Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, September 30, 1995 TAG: 9510020036
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
Despite being banned for life from the securities and investment adviser business, disgraced junk-bond king Michael Milken is making the big bucks again for his deal-making prowess.
Nearly three years after he finished serving time for securities law violations, Milken stands to reap a reported $50 million from helping advise Ted Turner in his negotiations to sell Turner Broadcasting System Inc. to Time Warner Inc. for $7.5 billion.
The huge sum shows that Milken, one of the most influential financiers of the 1980s, hasn't lost his touch, even though he has paid $1.1 billion in fines and legal settlements and spent two years in prison.
He remains one of the richest Americans, with an estimated worth of about $500 million, according to Forbes magazine. He also gave advice on MCI Communication Inc.'s investment in News Corp., although the size of his fee wasn't known.
Details of Milken's latest deal-making, reported Friday in The Wall Street Journal, raised the eyebrows of federal securities regulators. The Securities and Exchange Commission had barred the former Drexel Burnham Lambert bond executive from securities dealings and investment advice as part of his historic settlement with the government in 1990.
His compensation, contingent on completion of the Time Warner-Turner merger, opens the question of whether Milken acted as an investment adviser in violation of his SEC sanctions.
A Milken spokesman, Kam Kuwata, acknowledged that a fee would be paid to Milken but would not specify the amount, saying it was still in discussion. He insisted Milken was solely a business consultant to the companies, didn't negotiate the transaction and wasn't at meetings attended by other advisers.
``He is a consultant to Turner on the long-range planning needs of Turner Broadcasting,'' Kuwata said.
Still, Milken's role in the Time Warner-Turner deal wasn't clear. Kuwata declined to say exactly what Milken did. Spokesmen for the companies also would not comment.
According to the Journal, one-fifth of Milken's fee, or $10 million, will come from counseling Turner Chairman Ted Turner, who will pay the cost from his own pocket. The remainder will be picked up by Turner Broadcasting.
Turner initially proposed paying Milken $100 million, but that idea was squelched by Turner board member John Malone, chairman of Tele-Communications Inc., the Journal said. TCI is the nation's biggest cable system operator and owns 21 percent of Turner Broadcasting's stock.
A TCI spokeswoman declined to comment and said Malone was not available.
Time Warner agreed last week to pay about $7.5 billion in stock for Turner Broadcasting System. The deal assures Time Warner that it will remain the biggest media and entertainment company, with $18.7 billion in annual revenue.
News of Milken's continued influence in the world of giant corporate deals paints another contradictory portrait of the man at the heart of the biggest securities fraud investigation in history.
During the 1980s, Milken earned huge fees by essentially creating the market for high-yield, high-risk securities, peddling the junk bonds to investors while providing financing to companies that otherwise couldn't get access to capital.
Milken was felled by charges that he flouted securities laws in connection with notorious insider trader Ivan Boesky. Yet Milken told Forbes magazine in his first prison interview in March 1992 that moneymaking never motivated him and that he had been widely misunderstood.
Milken did not return calls Friday seeking comment.
``Here's a guy with a lot of brains and a lot of skills and a lot of connections. I think there was no way to keep him from exercising those within certain limits,'' said Alan Bromberg, a Southern Methodist University securities law professor who is an authority on securities fraud.
``The question here, of course, is whether he's crossed over those limits.''
The general criteria for being considered an investment adviser are having 15 or more clients and identifying oneself to potential clients as an investment adviser, Bromberg said, but he added that the definition is open to interpretation.
Still, Bromberg said, ``I'm reasonably sure that's what (the SEC) had in mind - they didn't want this guy influencing transactions.''
The SEC declined to confirm or deny whether it was investigating Milken, citing its policy. But an SEC official, speaking on condition of anonymity, said, ``As a general matter, the commission considers its administrative orders to be important.''
by CNB