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Michael Milken is still seeking redemption

Disgraced junk bond king has raised millions for cancer research but a presidential pardon eludes him.

February 03, 2009|Stuart Pfeifer and Tom Petruno

In the 16 years since his release from prison, disgraced junk-bond king Michael Milken has beaten prostate cancer, raised hundreds of millions of dollars for medical research and reshaped an image tarnished by a 1990 conviction for securities fraud.

One thing he's been unable to do is win a presidential pardon, despite the support of some of the country's most influential people.

Before he left office Jan. 20, President Bush declined to grant Milken's pardon application, just as President Clinton had eight years earlier.

One of those disappointed by Bush's decision was outgoing Food and Drug Administration Commissioner Andrew von Eschenbach, who said Milken's philanthropy had transformed medical research, raised awareness of prostate cancer and saved lives.

"Forgiveness is something that's an important part of our culture," Von Eschenbach said. "Here's a man who is really serving society."

To push his latest bid for a pardon, Milken retained Theodore B. Olson last summer. Olson, a partner in law firm Gibson, Dunn & Crutcher's Washington, D.C., office, served as solicitor general under Bush and was his lawyer in the Supreme Court case that stopped the Florida recount, assuring his 2000 election.

In the final months of Bush's term, "many prominent people from a wide range of fields in business, government, education and medical research" wrote letters supporting a pardon, Milken spokesman Geoffrey Moore said in an e-mail to The Times.

Support for Milken's pardon was not universal, however, with resistance from some within the Justice Department and some on Wall Street.

Bill Seidman, former chairman of the Federal Deposit Insurance Corp. and Resolution Trust Corp., said it would be a mistake to minimize the economic damage that Milken wrought in the 1980s.

Milken's junk bonds became favored holdings of some huge savings and loans that later failed, causing some to blame him for that crisis. It's a charge Milken and his supporters have denied.

"If you add it all up, he cost the government more money than any person in the S&L debacle," said Seidman, now CNBC's chief commentator and publisher of Bank Director magazine.

"The crimes for which he was convicted were one thing. But the cost to the government of his operations in the S&L industry was hundreds of millions of dollars."

Although Seidman said he didn't campaign against the pardon, he said he wasn't convinced that philanthropy alone should win clemency for Milken, whose net worth is estimated at $2.5 billion.

"He's spent a huge amount of money to improve his reputation. I'm not sure that's the basis upon which a pardon should be given," Seidman said.

The 62-year-old Milken, who was raised in Encino, is the finance legend who built the modern junk bond market in the 1980s while at Drexel Burnham Lambert -- only to have the government indict him on racketeering, insider trading and securities fraud charges in 1989.

His star-crossed career began in 1970 when he joined the then little-known Drexel investment bank on Wall Street and began to research and trade junk bonds.

Milken believed that the long-term reward in owning such high-yielding, low-quality securities far outweighed the risks.

That would be the basis of the empire he would build -- first in buying junk securities for himself and for investor clients, then in underwriting the issuance of the bonds for entrepreneurs and corporate raiders who were unable to easily raise capital from conventional sources such as banks.

By the mid-1980s, Milken, now relocated to Beverly Hills, was financing a new generation of entrepreneurs, including William G. McGowan of upstart long-distance firm MCI and Las Vegas casino visionary Steve Wynn.

But his power mushroomed when he became the investment banker to corporate raiders who saw major U.S. companies as bloated and thus vulnerable to attack. That fueled widespread enmity against Milken in corporate America -- and allegations that he was corrupting financial markets.

The $550 million he personally earned from his junk-bond empire in 1987 also made him a natural target for politicians railing against Wall Street greed.

But it wasn't until 1989 that Rudy Giuliani, then the U.S. attorney in Manhattan, persuaded a grand jury to indict Milken on 89 charges, including racketeering, insider trading and securities fraud.

In April 1990 Milken, with his business in a shambles after his indictment, pleaded guilty to six lesser charges that mostly involved violations of securities-disclosure rules.

He was sentenced to 10 years in prison and served 22 months.

After his release, Milken was diagnosed with prostate cancer. He received the grim news after insisting that his doctor test him for the disease because a friend had recently died from it.

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