The Mythology of Michael Milken

A common error often repeated in the press is that Milken was a financier who "turned to" philanthropy. (Variations on this myth are that he 'reinvented' himself as a philanthropist following his 1993 cancer diagnosis and that his old legal problems led to an effort to 'redeem' himself.) Saying that Milken is "now a philanthropist" is like saying the Pope is now a Catholic - technically true but misleading. Milken's medical and public health philanthropy began in the 1970s and paralleled his business career. This was 20 years before his cancer diagnosis and a decade before any legal issues arose. He formalized his individual efforts in early 1982 (when he was relatively unknown to the general public) with the formation of the Milken Family Foundation, which was endowed with several hundred million dollars. Over the span of more than 35 years, the Milken Family Foundation has been one of America's most innovative forces for the advancement of education, public health and medical research. These health and educational advocacies have been Milken's longstanding pursuits and have nothing to do with 'redemption.' His Wall Street career spanned 19 years, but his philanthropic passions have been life-long.

Milken has advocated a sound capital structure - the relative levels of equity and debt on corporate balance sheets - throughout his career. Among other points, he has always said that risk in capital structure should vary inversely with business risk and volatility. He first said this while still a student at Wharton in the 1960s. When he was on Wall Street between the 1960s and 1980s, his business rarely used leverage and when it did, it was not more than 4:1 - far from the 30:1 or higher that Wall Street institutions used leading up to the 2008 financial crisis. In various Wall Street Journal op-ed articles, Milken has noted:

"There is no optimum capital structure - X percent equity and Y percent debt - that can be applied to different organizations, or to the same corporation at different points of time. Just as you can't make real money by putting a dollar bill on a copying machine, you can't successfully copy the financing technique that once worked for a particular company and transfer it to another time or another company. That's why I have always said that finance is a continuum with infinite variations and hybrids. It takes deep understanding of a company, its environment, and the financing tools available to build sustainable growth that will reward shareholders and create jobs."

"When your business depends on technology - whether it's aerospace, computer and electronics firms in the 1960s or Internet, telecom and networking companies in the 1990s - volatility is a fact of life. Unlike slower-changing industries like supermarkets, which can appropriately assemble a balance sheet with more debt, technology is an inherently risky business and needs a strong balance sheet to survive. In fact, risk in capital structure should vary inversely with business risk."

"The decision to increase or decrease leverage depends on market conditions and investors' receptivity to debt. The period from the late-1970s to the mid-1980s generally favored debt financing. Then, in the late '80s, equity market values rose above the replacement costs of such balance-sheet assets as plants and equipment for the first time in 15 years. It was a signal to deleverage. In this decade, many companies, financial institutions and governments again started to overleverage, a concern we noted in several Milken Institute forums."

"The [2008] recession started in real estate, just as in 1974. Back then, many real-estate investment trusts lost as much as 90% of their value in less than a year because they were too highly leveraged and too dependent on commercial paper at a time when interest rates were doubling. This time around it was a combination of excessive leverage in real-estate-related financial instruments, a serious lowering of underwriting standards, and ratings that bore little relationship to reality."

"Grave illness is often more life-threatening when it follows years of bad habits – overeating, drinking to excess, failing to exercise, and abusing substances that create dependence. The recent economic boom reflected a similar lack of discipline – overindulging on credit, leveraging assets to excess, failing to maintain enough equity in the capital structure, and disregarding the consequences of dependence on foreign oil."

"When doctors tell patients to adopt healthier habits following a heart attack, the patients have no one to blame but themselves if they fail to comply. And when markets tell companies it's time to deleverage following an economic downturn, the companies have no one to blame but themselves if they fail to change their balance sheets."

