Michael Robert Milken (born July 4, 1946) is an American financier. He is known for his role in the development of the market for high-yield bonds ("junk bonds"), which led to his reputation as the "Junk Bond King", and his conviction and sentence following a guilty plea on felony charges for violating U.S. securities laws. Milken's compensation while head of the high-yield bond department at Drexel Burnham Lambert in the late 1980s exceeded $1 billion over a four-year period, a record for U.S. income at that time. With a net worth of $6 billion as of 2022, he is among the richest people in the world. and permanently barred from the securities industry by the U.S. Securities and Exchange Commission. His sentence was later reduced to two years for cooperating with testimony against his former colleagues and for good behavior. Milken was pardoned by President Donald Trump in February 2020.

Milken is a co-founder of the Milken Family Foundation, chairman of the Milken Institute, and founder of medical philanthropies funding research on melanoma, cancer, and other life-threatening diseases. A prostate cancer survivor, Milken has devoted significant resources to research on the disease.

Early life and education

Milken was born into a middle-class Jewish family in Encino, California. He graduated from Birmingham High School where he was the head cheerleader and worked at a diner while in school. His classmates included future Disney president Michael Ovitz and actresses Sally Field and Cindy Williams. In 1968, he graduated from the University of California, Berkeley with a BS with highest honors. He was elected to Phi Beta Kappa and was a member of the Sigma Alpha Mu fraternity. He received his MBA from the Wharton School of the University of Pennsylvania. While at Berkeley, Milken was influenced by credit studies authored by W. Braddock Hickman, a former president of the Federal Reserve Bank of Cleveland, who noted that a portfolio of non-investment grade bonds offered "risk-adjusted" returns greater than that of an investment-grade portfolio.

Career

Through his Wharton professors, Milken landed a summer job at Drexel Harriman Ripley, an old-line investment bank, in 1969. After completing his MBA, he joined Drexel (by then known as Drexel Firestone) as director of low-grade bond research. He was also given control of some capital and permitted to trade. Over the next 17 years, he had only four down months. By 1976, Milken's income at the firm, which had become Drexel Burnham Lambert, was estimated at $5 million a year. In 1978, Milken moved the high-yield bond operation to Century City in Los Angeles.

High-yield bonds and leveraged buyouts

By the mid-1980s, Milken's network of high-yield bond buyers (notably Fred Carr's Executive Life Insurance Company and Tom Spiegel's Columbia Savings & Loan) had reached a size that enabled him to raise large amounts of money quickly. This money-raising ability also facilitated the activities of leveraged buyout (LBO) firms such as Kohlberg Kravis Roberts and of the so-called "greenmailers". Most of them were armed with a "highly confident letter" from Drexel, a tool Drexel's corporate finance wing crafted that promised to raise the necessary debt in time to fulfill the buyer's obligations. It carried no legal status, but by that time Milken had a reputation for being able to make markets for any bonds that he underwrote. For this reason, "highly confident letters" were considered to reliably demonstrate capacity to pay.

Supporters, like George Gilder in his book Telecosm (2000), state that Milken was "a key source of the organizational changes that have impelled economic growth over the last twenty years. Most striking was the productivity surge in capital, as Milken... and others took the vast sums trapped in old-line businesses and put them back into the markets." Despite his influence in the financial world during the 1980s, (at least one source called him the most powerful American financier since J. P. Morgan), Milken is an intensely private man who shuns publicity; he reportedly owned almost all photographs taken of him. He invested in K12 Inc., a publicly traded education management organization (EMO) that provides online schooling, including to charter school students, for whom services are paid by tax dollars, which is the largest EMO in terms of enrollment.

Scandal

Dan Stone, a former Drexel executive, wrote in his book April Fools that Milken was under nearly constant scrutiny from the Securities and Exchange Commission from 1979 onward due to unethical and sometimes illegal behavior in the high-yield department.<!--ISSN/ISBN needed-->

Ivan Boesky and an intensifying investigation

The SEC inquiries never advanced beyond the investigation phase until 1986, when arbitrageur Ivan Boesky pleaded guilty to securities fraud as part of a larger insider trading investigation. As part of his plea, Boesky implicated Milken in several illegal transactions, including insider trading, stock manipulation, fraud, and stock parking (buying stocks for the benefit of another). This led to an SEC probe of Drexel, as well as a separate criminal probe by Rudy Giuliani, then United States Attorney for the Southern District of New York. Although both investigations were almost entirely focused on Milken's department, Milken refused to talk with Drexel (which launched its own internal investigation) except through his lawyers. The discovery of MacPherson Partners—whose existence had not been known to the public at the time—seriously eroded Milken's credibility with the board. On December 21, 1988, Drexel entered an Alford plea to six counts of stock parking and stock manipulation. It allowed Drexel to maintain its innocence while conceding that it "was not in a position to dispute" the allegations made by the government. As part of the deal, Drexel agreed that Milken had to leave the firm if indicted. of racketeering, mail fraud and securities fraud and sought $1.845 billion in forfeitures. The indictment included a long list of misconduct, including insider trading, tax evasion, stock manipulation, tax fraud, stock parking (concealing "Drexel's ownership of 6f securities by causing the securities to be secretly purchased or sold through affiliates of Boesky or Princeton/Newport for the purpose of gaining secret and unlawful advantages and profits in corporate takeover contests"), and other crimes. One charge was that Boesky paid Drexel $5.3 million in 1986 for Milken's share of profits from illegal trading. This payment was represented as a consulting fee to Drexel. Shortly afterward, Milken resigned from Drexel and formed his own firm, International Capital Access Group. Peizer provided material evidence to prosecutors against Milken. At Milken's pre-sentencing hearing for securities fraud in 1990, Peizer testified against Milken in exchange for immunity from both criminal prosecution and SEC sanctions. On April 24, 1990, Milken pleaded guilty to six counts of securities and tax violations.

