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Michael Milken legacy in dispute, pardon or not

By Gary Gentile AP Business Writer
Monday January 22, 2001

LOS ANGELES – President Clinton may have heeded federal prosecutors’ pleas to deny Michael Milken a pardon, but the financier’s case is unlikely to fade completely. The man who built Wall Street’s junk bond market continues to spend much of his wealth on cancer research and other charitable causes. 

Milken takes quick offense at suggestions that his philanthropic activities, which moved into high gear after his release from prison in 1993, are an attempt to restore his public image or win a pardon. And he has many friends to argue his case. 

“I’ve never met anyone who was more passionate about truly making the world a better place for people to live, as corny as that may sound,” Ted Virtue, a Milken colleague at Drexel and president of Deutsche Bank Securities, said. “I don’t think it’s a facade.” 

Milken pleaded guilty to six counts of security fraud in 1990 and was barred from the securities business for life. In 1995, federal authorities began investigating Milken again, soon after it became public that Milken received a fee of $50 million for helping to broker Time Warner’s purchase of Turner Broadcasting. 

The SEC sued Milken in February 1998 for violating his pledge not to re-enter the securities business. Without admitting to or denying the allegations, Milken agreed to repay $47 million in brokerage fees. 

As President Clinton prepared to hand over office, he was considering scores of pardon requests, including one on Milken’s behalf. 

Milken and his family have given more than $750 million away over the past 30 years, according to a Milken spokesman. Much of it is channeled through the Milken Family Foundation, founded in 1982, which funds education and medical research, especially in the area of cancer. 

Several Milken family members have suffered from cancer. Only days after his release from a federal prison, after serving 22 months of a 10-year sentence for securities fraud, Milken was diagnosed with prostate cancer, which is now in remission. He responded by launching CaP CURE, an association to fund cancer research into the deadly disease. 

Milken, 54, is also chairman of the Milken Institute, a nonprofit think tank, and Knowledge Universe, a for-profit company that invests in a variety of young companies. 

Samuel Broder, a former head of the National Cancer Institute who now is vice president of Celera Genomics, said Milken’s efforts have greatly accelerated research into prostate cancer and other diseases and had a lasting impact on the careers of many scientists. 

“He fostered a lot of research activity that would not have gotten done otherwise,” Broder said. 

Federal officials acknowledge his charitable activities, but have argued that they should not overshadow the harm they say he has done to the country’s financial markets. 

Richard Walker, enforcement director of the Securities and Exchange Commission, wrote the White House opposing a presidential pardon saying, “Few people have done more than Milken to undermine public confidence in our markets.” Walker also wrote, “Philanthropy cannot provide a license to violate the law.” 

Milken’s misconduct during the 1990s, Walker said, showed Milken’s “continuing contempt for the law and discredits any claim that he has learned from his mistakes and has been rehabilitated.” 

Friends and associates of Milken reject the notion that Milken used his philanthropy as a shield for illegal activities or wants a pardon so he can resume his securities activities. 

Geoffrey Moore, senior vice president of Knowledge Universe and Milken’s spokesman, said Milken is not planning a return to high finance should he be pardoned. 

“He feels he has more than a lifetime’s worth of work in his medical research and education initiatives,” Moore said. 

Wall Street observers generally agree that Milken made lasting contributions to the financial markets. They differ on whether those achievements, along with his philanthropy, merit a pardon. 

“Michael Milken helped bring many companies to market that otherwise would not have been able to,” said Alan Shapiro, a professor of banking and finance at the Marshall School of Business at the University of Southern California. 

Shapiro believes Milken may have angered investment bankers, corporate leaders and federal regulators with his aggressive tactics, prompting authorities to make him an example. 

“If it had been anyone other than Milken, he wouldn’t have been prosecuted,” he said. “At best, he should have had civil, not criminal, penalties imposed.” 

A presidential pardon may change Milken’s legal status, but it is unlikely to change many minds. 

“Milken was a crook. He pleaded guilty to felony counts,” said Mark Eaker, a professor of business administration at the Darden Graduate School of Business at the University of Virginia. “Regardless of what else he has or hasn’t done or what you think of him, that’s a fact.”