Some news organizations have confused the pleas in the government prosecution of Milken with statements such as "Milken pleaded guilty to reporting violations in connection with a government investigation of insider trading." Readers then erroneously assume that the violations to which he agreed to plead included insider trading. They did not. In 1992, The Wall Street Journal noted that "things have changed since Milken's plea. The SEC simply fined 98 brokerage firms and banks for Milken-like technical reporting violations." He was not guilty of insider trading and was never convicted of it. Noting this fact, the Journal's late editor, Robert L. Bartley, wrote in a May 2002 column, "The 1990 recession did shake out a real insider-trading ring ... Its mastermind, Ivan Boesky, got off with a three-year sentence by offering to cooperate ... fingering Mr. Milken and others; cases based on his information collapsed." (Emphasis added.) At pre-sentencing hearings, the prosecution was invited to show its best evidence, after more than four years of intensive investigation, of more serious violations, including insider trading. Hearing the prosecution's determined efforts, the judge said they had failed to prove the more serious charges. What, then, did Milken plead? Against the advice of those who urged him to carry on the fight (as some others did successfully), Milken admitted conduct that resulted in five violations of complex securities/reporting regulations. None of these violations involved insider trading. In April 1992, one of the prosecutors, speaking at Seton Hall Law School, admitted that with Milken, "we're guilty of criminalizing technical offenses ... Many of the prosecution theories we used were novel. Many of the statutes that we charged under hadn't been charged as crimes before ... We're looking to find the next areas of conduct that meet any sort of statutory definition of what criminal conduct is." Professor Norman Barry wrote in his book Business Ethics (Macmillan, 1998), "Like many innovators before him, Milken had to pay the price for his success. The pursuit of Milken was an affront to the rule of law. He originally faced a 98-count indictment (including insider trading charges), which the Justice Department knew would not stick. So the department managed to coerce Milken to plead guilty to trivial offenses. If they want you, they will get you. Milken's problem was his success." Another Wall Street Journal column added: "Mr. Milken was coerced into a plea bargain involving trading violations elevated into felonies ... Prosecutors and politicians want scapegoats, and often have the collaboration of businessmen. With Milken, business competitors egged on prosecutors. And the truly culpable parties can get off lightly by conning prosecutors with the promise of bigger fish."

The 2009 book Three Felonies a Day: How the Feds Target the Innocent, by civil liberties attorney Harvey Silverglate, says: "Had Milken not been famous and wealthy, critics might have taken a closer and more dispassionate look at the fabricated case against him and the methods used to force him to plead guilty. As is so often the case with federal criminal prosecutions, the fabrication consisted, in part, of dubious testimony given by rewarded witnesses, and felony charges for conduct (admitted to by Milken) that, to informed and objective observers, did not appear to constitute crimes." Citing Silverglate's book in The Wall Street Journal, columnist and lawyer L. Gordon Crovitz said: "This is a common problem in securities laws, which Congress leaves intentionally vague, encouraging regulators and prosecutors to try people even when the law is unclear. Prosecutors identify defendants to go after instead of finding a law that was broken and figuring out who did it."

In a 2012 Bloomberg TV interview, author Jesse Kornbluth, who wrote the 1992 book "Highly Confident," discussed how the prosecutor used Milken's wealth as a public relations weapon. Kornbluth said the public assumed anyone with Milken's level of compensation "had to be guilty."

"You take a very rich man and you hit him with a club. Hitting a rich man in those days was a very smart thing for a guy like [federal prosecutor and future New York Mayor] Rudy Giuliani. He made his name indicting criminals – he broke the Mafia by using the racketeering act. And then he discovered he could use that on Wall Street. It's an unbelievably powerful weapon because it means you have no credit, you can't function, so the mere threat of it means you have to come in and plead."

Kornbluth then described how insider traders have become more sophisticated over the past 20 years:

"It's no longer guys with briefcases [of cash] like Ivan Boesky. The deals are different now. Ivan Boesky made a sweetheart deal with the government – he fooled the government completely because Giuliani had no idea about anything. [Boesky] talked about a 'Mr. Big' –Milken. But Boesky was 'Mr. Big.' Milken never committed insider trading. The total economic damage Milken committed was about $300,000 – a piker. We're talking about people making billions of dollars a year now."

Journalists who don't know the history sometimes conclude that he really did engage in insider trading but got the charge dropped as part of a plea deal. This is false - he did not commit this crime and there was no deal. The judge threw out the insider trading charge.

Milken paid a $200 million fine. There were other payments, primarily to dispose of civil litigation, but there was no adjudication of wrongdoing in those suits. It is misleading and erroneous to combine negotiated civil payments with mandatory criminal sanctions. Civil settlements are not a measure of criminal liability and signify nothing more than a civil defendant's desire to move on with his or her life, whether or not the claims have merit. Other defendants in cases similar to Milken's fought charges for as long as a decade, and eventually prevailed. Milken, financially able to afford the settlements and concerned about the stress on his family, felt his time would be better spent on efforts such as helping address America's serious education, medical research and public health issues - instead of spending a decade in court.

