Michael Milken pardon follows long campaign to rehabilitate image

Michael Milken leads a discussion at the Milken Institute Global Conference in April 2018 in Beverly Hills.

Feb. 18, 2020 3:25 PM PT

When President Trump pardoned Michael Milken on Tuesday, it came just a week after the former junk bond king’s Milken Institute had wrapped up its latest conference in Abu Dhabi, United Arab Emirates.

The gathering featured a mix of high-powered leaders, including hedge-fund guru Ray Dalio and former Republican House Speaker Paul Ryan, but it wasn’t just about how to make money or navigate the Washington thicket. Reflecting the Santa Monica institute’s focus, the program of the 2020 Middle East and Africa Summit featured sessions on health, global diseases, education and the environment.

The event marked the latest manifestation of the 73-year-old Los Angeles resident’s decades-long commitment to philanthropy. It began before he pleaded guilty to felony violations of securities laws in 1990, but ramped up in the years since in what became either an intentional or unintentional effort, depending on your view, to rehabilitate his image as the poster boy of 1980s greed.

In a tearful admission of guilt in a Manhattan federal courtroom, Milken pleaded in April 1990 to counts of conspiracy; aiding and abetting failure to meet federal securities disclosure regulations; securities fraud; aiding and abetting a regulated broker-dealer to violate securities reporting requirements; mail fraud, and assisting in filing a false tax return.

Milken was given a 10-year sentence, fined $200 million and required to pay $400 million in restitution. He settled lawsuits for an additional $500 million. He served 22 months at a minimum-security prison dubbed “Club Fed” in Dublin, Calif., and was released after testifying against a former colleague. He also was banned for life from the securities industry.

Milken was among 11 felons who were either granted pardons or commutations of their sentences by Trump on Tuesday. Among the others was former Illinois Gov. Rod Blagojevich, who was serving a 14-year sentence for trying to sell an open U.S. Senate seat held by Barack Obama.

Trump’s decision follows a long campaign by Milken and his supporters to win a pardon for him. In 2008, Milken retained high-powered Washington attorney Theodore Olson, who served as solicitor general under President George W. Bush, to engineer a pardon, but the president declined to grant the application.

In 2018, financier Anthony Scaramucci, who served briefly as Trump’s communications director, told The Times that L.A. financier Gary Winnick, a former associate of Milken at now-defunct investment bank Drexel Burnham Lambert, had raised the issue at Trump’s inauguration, citing his “commitment to health and global progress.”

Other proponents of a Milken pardon at the time were said to include Jared Kushner, Trump’s son-in-law and senior advisor; Treasury Secretary Steven T. Mnuchin; and Rudolph W. Giuliani, Trump’s outside counsel. It was Giuliani’s investigation of Wall Street malfeasance in the 1980s, when he was a federal prosecutor, that led to Milken’s guilty plea and imprisonment.

In its statement announcing the pardon, the White House called Milken “one of America’s greatest financiers” whose work created entire industries and “also democratized corporate finance by providing women and minorities access to capital that would have been unavailable to them otherwise.”

The statement noted Milken’s contributions to medical research, education and disadvantaged children and named more than 30 supporters of the pardon in the private equity, hedge fund, real estate and other industries. They include Winnick, Giuliani, billionaires Tom Barrack, Ron Burkle and Sheldon Adelson; L.A. Angels owner Arte Moreno; and media titan Rupert Murdoch.

In remarks made at Joint Base Andrews, Trump said Milken has “done an incredible job for the world. He suffered greatly. He paid a big price, a very tough price, but he’s done an incredible job.”

Robert Hockett, a Cornell Law School professor and expert on financial regulation, said that Milken’s years-long campaign to clear his name rubs against the very notion of contrition. “I would think if he was actually doing this to atone, then he wouldn’t be trying to get the record expunged,” Hockett said.

Milken pioneered the issuance of high-yield bonds for companies that were running out of money or needed capital but didn’t have access to it through traditional Wall Street channels.

Milken, an Encino native, moved the bond operation from New York to Beverly Hills in 1978.

The issues gained the unflattering name of junk bonds because of their higher risk of default. The bonds also drew critics as they were employed by corporate raiders to take over and loot functioning corporations, laying off workers by the thousands and draining the savings of retirees.

Milken wasn’t known for lavish living, but his $550-million salary and bonus in 1987 alone prompted outcries. And his 1980s-era investment conferences at the Beverly Hilton were dubbed Predators’ Balls for attracting corporate raiders looking for new takeover targets.

When Milken was sentenced in 1990, Richard C. Breeden, the chairman of the Securities and Exchange Commission, said that the trader “stood at the center of a network of manipulation, fraud, and deceit.” At the time, Milken’s record-setting pay amounted to a quarter of the annual budget for Breeden’s agency.

Milken, however, has long defended his pioneering work, saying the access to low-cost capital created more jobs than were lost.

“I’m proud of what we accomplished at Drexel,” he told Forbes magazine in 1992. “We were matching capital to entrepreneurs who could use it effectively. We were creating investments that money managers needed in volatile markets.”

Shortly after his release from prison in 1993, Milken was diagnosed with advanced prostate cancer and given 18 months to live.

He survived the disease and launched a foundation that channeled more than $700 million into prostate research. In 2004, he was called the “the man who changed medicine” by Fortune magazine, which noted the funding and visibility he had brought to the battle against prostate cancer.

Milken also brought his well-documented work ethic to causes other than the Prostate Cancer Foundation. His Milken Family Foundation, which he started in 1982 with his brother Lowell, has made charitable donations of more than $1.25 billion.

Thousands of teachers across the U.S. were recognized with no-strings awards of $25,000 each. In 2014, George Washington University in 2014 opened its Milken Institute School of Public Health with a gift of $50 million.

Milken also founded the Milken Institute, a think tank that promotes capitalist solutions to global challenges. It annually brings together several thousand of the world’s most successful people in business, government, entertainment, sports, arts and the sciences.

Milken has signed the Giving Pledge, an initiative by Warren Buffett and Bill and Melinda Gates that commits signatories to giving away the majority of their fortune either during during their lifetimes or when they die. Milken has an estimated net worth of $3.8 billion, according to Forbes.

In issuing the pardon, the White House said that Milken had originally sought to fight the charges brought against him — which it described as “technical offenses and regulatory violations that had never before been charged as crimes” — but pleaded guilty only in exchange for having prosecutors drop criminal charges against Lowell Milken, who worked with him at Drexel.

After Trump’s announcement, Milken issued a statement saying he had no plans to return to the securities industry. Instead, he said he and his wife, Lori, are “very grateful to the president” and “look forward to many more years of pursuing our efforts in medical research, education and public health.”

Hockett said that even if Milken wanted to reenter the securities industry, he would have to separately seek redress from the SEC, which issued the ban. And that would be hard to get unless there was a “dramatic new showing of legal error or procedural defect,” which was not likely.

“It’s hard for me to imagine Mr. Milken’s wanting to return to the industry anyway. It’s moved on since his day,” Hockett said via email. “Hard to see the point.”

Though the president’s decision concludes Milken’s campaign to get a pardon, it hasn’t washed away one lasting blemish to his reputation. As news of the pardon spread, many in the media referred to him as the “junk bond king” — a sobriquet his personal web page calls a “hackneyed epithet.”

Former Times staff writer Steve Chawkins contributed to this report.