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The Junk-Bond King's Next Move : Mike Milken Revolutionized Wall Street. Now, in the Face of Insider-Trading Investigations, the Beverly Hills Capitalist Explains His Next Assault on the World of High Finance.

August 30, 1987|EDWARD JAY EPSTEIN | Edward Jay Epstein, a contributing editor of Manhattan Inc., is the author of nine books; his latest, "International Deception," will be published next year by Simon and Schuster

At 4:30 A. M. a MERCEDES pulls up behind Gump's department store in Beverly Hills--as it does every weekday--and a boyish-looking man with an angular face gets out, toting two dogeared canvas bags full of documents and reports. Under the watchful eye of his bodyguard, he takes the elevator to the fourth-floor trading room of Drexel Burnham Lambert. He then slips into his slot at the center of the large X-shaped desk occupied by a dozen other traders. He is Michael Robert Milken, and although he is nominally just the head of this small branch office, he is arguably the most powerful and feared financier in America since World War II.

Milken, a man who has been called "the Oral Roberts of junk bonds" and "Milken the Magnificent" in the financial press and who in less than 10 years expanded a small, largely ignored investment market--junk bonds--to an astounding $125-billion capital market, remains invisible to the world outside; he shuns social functions and until recently has refused press interviews. But on the advice of his lawyer, Edward Bennett Williams, Milken has now, in interviews over the course of nearly two months, emerged from his previous anonymity. The following is Milken's view of his world--where, on the one hand, he may soon be indicted in the widening insider-trading scandal (see "Milken Goes Public," opposite) but also where, on the other, he is preparing for his next financial assault: tapping--and expanding--the $650-billion market in near-defaulted government loans in Mexico, Brazil, Zaire and other Third World nations. "Someone has to solve the problems of Third World debt, and if we don't to it, the Japanese will," Milken says.

MILKEN, WHO HAS been compared to legendary financier J. P. Morgan, is a thin man with a large head and deep-set eyes. When he smiles, his toothy grin makes him look much more boyish than his 41 years. So does his suntan and well-fitting hairpiece. He wears a tie but no jacket in the trading-room office, which resembles a casual, democratic newsroom: People talk across desks and there is a feeling of deadline pressure that doesn't wind down until about 4 in the afternoon, after New York offices close. A mystery to the outside world, Milken is easy-going and accessible to his colleagues.

Even when he arrives at 4:30 in the morning, Milken's energy is irrepressible. After saying good morning to his assistants--who work in relays, dialing phone numbers and jotting down messages--he begins making his morning telephone calls, or "visits," as he calls them, to clients, associates and friends, all spoken with a lilting cadence, as Milken issues forth ideas and his views of the world. Almost everyone takes his calls, and everyone listens.

Mike Milken moved his entire 20-man operation over the Fourth of July weekend in 1978 from Broad Street in New York to the Avenue of the Stars in Century City. That July 4 was his 32nd birthday--and his personal declaration of independence from Wall Street. At Milken's side were his younger brother, Lowell, once a lawyer, now a Drexel vice president; Peter Ackerman, a Ph.D. from Fletcher School of Law and Diplomacy, and Gary Winnick, bond salesman, all of whom, among others, were eventually partnered with Milken in various companies and ventures--and also became multimillionaires.

Milken had been working at Drexel in New York for nine years, since 1969, after he graduated from the University of California at Berkeley and enrolled in the Wharton School of Business in Philadelphia. He commuted to Wall Street from Philadelphia every day by bus, avoiding his competitors and using the time to read prospectuses. He told his boss, "I don't know if I'm smarter than anyone else, but I can work 25% longer." As it turned out, he had such a hot hand trading obscure bonds that in one year he doubled the money Drexel gave him to invest and became such a legendary trader that Drexel acceded to his unusual request to move to Los Angeles.

For Milken, it was a return home. He bought a house in Encino only a few miles from where his family lived when he was a child. (The house, although it once belonged to Clark Gable, is not particularly ostentatious.) Milken's father, Bernard, had been an accountant. At Birmingham High School in nearby Van Nuys, Milken had been elected both head cheerleader and prom chairman, and he also began dating Lori Anne Hackel, whom he later married. Milken then went on to Berkeley, where, in the 1960s, he considered himself something of a rebel because he studied business administration rather than conform to the current political-protest movement; he became a Phi Beta Kappa student and then moved back to Los Angeles, where he worked one summer as an accountant at Touche Ross and Co., commuting to Berkeley for exams.

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