Milken's wealth grew during his business career beginning in the 1960s. Even prosecutors conceded to Milken's attorneys that his wealth was earned legitimately. None of the Milken family's $1.25 billion in charitable contributions is in any way "tainted." In fact, the fastest growth increment to Milken's wealth was in 1974-76, when he earned the base of his family wealth by correctly calling a major turn in the market. Subsequently, he earned entirely legitimate payments from his firm pursuant to an employment contract that had been negotiated years earlier. The Milken Family Foundation was established years before any of the activities occurred that were later found to violate securities regulations.

The violations to which Milken pleaded had little economic effect. In fact, four of the five were found by the judge to have had zero economic effect. The fifth involved a failure to disclose a commission of a transaction that, if disclosed, would be legitimate. This type of non-disclosure has never before - nor has it since - been the subject of a criminal prosecution. Even though Milken had traded more than a billion dollars a day in securities - several trillion dollars at that point in his financial career - the total economic effect of the violations found by the judge was $318,082 - about three ten-thousandths of a single day's trading; and that amount was spread over a period of several years. In fact, even this comparatively small "economic effect" of $318,082 is entirely theoretical; the transactions were executed within the spread of the bid and asked prices, and it has never been shown that any investor lost anything as their result. In the civil lawsuits, all plaintiffs involved settled and took their money without any admission of wrongdoing by Milken.

The majority of the Milken family wealth, however, has been earned since the mid-1990s. It is derived from a broad portfolio of investments including many companies in such areas as biotechnology and other growth sectors. It is unrelated to his previous work on Wall Street. In 2009, he said, "I never thought we'd see an opportunity like 1974 again, but here it is."

Much has been made of Milken's brief and sporadic contacts with the notorious Ivan Boesky. Milken never socialized with Mr. Boesky, who was described as a "pathological liar" on a 2001 CNBC broadcast based on the book, The Great Game: The Emergence of Wall Street, by business historian John Steele Gordon. Gordon suggests that Milken may have been "the victim of jealousy, self-serving crooks like Boesky, and ambitious prosecutors who lusted after so high-profile a case." Noting Boesky's crimes, Gordon writes, "Michael Milken was a different matter altogether." He calls the infractions to which Milken pleaded "minor" and notes that "the judge said she could not find more than a few hundred thousand dollars in discrepancies." In July 2002, Mr. Gordon appeared on MSNBC's The News with Brian Williams and said, "Ivan Boesky was just a plain crook. He showed up in people's offices with suitcases full of cash." Gordon then contrasted Boesky with Milken, whom he described as "a highly creative financier who did a great deal of good and helped the American economy in many ways." A man of modest behavior, Milken is the total antithesis of Boesky.

Milken was one of the early prominent voices warning about impending problems in the S&L industry. In the second half of the 1980s, Milken repeatedly called for regulatory reform and warned companies and financial institutions to deleverage their capital structures. The S&Ls problems were caused not by Milken, but by unwise real-estate loans, federal deposit insurance and regulatory mismanagement. Junk bonds comprised less than one percent of S&L holdings and thus could not cause the S&L crisis. Indeed, they were the best-performing S&L assets in the 1980s.

The ill-conceived Financial Institutions Reform Recovery and Enforcement Act of 1989 forced some S&Ls to sell their junk bonds. That caused a temporary drop in the junk-bond market - less than 10% in 1990. It roared back 46% percent in 1991. Exhaustive research by independent scholars over the past 20 years shows that Milken created tremendous economic value that was partially destroyed for some S&Ls by misguided government action. An October 2010 article in The Economist said Milken was "a useful scapegoat for the savings-and-loan crisis."

Milken is a philanthropist, financier, medical-research innovator, author, foundation executive, public health advocate, corporate officer, husband, father and grandfather. The hackneyed epithet "junk bond king" was coined by Milken's old Wall Street competitors from the 1970s and '80s to dismiss the significance of his work. It was then picked up by The New York Times and has been parroted ever since. Given the breadth of Milken's activities before and after the flurry of media attention to his Wall Street career, it's a phrase that overlooks four decades of leadership in medical-research and public health advocacy, not to mention Milken's pioneering use of complex capital-structure strategies involving equity-based financial instruments and other securities. Between 1969 and 1989, Milken employed approximately 50 distinct securities types in a dozen major asset classes (only one of which was high-yield debt) to help finance the growth of more than 3,200 companies. This created millions of jobs.

