Michael Milken

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Michael Robert Milken (born July 4, 1946) is an American financier and philanthropist.

He is known for his role in the emergence of high-yield bonds ("junk bonds"), as well as his conviction and sentence after a guilty plea of violating US securities law.

Since being released from jail, Milken has also been charged with racketeering and securities fraud in 1989 as part of an insider trade probe.

He pleaded guilty to securities and reporting fraud as a result of a plea bargain, but not to racketeering or insider trading.

The Securities and Exchange Commission has sentenced milken to ten years in jail, fined $600 million, and permanently banned from the securities industry.

His term was suspended to two years for cooperating with testimony against his former coworkers and for good conduct.

Milken has supported medical research since being released from jail. He is co-founder of the Milken Family Foundation, chairman of the Milken Institute, and author of medical philanthropies that fund scientific trials into melanoma, cancer, and other life-threatening disorders.

Milken, a prostate cancer survivor, has devoted significant funds to study the condition.

Fortune magazine dubbed him "The Man Who Changed Medicine" for reforms in finance and results that he initiated in November 2004.

Milken's compensation as the head of Drexel Burnham Lambert's high-yield bond division in the late 1980s surpassed $1 billion over a four-year period, a record for US income at that time.

He is ranked as the 6th richest person in the world by Forbes magazine with a net worth of $3.7 billion as of 2018.

Education

In Encino, California, Milken was born into a middle-class Jewish family.

He graduated from Birmingham High School as the head cheerleader and spent time at a diner while studying. Michael Ovitz, the future Disney president, and actresses Sally Field and Cindy Williams were among his classmates. He earned a Bachelor's degree from the University of California, Berkeley, in 1968. With the highest accolades. He was elected to Phi Beta Kappa and a member of Sigma Alpha Mu fraternity. He obtained his MBA from the University of Pennsylvania's Wharton School. Milken was influenced by credit reports published by W. Braddock Hickman, a former president of the Federal Reserve Bank of Cleveland, who said that a portfolio of non-investment grade bonds had higher returns than an investment grade one.

Personal life

Lori Anne Hackel, the author of this article, has been married to Milken, who attended high school. The couple have three children. He is said to be a vegetarian-like diet rich in fruits and vegetables for its health, and he coauthored a vegan cookbook with Beth Ginsberg.

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Career

Through his Wharton professors, Milken landed a summer job at Drexel Harriman Ripley, an old-line investment bank, in 1969. After completing his MBA, he joined Drexel (by then known as Drexel Firestone) as director of low-grade bond research. He was also given control of some capital and permitted to trade. Over the next 17 years, he had only four down months.

Drexel merged with Burnham and Company in 1973 to form Drexel Burnham. Despite the firm's name, Burnham was the nominal survivor; the Drexel name came first only at the insistence of the more powerful investment banks, whose blessing was necessary for the merged firm to inherit Drexel's position as a "major" firm.

Milken was one of the few prominent holdovers from the Drexel side of the merger, and became the merged firm's head of convertibles. He persuaded his new boss, fellow Wharton alumnus Tubby Burnham, to let him start a high-yield bond trading department—an operation that soon earned a 100 percent return on investment. By 1976, Milken's income at the firm, which had become Drexel Burnham Lambert, was estimated at $5 million a year. In 1978, Milken moved the high-yield bond operation to Century City in Los Angeles.

By the mid-1980s, Milken's network of high-yield bond buyers (notably Fred Carr's Executive Life Insurance Company and Tom Spiegel's Columbia Savings & Loan) had reached a size that enabled him to raise large amounts of money quickly.

This money-raising ability also facilitated the activities of leveraged buyout (LBO) firms such as Kohlberg Kravis Roberts and of the so-called "greenmailers". Most of them were armed with a "highly confident letter" from Drexel, a tool Drexel's corporate finance wing crafted that promised to raise the necessary debt in time to fulfill the buyer's obligations. It carried no legal status, but by this time, Milken had a reputation for being able to make markets for any bonds that he underwrote. For this reason, "highly confident letters" were considered to reliably demonstrate capacity to pay. Supporters, like George Gilder in his book, Telecosm (2000), state that Milken was "a key source of the organizational changes that have impelled economic growth over the last twenty years. Most striking was the productivity surge in capital, as Milken ... and others took the vast sums trapped in old-line businesses and put them back into the markets."

Amongst his significant detractors have been Martin Fridson formerly of Merrill Lynch and author Ben Stein. Milken's high-yield "pioneer" status has proved dubious as studies show "original issue" high-yield issues were common during and after the Great Depression. Milken himself points out that high-yield bonds go back hundreds of years, having been issued by the Massachusetts Bay Colony in the 17th century and by America's first Treasury Secretary Alexander Hamilton. Others such as Stanford Phelps, an early co-associate and rival at Drexel, have also contested his credit for having pioneered the modern high-yield market.

Despite his influence in the financial world during the 1980s (at least one source called him the most powerful American financier since J. P. Morgan), Milken was an intensely private man who shunned publicity; he reportedly owned almost all photographs taken of him.

Milken and his brother Lowell founded Knowledge Universe in 1996, as well as Knowledge Learning Corporation (KLC), the parent company of KinderCare Learning Centers, the largest for-profit child care provider in the country. Michael Milken was chairman of Knowledge Universe until it was sold in 2015.

He invested in K12 Inc., a publicly traded education management organization (EMO) that provides online schooling, including to charter school students, for whom services are paid by tax dollars, which is the largest EMO in terms of enrollment.

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