while Milken was a financial genius and very
generous benefactor, he will always be remembered as a fraud and a racketeer –
no amount of money can ever change that.

Peter Fray

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