Writing in Forbes magazine (Dec. 21, 2015), financial columnist Martin Sosnoff said, "Mike Milken was termed the junk bond king, again and again by headline copy editors, but he was of course much more. Mike was one of the great investment bankers of the 1980s."

What exactly is a "junk bond king"? Did the press refer to Bill Gates as the "software king" because he controlled more than 90% of the operating system market? Although Milken's firm was the largest in the field, it handled no more than 33% of the trading in high-yield securities, which incidentally had been used in America for more than 200 years. Recognizing these facts, responsible publications have come to consider "junk bond king" a lazy clichè - like "Panamanian strongman" or "intrepid traveler" or "the powerful House Ways and Means Committee." Milken is not - and was not - king of anything.

His most important financial work was in the 1960s and 1970s when his theories of credit risk and capital structure were being developed at Berkeley and Wharton. These theories, thought revolutionary at the time, are now widely taught in business schools. They came into play in the early '70s and were validated during the severe market drop of 1974, which Milken considers the most important year of 20th-century financial history. By 1975, he was independently wealthy and never needed to work again. Milken considers 1976 to be the peak of his financial career because the markets had affirmed what he believed and predicted. (At this peak, ironically, Milken said he felt "powerless" after learning that his father's cancer was terminal - a fact that accelerated his involvement in medical research and prevention initiatives.) By the late 1970s, Milken had made major strides in democratizing capital access for below-investment-grade companies and entrepreneurs. In the words of Wharton School management professor Daniel Raff, "the capital markets roused from their critical slumber." Unfortunately for Milken, this process agitated the establishment. "By forcing open the sluice gates of capital," wrote Alvin Toffler in his 1990 book PowerShift, "Milken had rattled the entire structure of smokestack power in America."

Before Milken, the greatest financier had been J.P. Morgan, who saw markets as a zero-sum game in which he tried to be the winner at someone else's expense. For example, when financing AT&T, Morgan used his enormous Wall Street and banking influence to ensure that potential AT&T rivals lacked access to capital. Milken did the opposite, opening access to capital for thousands of smaller companies. Milken showed it was possible to align the interests of all corporate stakeholders - investors, entrepreneurs, debtors, creditors, consumers, management, employees and society - to create jobs, wealth and economic growth. The key was his profound understanding of capital structure and how it must change as exogenous conditions change. [See Milken's articles "Why Capital Structure Matters" and "The Corporate Financing Cube".] By the late 1970s, he had already shown it was possible to unlock great potential value hidden in accumulated assets. As others began to exploit this insight, Milken turned increasingly to such issues as public health, education, wage disparity, expanding human capital, and medical research.

Invoking the myth that Milken's finance work was limited to high-yield instruments – and that these were used to finance corporate raiders – shows poor understanding of his work or its complex theoretical underpinning. Simply stated, Milken asserts that capital structure matters - and matters to a degree more profound than commonly acknowledged. The choice of capital structure can significantly affect the valuation of a company and its risk as an investment. There is no "one right way" to capitalize a corporation, Milken has repeatedly said, nor can any single financial structure be correct at all times. Success through good times and bad depends on building a strong capital structure that limits risk where business conditions are volatile. Getting the right balance requires deep understanding of social and regulatory trends, management competence, industry conditions, capital markets cycles, and the economy. Sometimes, as in the late 1980s, many companies likely would have been advised to de-leverage by issuing equity. For much of the 1970s, conditions generally favored debt financing. Yet, Milken believes, for certain companies – such as airlines in the 1960s and dot.com startups in the late 1990s – any debt is excessive because risk in capital structure should vary inversely with business risk. Glib references to the "junk bond king" perpetuate a one-dimensional caricature of a multi-dimensional financial innovator.

