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Milken Redux : Has Cancer, Charity Work Reformed an Ex-Junk Bond King?


It's just past 2:30 on a Thursday afternoon and Michael Milken is on a roll. The man who once made financial markets quiver is facing an audience as tough as any on Wall Street--22 students at Mount Vernon Middle School near downtown Los Angeles--and he's in command.

Milken is teaching the students how to do huge multiplication problems instantly in their heads. "What's 87 times 83?" he bellows to the adolescents who compete against each other in the exercise. "You guys are streaking in the lead on Team Five," he shouts.

Milken keeps up the high-paced math chatter for 90 minutes, his energy never waning. An adult pokes her head in the class, curious. "Are we making too much noise for you today?" he asks cheerfully.

Meet Mike Milken, Chapter 2. Dressed in a Mike's Math Club T-shirt, Milken is here as part of his court-ordered community service required since his release from a federal prison in Dublin, Calif., three years ago.

It's a long way from the days when Milken, now 49, ruled Wall Street and came to personify the ruthlessness and greed of the 1980s. At the now-defunct investment firm Drexel Burnham Lambert, he started work well before dawn and reigned over a frenzied operation so stressful that one bond trader chewed through his phone cord.

Milken created the modern market for high-risk, high-yield securities known as "junk bonds" and he was as dominant in that field as Bill Gates is now in personal computers.

In 1987 alone, Milken earned an astonishing $550 million. And while his sprawling junk-bond empire was raising billions in capital, Milken was involved in what author James B. Stewart, in his book "Den of Thieves," calls "the greatest criminal conspiracy the financial world has ever known."

In 1989, Milken was indicted on 98 counts of racketeering and securities fraud. He avoided a trial by pleading guilty in April 1990 to six felonies, including illegally concealing stock positions, helping clients evade income taxes and a conspiracy involving secret record-keeping with stock speculator Ivan Boesky.

Milken ended up paying a $200-million fine, plus $400 million to the government for restitution, and he paid another $500 million to settle civil lawsuits. He was sentenced to 10 years in prison, but served just two after agreeing to testify in other securities trials.

Today, Milken lives relatively modestly in the same Encino house he bought in 1978 with his wife Lori, whom he met while both were students at Birmingham High School in the San Fernando Valley. Just after his release from prison, he was diagnosed with prostate cancer, but the cancer is now in remission.

Milken has thrown himself into his community service and charity work with the same zeal he once directed at junk bonds. Yet he remains recalcitrant when it comes to his criminal record, portraying himself as a misunderstood visionary who will one day be vindicated in the court of public opinion.

During a recent interview, Milken lapsed into a rambling defense of his past--"my problems from the '80s"--arguing that his junk bonds helped create entire industries from cable TV to cellular phones.

"I kind of got off easy," he said. "Most revolutionaries were killed. . . . It took 200 years for people to decide Jesus Christ was a positive."

One former associate, who asked not to be identified, sees little change in Milken's basic makeup. He described him as a mix of brilliance and weakness--and someone still driven by power, money and ego.

The one change, he added, is Milken's powerful desire to cleanse his blackened reputation. "Basically, he's trying to rewrite history. . . . That's the current campaign: to rebuild his image," he said. "He wants people to think he never did anything wrong. He wants people to view him like J.P. Morgan, a business pioneer."

But so far, his public relations efforts have not accomplished that much. Author Daniel Fischel, who has written a favorable book about the former junk-bond king, said Milken "has paid millions to PR firms in various attempts to improve his image, and they all seemed to have been a colossal failure."

Fischel says Milken is "very concerned about his place in history. . . . What's helped him most isn't anything he has done but the passage of time."

Milken has been more successful in the familiar world of finance, where he still works part time and receives a ton of money from investment income and consulting fees.

He now works with a small circle of old colleagues, including his brother, Lowell, and Richard Sandler, his longtime lawyer and childhood friend. He also hired two former Democratic operatives as publicists: Michael Reese, former deputy campaign manager for Kathleen Brown, and Kam Kuwata, Dianne Feinstein's former campaign manager.

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