THE MILKEN INDICTMENT : Milken’s Strategy for Making Lots of Fast Money on Wall Street

So you want to be a billionaire? Well, toss out that stack of unread books on how to get rich. No, this isn’t a pyramid scheme.

It’s straight from the public record: The government’s 110-page indictment of Michael Milken offers all the words of wisdom any aspiring financial magnate ought to need.

After all, Milken’s pay for running Drexel Burnham Lambert’s “junk bond� department was a cool $550 million in 1987 alone, according to federal investigators.

Even to investment bankers, that’s real money. And Milken didn’t get it by accident; he employed certain time-honored strategies. There’s no reason they can’t work for any other enterprising financier:

- Make yourself indispensable. Milken’s junk bond operation, which prepared high-risk, high-yield issues, accounted for about half of the profits of the entire New York-based firm.

In 1983 and 1984, Milken’s department represented 75% to 80% of Drexel’s profits, according to investigators. And that enabled Milken to exploit the following principle.

- Get a piece of the action. While the Beverly Hills operation became a powerful money machine for the parent company, Milken--whose financial genius and extraordinary drive sparked its success--took home 28% to 44% of the office’s gross revenue.

Between 1983 and 1987, his pay and bonus levels jumped into the stratosphere: from $45.7 million to $123.8 million to $135.3 million to $294.8 million--and ultimately above $500 million.

“It’s an astounding amount of money,� said Fredric M. Roberts, an investment banker and chairman of the Southern California district of the National Assn. of Securities Dealers. “On the other hand, he was paid for performance--and he performed.�

- Don’t underprice your services. Milken seems to have watched this one carefully. When Drexel arranged $1.4 billion in financing for Turner Broadcasting and advised it in its purchase of MGM/UA in early 1986, for example, Milken’s shop got $66.8 million in fees.

For helping Kohlberg Kravis Roberts & Co. take over Storer Communications in 1985--services that included arranging and selling $1.47 billion in securities--Drexel received $49.5 million.

It isn’t clear, however, whether such fees are extraordinary. Investment bankers typically charge a percentage of a deal’s value for their services, and large transactions often result in payments of many millions of dollars.

“No one put a gun to Ted Turner’s head and said, ‘Pay these guys 5% for the service’ if they could get it for 2% somewhere else,� Roberts said.

- Believe in yourself. Milken apparently did: As of October, 1988, he owned an estimated $100 million worth of Drexel stock, which he apparently considered a good bet for the future. In fact, he was the firm’s largest shareholder, owning about 5.62% of its shares in late 1986, investigators found.

- Keep it in the family. Milken employed his younger brother, Lowell Milken, as a senior vice president. Lowell Milken, also indicted Wednesday, received $10.18 million from the firm in 1984, $16.67 million in 1985, $27.21 million in 1986 and $48.06 million in 1987. He also owned about $13 million worth of Drexel stock as of last October.

- Keep more of it in the family. In the early 1980s, Milken and partners bought the five-story Gump’s building in Beverly Hills for $25.9 million. Between 1984 and 1988, Milken shared in $11.2 million in rental receipts--from Drexel, which set up shop in the building.

Finally, don’t lose sight of basic American virtues. Those who know Milken agree that he was a tireless worker, relying on extra effort as a way to gain an edge in the competitive world of high finance.

In a deposition, he once said his Beverly Hills office averaged a quarter of a million transactions per month. In an earlier, happier day, Milken reportedly told a boss: “I don’t know if I’m smarter than anyone else, but I can work 25% harder.