He used more than 50 distinct types of securities in some dozen asset classes to help finance corporate growth for his clients and adapt their capital-structure needs to changing market conditions. At various times this included convertible bonds, preferred stock, high-yield bonds, collateralized loans, equity-linked instruments, securitized obligations and derivatives. But he recognized that in a changing society, "The Best Investor is a Social Scientist" (the title of his first talk on Wall Street in 1969). In his book How the Markets Really Work (Crown, New York, 2002), former Harvard Business Review editor Joel Kurtzman wrote:

"Milken's real contribution was far greater than simply to sell portfolios of bonds. His real contribution was to get investors to understand that the stock and bond markets were not really separate markets. Milken created a tremendous pool of liquidity and guided its use with surgical precision. He did it in a way that took an often bloating and ailing American economy and made it lean, mean and resilient. Much of the strength and resilience of the economy today - including its ability to rebound in times of adversity - is due to the way people using Milken's financing vehicles remade ailing companies or put their entrepreneurial zeal to work."

His most important work was financing entrepreneurs who had good ideas for building companies that became engines of job creation. Based on his studies during the 1960s and his practical experience in the 1970s, Milken was determined to focus, first, on cash flow rather than reported earnings; and second, to consider human capital part of the balance sheet. He played this out by backing such pioneers as Bill McGowan (telecommunications), Ted Turner (cable television), Craig McCaw (cellular telephones), Len Riggio (book retailing) and Bob Toll (homebuilding). They earned Milken's respect and backing because they demonstrated greater vision than the sclerotic, risk-averse managers who relied on banks for financing. When banks encountered problems in the 1970s and shut down the flow of capital, Milken stepped forward and made capital available for thousands of dynamic, growing companies that created jobs and shareholder value. This helped make the U.S. economy the envy of the world in the last quarter of the 20th century.

Milken didn't simply head a variety of departments in his work at Drexel. He and his colleagues created what is today a major part of the structure of global finance, based on their innovations in the 1970s. This structure - taken for granted today and widely taught in business schools - powered job growth in America for a quarter-century and is now moving around the world through the efforts of the Milken Institute. It's no surprise Milken was introduced at an investment firm's 2007 executive retreat as "the father of modern capital markets" and "the man who created modern private equity."

There was a relatively small sector of Milken's business that later did help dislodge less-efficient, non-stockholder managers as part of the normal process of business rationalization. These takeovers improved the quality of management at less-efficient companies and helped the economy, making it more dynamic and innovative. In a June 26, 2002, opinion column, the dean of the George Mason School of Law, Henry G. Manne, called takeovers "the most powerful market mechanism for displacing bad managers ... just the threat of a takeover provides incentive for managers to run companies in the interest of the shareholders." Professor Manne called the supposed abuses of takeover activity "largely mythical."

In The American Spectator [June 2005], Stephen Moore, former senior economist of the Congressional Joint Economic Committee, wrote:

"The economic literature is clear that the biggest gainers from M&A activities are not the acquiring firms, but the owners of the acquired firms. One value of the raiders is that they serve as the ultimate cops on the financial market beat, searching out and destroying flab and inefficiencies. For all the vilification of Michael Milken, his firm Drexel Burnham easily created more wealth for American shareholders single-handedly than all the trustbusters in American history combined. Practically every hostile takeover, even those financed with junk bonds, made hundreds of millions, if not billions of dollars, for stock owners."

A May 2007 article in The Sunday Times of London said:

"Nobody loves a revolutionary. Roosevelt was hated by entrenched business interests for passing the antitrust laws. Milken was hated by the corporocrats for making it possible for social outsiders - many of them 'young, aggressive and Jewish,' according to one description, and therefore ineligible for membership in the better clubs - to take over sleepy companies. They grounded corporate jets and sold off company wine cellars in order to increase profits."

As an October 2010 article about Milken in The Economist put it, the mere threat of buyouts "forced many big companies to slim costs and increase returns to shareholders."

These takeovers were an important trend and clearly helpful to the economy, but what has been missed in press accounts is that they were merely a natural outgrowth of Milken's revolution in capital access for entrepreneurs with ability. That revolution broke the stranglehold of "establishment" lenders and shifted power from non-stockholder corporate managements to stockholders. This led to enormous job creation by the 99.9% of small- and medium-size firms that are not "investment grade" and are usually managed by owners. These companies created 62 million jobs in the last 30 years of the 20th century while the Fortune 500 "investment grade" firms laid off more than four million.

