Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, December 12, 1993 TAG: 9312100086
SECTION: BUSINESS PAGE: F2 EDITION: METRO
SOURCE: E. SCOTT RECKARD ASSOCIATED PRESS
DATELINE: ONTARIO, CALIF. LENGTH: Long
The discussion of how to interest slow learners in polynomial equations is hard to follow, and an aide in the front row, Lorraine Spurge, hisses: "Move. They can't see." Oblivious, Milken pushes on; surely the energy and acumen that transformed Wall Street can dispel the puzzled looks.
"Oh, Michael," Spurge moans as he finally glances down, sees what's happened and falls silent. He steps aside, then tries to remedy things with a baffling double-speed rehash of his harangue.
No one said things would go easily as the era's most famous financial felon steps into spotlight after public spotlight, saying he wants to open discussions to correct the record about himself and the Roaring '80s.
As Drexel Burnham Lambert Inc.'s head of high-yield securities, Milken rediscovered the power that junk bond financing could unleash for supposedly less credit-worthy companies.
That achievement, emulated by other brokerages but dominated by Drexel, helped fuel corporate booms and takeover frenzies, though Milken says it was just one part of his greater financial vision.
He spent 22 months in the less heady '90s in a prison camp after pleading guilty to six felony securities fraud counts and paying a staggering $1.1 billion to put criminal and civil charges behind him.
In the outer Los Angeles suburb of Ontario to accept an educational commitment award from a state university and teachers' group, he portrays himself as having learned to accept if not duck the many punches thrown his way. He says he recently learned that teachers get tested for stressi
"I think I've probably taken more stress tests than anyone in America during the last decade, and I've always tried to find a little humor in things," he says.
Seeming far less awkward a week later during a guest lecture to a UCLA finance class, he elicits repeated laughs.
"I noticed that we have had scandal after scandal related to brokerage firms," he says with mock surprise at one point, adding later: "I collect subpoenas the way other people collect other things."
The class, ridiculed in "Doonesbury," is by far the most sought-after at the UCLA business school. The draw isn't just Milken but the parade of Drexel- financed chiefs from companies like MCI, McCaw Cellular and Mirage Resorts.
Daniel Druker, a 27-year-old student, said junk bonds and Milken's past have played only a small part in the classes, which include game-playing exercises with students impersonating corporate finance executives, bankers, money managers, regulators and the like.
He praised Milken's personal attention to students, saying it would be overly cynical to regard the classes, videotaped by a crew of 10 with four cameras, as intended to rehabilitate Milken's reputation.
Still, Milken "has a natural tendency to put some spin on things," Druker said. "He's great at talking about deals where they made billions of dollars. It's hard to get him to talk about deals where they screwed up, though.
Critics say that's part of a pattern of fact-twisting and subtle manipulation. "Michael Milken's pattern of wrongdoing ... is to step just over the line into unlawful conduct, and to do so in a way that preserves his `deniability,"' wrote the federal judge who sentenced him, Kimba M. Wood.
Hours before the UCLA class this past Wednesday, U.S. District Judge Milton Pollack in Manhattan said Milken was "unworthy of belief" compared to Ivan Boesky, the takeover speculator who also fell in the federal investigation of Wall Street corruption.
Pollack had presided at a trial where Milken testified along with Boesky, the takeover speculator who made the notorious "greed is good" remark. Boesky also was a participant in one crime to which Milken pleaded guilty.
Milken replied: "I would simply like to reaffirm that my testimony was truthful in all respects.
As he defends himself against what he calls gross distortions, he finds himself slowed by radiation treatments for prostate cancer, begun last month.
He complains that sometimes he barely has the time and energy to help his children with homework before collapsing into sleep at his San Fernando Valley home.
It's another reminder of mortality for a workaholic who grew used to seeing "king" or "wizard" coupled with his name, only to wind up a felon and paying $1.1 billion to put the blizzard of criminal charges and civil lawsuits behind.
Most mortals would still find the pace frenetic: the UCLA finance lectures; an educational TV network startup; awards bestowed on him and by his foundations; interactive technology investments; after-school clubs designed to keep inner city children off drugs.
The after-school endeavor is community service, part of punishments that included the two-year prison term. Milken says he plea-bargained to technical violations in 1990 to end a 3-year nightmare: the government's full fury coming down on his entire family, including FBI interrogations of his 92-year-old grandfather.
As disparate as his other activities seem, they share a common effect: a tendency to temper Milken's image as the chief driver of frenzied corporate takeovers and the central figure in the Wall Street insider trading scandals.
"People have a large capacity to believe things that simply aren't true," he says.
He has taken a major ownership position in 7th Level Inc., a multimedia outfit hoping to exploit the convergence of Hollywood and Silicon Valley. He attended the hottest party celebrating that hottest of recent phenomena at the recent Comdex computer show in Las Vegas.
The attraction is 7th Level's advanced animation software, which he hopes will help him realize his goal of a genuinely entertaining educational cable-TV network.
Spurge, his aide, also envisions CD-ROMs that allow users to, say, choose among various avenues of corporate finance to explore, using actual footage of finance experts and CEOs. There are endless hours of potential material from Drexel-era "road shows" and "Predators' Ball" conclaves of corporate titans and takeover strategists.
No longer evident are the PR phalanxes that guarded Milken during days that began at 4 a.m. on the bond desk in Beverly Hills, the Predators' Balls, the investigations that also toppled Boesky and a number of other Wall Street investment bankers.
But the message is the same: Milken funded smaller companies that created jobs in growth industries like cellular, cable and health care; high-yield, high-risk bonds were appropriate means to that end in the early '80s; he unsuccessfully begged Drexel to back away from hostile takeovers; he was denouncing excess debt just as the rest of Wall Street went overboard.
Above all is his insistence that junk bonds remain a far better investment than higher-grade securities with less yield. Ill-advised regulation, media overkill and grandstanding politicians caused the collapse of the junk bond market in the late 1980s, he says.
It has recovered over the past three years - vindication, he says, for him and allies like First Executive Corp. chief Fred Carr.
Carr's New York and California insurance companies were seized when the value of their junk bonds plunged; today, the debate is only over whether regulators gave away the store when they sold the securities, Milken says.
"It took hundreds of years for Galileo to be proved right," he says, employing an analogy pilloried in "Doonesbury," which depicted the UCLA lectures as "greed is good" seminars celebrating his own conceit and wealth.
The off-kilter smile, the absence of the once trademark toupee, the sometimes stumbling speaking manner, the necktie dotted with fractions and quotations, the anecdotes about teachers' trials, all reinforce his post-prison remake as educator and senior financial commentator.
He is quick, though, to distance himself from the ideas of other former clients - say Charles H. Keating Jr., whose Drexel-financed takeover of Lincoln Savings ended in the nation's worst S&L collapse, a $3.4 billion bailout bill for taxpayers, Keating imprisoned for racketeering, and thousands of small investors still not fully compensated for millions of dollars in losses.
"I wasn't on the board of that company," he says.
Keywords:
PROFILE
by CNB