Critics of the government charge that the government indicted Milken's brother Lowell to pressure Milken to settle, a tactic some legal scholars condemn as unethical. "I am troubled by – and other scholars are troubled by – the notion of putting relatives on the bargaining table," said Vivian Berger, a professor at Columbia University Law School, in a 1990 interview with The New York Times. As part of the deal, the case against Lowell was dropped. Federal investigators also questioned some of Milken's relatives about their investments.

In statements to a parole board in 1991, Judge Wood estimated that the "total loss from Milken's crimes" was $318,000 less than the government's estimate of $4.7 million, and she recommended that he be eligible for parole in three years. Milken's sentence was later reduced to two years from ten; he served 22 months.

2013 SEC investigation

In February 2013, the SEC announced that they were investigating whether Milken violated his lifetime ban from the securities industry. The investigation concerned Milken's allegedly providing investment advice through Guggenheim Partners. Since 2011, the SEC had been investigating Guggenheim's relationship with Milken.

Presidential pardon

thumb|February 2020 pardon granted by Donald Trump

In June 2018, it was reported that some of president Donald Trump's supporters and friends, including Kevin McCarthy, Rupert Murdoch, Sheldon Adelson, Elaine Chao, and Rudy Giuliani, the onetime federal prosecutor whose criminal investigation led to Milken's conviction, were urging the president to pardon Milken. Milken's attempts to secure a presidential pardon spanned multiple administrations. On February 18, 2020, Trump granted a full pardon to Milken. However, his previous trading license which he lost following his conviction still remained void, and he would still have to reapply and obtain a new trading license in order to return to trading securities.

Philanthropy

thumb|left|Milken speaks with [[PayPal CEO Dan Schulman, 2019.]]

According to Forbes, Milken has given away between 5–10% of his fortune, earning a philanthropy score of 3 out of 5. Upon his release from prison in 1993, Milken founded the Prostate Cancer Foundation for prostate cancer research, which by 2010 was "the largest philanthropic source of funds for research into prostate cancer". Milken himself was diagnosed with advanced prostate cancer in the same month he was released.

His cancer is in remission. The Prostate Cancer Foundation works closely with Major League Baseball through its Home Run Challenge program to promote awareness of prostate cancer and raise money for medical research. Each season in the weeks leading up to Father's Day, Milken visits many ballparks and appears on TV and radio broadcasts during the games. In 2003, Milken launched a Washington, D.C.–based think tank called FasterCures, which seeks greater efficiency in researching all serious diseases. Initiatives of FasterCures include TRAIN, Partnering for Cures, and the Philanthropy Advisory Service. In September 2025, Milken officially opened the Milken Center for Advancing the American Dream (MCAAD) next to the White House in Washington, D.C., an interactive museum that features artists, entrepreneurs, and innovators in health and education. MCAAD also highlights the American financial system.

Milken became the first recipient of the Ig Nobel Economics Prize in 1991. He is also a character in the 1991 film Pizza Man, where he is portrayed by actor Jim Jackman. Milken is referenced by Chris Stevens in the 1994 Northern Exposure episode "The Robe" (season 6, episode 5) at 31:29: "Trust and honesty. The age-old quest of Diogenes in a post-Milken universe." He is referenced by Hank Scorpio in the 1996 The Simpsons episode "You Only Move Twice". Milken is referenced in the 2002 Futurama episode "Future Stock". Ayad Akhtar's 2016 play Junk, set during the bond trading scandals of the 1980s, is partly based on Milken's "fall from grace". Milken is the inspiration for the main character in the play.

Personal life

Milken is married to Lori Anne Hackel, whom he had dated in high school. The couple has three children. He reportedly follows a vegetarian-like diet rich in fruits and vegetables for its health benefits and has co-authored two vegan cookbooks with Beth Ginsberg.

See also

  • List of Ig Nobel Prize winners
  • List of people granted executive clemency by Donald Trump
  • Savings and loan crisis

References

;Notes

;Further reading

  • Connie Bruck - The Predators' Ball: the inside story of Drexel Burnham and the rise of the junk bond raiders, New York: American Lawyer/Simon & Schuster, 1988, Penguin paperback (updated), 1989.
  • Fenton Bailey - "Fall From Grace: The Untold Story of Michael Milken", Carol Publishing Corporation (October 1992), .
  • James B. Stewart - Den of Thieves, New York: Simon & Schuster, 1991, ().
  • Ben Stein - A License to Steal: the Untold Story of Michael Milken and the Conspiracy to Bilk the Nation, Simon & Schuster, 1992
  • Daniel R. Fischel - Payback: the conspiracy to destroy Michael Milken and his financial revolution, New York: HarperBusiness, 1995, ().
  • Robert Sobel - Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken (1993), ().
  • Taking America: How We Got from the First Hostile Takeover to Megamergers, Corporate Raiding, and Scandal, by Jeff Madrick, Beard Books, 2003. Retrieved March 10, 2019.