But Milken underestimated the political clout of corporations with bloated management structures that suddenly were obliged to compete with vigorous new players. There was a strong reaction from the establishment through their Congressional representatives and on the editorial pages of major newspapers. Rather than credit Milken for enlivening an economy gone dormant, they launched a public relations campaign to attack him as an enabler of "raiders" who were "destroying America." Politicians to whom these corporations made large contributions, and the publishers in whose papers they bought substantial advertising, were quick to join the chorus.

As the late U.S. Senator Daniel Patrick Moynihan said, "We are all entitled to our own opinions, but not to our own facts." One fact often overlooked by the press is that takeovers were not a large part of Milken's two decades on Wall Street. And because the public didn't understand takeovers, it was a convenient target for the corporate old-boy network to use in shifting attention away from their own failings. According to a March 4, 1992 article in The Wall Street Journal, "Junk bonds have been blamed for takeovers, yet they provided no more than 5% of takeover financing." Ironically, most takeover financing was provided by banks, not the capital markets.

Because Milken challenged the status quo, many business and financial institutions had reason to feel threatened by his revolution in democratizing capital access. Before Milken, banks and insurance companies largely controlled the flow of available funding and provided very little growth capital to firms that weren't among the tiny minority considered "investment grade." Milken's innovations opened a wide range of financing techniques previously unavailable to these companies. This not only created millions of jobs; it also made bank loans almost superfluous, agitating a large segment of the financial community. (Today, ironically, banks are essentially what Drexel was in the 1970s and 1980s - originators of loans who package and sell them in the public markets.)

Insurance companies also saw Milken's innovations as a threat because they were generally required by regulators to carry only investment-grade securities. Their share of the market declined as Milken financed thousands of below-investment-grade companies.

The research departments of virtually every brokerage firm were focused on stocks and did little or no research on bonds and other types of debt. Between 1968 and 1976, Milken had established unrivaled credibility and trust by building up the quality of Drexel's debt research. As a result, Drexel became the largest firm not only in debt originations, but also in private placements and several other areas at the expense of the "bulge-bracket" firms.

Finally, non-competitive but entrenched corporate managements who used stockholders' assets inefficiently had much to fear from stockholders who wanted to replace them with managers who could allocate company resources more effectively. In fear for their jobs and (often lavish) perks, incumbent managers turned to regulators, legislators and the press for relief. In a public-relations campaign that glossed over their own behavior that had inflated expenses, they claimed they were victims of "greedy raiders" financed by Milken. In fact, the Milken-financed entrepreneurs who were most successful at building companies and creating jobs - Ted Turner, Craig McCaw, John Malone, Bill McGowan and hundreds of others - were focused on their own businesses, not on taking over others.

The bigger threat wasn't takeovers; it was faster-moving competitors that challenged large, established businesses. These large businesses were major contributors to political campaigns, and their armies of employees could be mobilized to write their Congressional representatives in defense of the status quo. In the 1970s and early 1980s, for example, AT&T controlled more than 98 percent of the telecommunications market and, with more than one million employees, was the largest employer in the United States. When Milken's financing allowed a tiny competitor to announce they would build the first national fiber-optic network, it was seen as a major threat to AT&T, which would be forced to spend $10 billion to replace its obsolete technology. Is it any wonder that politicians felt pressure to stop Milken's revolution?

Alvin Toffler, the futurist and author of Future Shock, summarized the entire Milken phenomenon of success and retribution in his 1990 book PowerShift:

"[Milken] made bitter enemies of two extremely powerful groups. One consisted of the old-line Wall Street firms who previously had had a stranglehold on the flow of capital to American corporations; the other consisted of the top managers of many of the largest firms. Both had every reason to destroy him if they could. Both also had powerful allies in government and the media."

In a September 2006 Financial Times column, Norman Barry, professor of social and political theory at the University of Buckingham, wrote:

"In retrospect, most American economic observers say that Mr. Milken was good for the economy; his actions led to the break-up of conglomerates and the necessary reorganisation of American business. His prosecution was more of a persecution."

An October 2010 article on Milken's legacy in The Economist quoted Kenneth Moelis, head of the investment bank Moelis & Co.:

"These days, with firms such as Google and Apple, everyone takes dynamism for granted. But Mike Milken started out in the 1970s when capitalism was struggling. In those days, there was very little innovation. Along comes Drexel, a firm with a visionary purpose, and suddenly you could get capital."

