Investment entrepreneur, born in California, USA. He studied at the University of California, Berkeley, and joined Drexel, Burnham, Lambert in 1970. He led the firm into the 1980s, using high-risk, high-yield bonds to finance corporate takeovers. Condemned by some for virtually inventing these junk bonds - bonds secured by little more than the future promises of the very companies the bonds were being used to take over - he was praised by others for shaking up complacent US businesses. In 1989 he admitted to fraud and racketeering charges, and was imprisoned until 1993.
Michael Robert Milken (born July 4, 1946 in Encino, California) is a prominent American financier and philanthropist who developed, after almost single-handedly having created, the market for "high-yield bonds" (also known as "junk bonds") during the 1970s and 1980s.
After he was sent to prison on finance-related charges, his detractors cited him as the epitome of Wall Street "greed" during the 1980s, and nicknamed him "The Junk Bond King."
After serving his sentence, Milken launched a public relations campaign to highlight his role as a great innovator and financier, particularly with regard to popularizing higher-risk alternative investments, while smoothing over his criminal record.
Education
A summa cum laude graduate of the University of California, Berkeley, where he was a member of Sigma Alpha Mu fraternity, and was elected to be a member of Phi Beta Kappa, Milken went on to receive his master's degree in Business Administration from the University of Pennsylvania Wharton School.
While at the Wharton School, he was influenced by credit studies authored by W.
Work on Wall Street
In January 1969 he went to work for Drexel Harriman Ripley as assistant to the chairman.
When Drexel merged with Burnham and Company in 1973, Milken headed the non-investment-grade bond department, an operation that earned a remarkable 100% return on investment.
During the 1980s he became known as a controversial financial innovator whose work at investment bank Drexel Burnham Lambert, Inc.
Through his business acumen, the network of contacts and clients, and the trust he had earned from "buy side" investors (buyers of primary market debt issues) as well as Milken's issuance of the highly confident letter, he had the ability to raise tremendous amounts of money.
He was a big contributor to the success of Drexel, that largely due to Milken went from $1.2 million in fees to over $4 billion in 1986, making it the most profitable firm on Wall Street at the time.
In June 1989, Milken resigned from Drexel to form his own company, International Capital Access Group.
While he is best known for his successful financing through high yield bonds, he also employed equity-based securities, hybrids and scores of other financial instruments in more than a dozen asset classes to help clients grow.
While having an illustrious and productive career, his rivals, which combined had minute marketshares, often alleged tactics he and his associates employed bordered on illicit behaviour.
Amongst his detractors have been Martin Fridson formerly of Merrill Lynch and author Ben Stein.
Legal charges
In 1989, Rudy Giuliani, future prominent Republican politician and then-United States Attorney for the Southern District of New York, charged him under the RICO act with 98 counts of racketeering and fraud, and he was indicted by a federal grand jury.
After a plea bargain, Milken pled guilty to six lesser securities and reporting violations.
Judge Kimba Wood, at Milken's sentencing, told him:
Wood recommended a 10-year prison sentence, of which, in her opinion, Milken should have served at least 36 to 40 months.
However, Milken served only about 22 months (from March 1991 until January 1993) before being released.
In 1998, without admitting any guilt, he returned $47 million in fees to settle another SEC charge related to the order in 1991 barring him from securities industry. He allegedly breached the order when he advised MCI/News Corporation in a transaction in 1995, for which he received $27 million in advisory fees, and when he advised Revlon chairman Ronald Perelman on a Revlon/New World Communications deal in 1996, with $15 million in fees to Milken.
After prison term
Upon his release, Milken resumed his philanthropic activities, keeping the focus on education and medical research.
Assessments of Milken's accomplishments
Judgments of Milken's accomplishments - namely whether they were good for the U.S. economy or if they were ethical - tend to depend on the ideology of the observer and usually fall within two groups.
Milken's supporters tend to be libertarian, including economist Milton Friedman.
Generally speaking, this group argues (as Friedman did in his 1971 article, Does Business Have Social Responsibility?), that no special moral obligations apply to businessmen and, since Milken's actions, by and large, were legal at the time, he did nothing wrong.
Generally speaking, they argue:
Junk bonds were a brilliant innovation and even today occupy a large part of most investment portfolios.On the other hand, individuals who believe businessmen should adhere to higher moral standards, such as financier Warren Buffett or former Salomon Brothers bond salesman Michael Lewis, condemn many of Milken's actions. While acknowledging the ingenuity of Milken's financial innovations, they also argue that:
Junk bonds are a high-risk investment;The most controversial are "corporate raids" Milken fostered to allow smaller companies to acquire older and larger corporations.
Charitable and Public Relations Work
Milken has used his wealth and high-level contacts to become an influential voice in economics, education, and medical research.
He counts among his supporters Ted Turner, Rupert Murdoch, and other business executives.
In 1982, he co-founded the Milken Family Foundation to support medical research and education.
In 2003, he launched the Washington, D.C.
The Milken Family Foundation founded the Milken National Educator Awards in 1985.
Each educator receives an unrestricted $25,000 prize and participates in an annual professional development conference.
He is a major donor to the Milken Community High School (see ), a private school in Los Angeles, CA.
Fortune magazine called him "The Man Who Changed Medicine" in a 2004 cover story about his positive influence on medical research. During the trial of former Enron CEO Kenneth Lay, Lay praised Milken while on the stand (Milken's response to such praise is of yet unknown).
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