Milken's financial revolution helped build this nation's current industrial and commercial infrastructure. He financed more than 3,000 companies that became engines of job creation starting with his very first deal, in 1969, which helped assure Boeing's market leadership through the rest of the century.

Milken built many industry-leading companies through his financing. He helped transform entire sectors where smaller players simply did not have access to capital until he provided it. In home building, which employs millions of people directly and through subcontracting, he financed KB Homes, now the largest company in the industry, as well as Toll Brothers, MDC Homes, Hovnanian Enterprises, Oriole Homes, U.S. Home and many others. These are companies that literally built the American dream, and Milken drove their industry.

In entertainment, MGM, News Corp., Viacom and AOL Time Warner were all Milken-financed. In the toy industry: Toys-R-Us, Mattel and Hasbro. In hospitality: Hilton, Days Inn, Holiday Inns and others. Convenience stores: 7-11 and Circle K.

Safeway is a company with 200,000 employees in almost 1,800 stores across the U.S. and Canada. Those employees can thank Milken for helping build the company that provides their paychecks. His financing was crucial to Chrysler when it most needed funding to stay in business and grow. The cable television industry would not be in anywhere close to four-fifths of American homes if Milken hadn't financed several major provider companies. Occidental Petroleum wouldn't have jobs for its 8,000 current employees without Milken.

Cellphones are in just about everyone's pockets today. The industry started in the early 1980s when Milken financed a small company called McCaw Cellular Communications. That company became AT&T Wireless, which served 22 million subscribers and employed 31,000 people producing more than $16 billion in sales before its acquisition by Cingular Wireless.

Another way to look at the impact Milken has had is to consider just one U.S. state. Nevada, one of the fastest-growing states in the nation, had its economy kick-started when Milken financed its casinos, newspapers and homebuilders. The rule of thumb in the gaming industry is that every job created within the industry creates more than three additional jobs in the local economy. By that measure, his financing of MGM Mirage, Mandalay Resorts, Harrah's Entertainment and Park Place accounts for some 600,000 jobs.

Other names among the companies Milken financed include: AMC Entertainment, Bally Manufacturing, Bally's, Barnes & Noble, Beatrice, Cablevision, Caesars World, Calvin Klein, Chiquita Brands, Duracell, Filene's Basement, GAF Corp., General Host Corp., Hasbro, Kay Jewelers, Knoll Int'l., MCI, Medco, Mellon Bank, Metromedia, Philadelphia Electric, Playtex, Southland Corp., Sunshine Mining, TCI, Uniroyal Goodrich and Telemundo. Milken was a sparkplug who helped ignite an economic boom. His financial innovations created millions of jobs.

A very cynical, though uninformed view, suggests that Milken's philanthropy is just a case of a rich guy trying to cure his own disease. This ignores the fact that his philanthropy started two decades before he was diagnosed with cancer in 1993. During the intervening 20 years, he was involved in research to fight many diseases. Programs and contributions by the Milken Family Foundation have made a difference in the battle against several grave conditions, including breast cancer and epilepsy. In the 1980s, Milken endowed a chair at Harvard's Dana Farber Cancer Center; was the primary benefactor of the Venice (Calif.) Family Clinic (which serves tens of thousands of people); and gave his time and resources to a wide range of medical causes. The Milken Family Medical Foundation was established in 1982 and provided grants to keep many young cancer researchers in their labs when they were tempted to pursue more-lucrative clinical practices. Mike has said, "Of all the programs we've supported, the biggest payoff in terms of social benefit has come from the awards to young investigators." Among those who received his awards in the 1980s were Dr. Dennis Slamon, who later discovered Herceptin, a revolutionary breakthrough in the treatment of one type of breast cancer; Dr. Steven Rosenberg, who reported a major breakthrough in the development of successful gene therapy that for the first time in history harnesses the body's own immune system to shrink tumors; Dr. Bert Vogelstein, who did pioneering work on the incalculably important p53 gene whose mutant form is believed to be involved in more than half of human cancers; Dr. Owen Witte, whose subsequent work provided the basis for the development of the breakthrough drug Gleevec, now used as a frontline therapy for patients with chronic myelogenous leukemia; Dr. Lawrence Einhorn, who developed a virtual cure for testicular cancer; Dr. Philip Leder, a pioneer in molecular biology who contributed to the deciphering of the genetic code; Dr. Charles Myers, who went on to become Chief of the Clinical Pharmacology branch of the National Cancer Institute; and many more. In addition to his family's contributions of $1.25 billion, Milken has been tireless in raising some $600 million from the public to support medical research around the world. In the 1990s, Milken supported the pioneering work of Dr. James Allison, whose development of immune checkpoint therapies – an immune-system “off-switch blocker” – provided a remarkable breakthrough in metastatic melanoma and, later, several other cancers. As a result of this work, Allison was awarded the Nobel Prize in 2018.

His philanthropy began in the 1970s and was originally focused on breast cancer, melanoma and childhood neurological disorders. When the Milken Family Foundation was established in 1982, the focus broadened to more life-threatening diseases as well as education reform and public health. It wasn't until 1993 that Mike founded the Prostate Cancer Foundation (PCF); and today, the PCF is only one of more than 50 disease-specific organizations that participate in the TRAIN program of FasterCures, the Milken Institute center that he launched in 2003 to remove barriers to progress against all serious diseases. While the PCF has done magnificent work and saved countless lives, Mike works with many other research and advocacy groups to accelerate medical solutions. The myth that Mike's main philanthropic concern is prostate cancer probably got started because of press reports about his diagnosis with that specific disease. In 2014, George Washington University announced the renaming of what is now the Milken Institute School of Public Health in recognition of a major gift from the Institute.

Some uninformed reports have confused the fictional character of Gordon Gekko in the Wall Street movies with Milken. On the contrary, the fictional Gekko character is based on Ivan Boesky, who in a famous 1986 speech at the University of California, Berkeley, said, "I think greed is healthy. You can be greedy and still feel good about yourself." Such a cynical philosophy is the antithesis of Milken's view. Over the decades since 1972, Milken has given away the overwhelming majority of his wealth in pursuit of his many philanthropic initiatives. (Along with Warren Buffett, Bill Gates and others, he has signed The Giving Pledge, committing to distribute most of his wealth to charities during his lifetime.) A 2017 Broadway play that fictionalized the activities of Wall Street financiers in the 1980s purported to be "inspired" by events in Milken's life. In fact, it displayed only a few superficial similarities to Milken's real life. Most of the plot bore no resemblance to historical facts.

It's quite a stretch to link accounting and money-management scandals in the 2000s to the financial turmoil of the 1980s. These two situations are, in fact, logical opposites. The more-recent scandals grew out of managerial abuse by executives acting in their own interests rather than in the interests of stockholders. This is an example of what academics call "the agency problem," which removes incentives to use stockholders' assets efficiently. It has been a corporate governance issue ever since A.A. Berle and Gardiner Means published their classic text The Modern Corporation and Private Property in 1932. Periodically, managers place self-interest above that of relatively powerless shareholders by bestowing themselves with perks. "That situation was partially corrected," said Weekly Standard contributing editor Irwin Stelzer (July 22, 2002), "when Mike Milken and his debt-financed raiders snatched control of many companies from the worst abusers of shareholders' interests, grounded fleets of corporate jets, sold off hunting lodges, and generally sweated the fat out of expenses - a wonderful example of markets working to correct abuses that seemed beyond the reach of regulators." The previously cited Professor Norman Barry, author of the book Business Ethics, wrote a September 1, 2002, column in a group of British newspapers citing "at least two waves of moralising about capitalism in the 1980s and the early 21st century."

"Both are condemned for their greed, but it is important to distinguish the economics and ethics of the two eras," Barry wrote. "In the 1980s, as always, personal self-advancement was essential to the allocation of economic resources. It advanced shareholder value from which everybody gained. In the early 21st century, the same motivation badly damaged shareholders' interests."

Another difference is the scope of the cases. WorldCom's Bernie Ebbers perpetrated what had been called the biggest fraud in corporate history-more than $11 billion. In contrast, as noted above, four of the five Milken violations were found by the judge to have had zero economic effect. The total economic effect of the violations found by the judge was $318,082. By this measure, the Ebbers case is more than 34,000 times bigger than Milken's. But, of course, even the enormous Ebbers fraud was dwarfed by those of Bernie Madoff, whose $65 billion scheme exceeds the Milken violation by a factor of more than 200,000.