‘Junk Bond’ King Donated $196 Million in ’87 : Milken Charities Among U.S.’ 50 Largest

Times Staff Writers

Beverly Hills financier Michael Milken and his wife donated a staggering $196.4 million to their three charitable foundations last year, lifting the foundations’ combined assets to $280.9 million and making them among the nation’s 50 biggest charitable groups, new state records show.

Milken, who has become a near-billionaire by pioneering the use of high-yield, high-risk debt known as “junk bonds,” recently was charged with civil securities fraud and illegal inside trading. Sometimes called the J. P. Morgan of 1980s finance, his enormous gifts to his foundations also rank Milken with the Rockefellers and Carnegies in charitable giving.

Milken’s donation in the year ended Nov. 30, 1987, exceeded the $182.5 million that Rockefeller gave to start the Rockefeller Foundation between 1913 and 1927. Of course, the amount Rockefeller contributed would be worth a lot more today after adjustment for inflation. Still, Milken did it at a much younger age than the oil tycoon. Rockefeller’s donations began when he was 74 years old; Milken is 42.


The combined assets of Milken’s charitable organizations would rank them as the 10th-largest foundation in California and the 48th largest in the country--bigger than those established by the industrial magnates who built Hallmark Cards, Ralston Purina, Fairchild Industries and Hilton Hotels.

Still, the nation’s biggest foundations dwarf Milken’s. The largest, the Ford Foundation, had assets last year of $5.5 billion. California’s largest, and the second nationally, was the J. Paul Getty Trust, with assets of $4.1 billion. All 10 of the largest U.S. foundations had assets of more than $1 billion.

Moreover, the largess of another California tycoon promises to eclipse Milken’s. Hewlett-Packard co-founder David Packard, 76, revealed plans earlier this year to gradually donate $2 billion in company stock to the David and Lucile Packard Foundation. But at the end of last year, the Packard Foundation’s assets were $145 million.

The three foundations controlled by Milken and his family are the M & L Milken Foundation, the Capital Fund Foundation and the Milken Family Foundation. All are based in Encino, where Milken lives. Milken works in Beverly Hills, where he directs the junk bond operation of the investment firm Drexel Burnham Lambert.

(A fourth foundation, the L & S Milken Foundation, is controlled by Milken’s brother, Lowell Milken, and Lowell’s wife, Sandra. Its assets as of last Nov. 30 were $5 million.)

Private tax-exempt foundations are required to file their federal tax returns and other documents with the state Registry of Charitable Trusts, an arm of the attorney general’s office. Earlier this year, the M & L Milken and Capital Fund foundations’ reports showed that the Milkens donated $93 million to the two groups in the year ended last Nov. 30.


But last week, the Milken Family Foundation weighed in with its report, which showed that Michael and Lori Milken donated an additional $83 million in cash and $20.8 million in securities to that foundation last year. So overall the Milkens last year donated $154.8 million in cash and $41.6 in securities to their three foundations.

The foundations, in turn, disbursed $14.8 million to dozens of charities and other organizations last year. Most of the money was earmarked for education, health care and medical research, and various community groups.

Much of the foundations’ remaining endowment is invested in the high-yield, high-risk junk bonds that Milken made famous. Milken’s spokesman, Kenneth Lerer, has said an outside money manager, not Milken, manages the foundations’ investments.

Milken’s office referred requests for an interview Wednesday to Lerer, who could not be reached for comment.

The explosive growth of Milken’s foundations has coincided with the growing Wall Street insider trading scandal, which erupted in late 1986 with disclosures that professional speculator Ivan F. Boesky had illegally profited from non-public corporate information. Last month, the Securities and Exchange Commission filed a civil suit alleging that Milken, Drexel and others broke securities laws that prohibit illegal insider trading.

Milken and Drexel have denied any wrongdoing, and Lerer recently denied any suggestion that Milken’s increased donations to his foundations were related to the growing scandal.


Foundation assets tend to grow in dramatic leaps, but usually when a benefactor retires or dies, according to Ann Caviness, interim director of the San Francisco office of the Foundation Center, an information clearinghouse.

Heavy giving by a businessman such as Milken at the height of his career “might be a bit rare,” Caviness said Wednesday. “But it may be very logical while he’s in his prime and he has the drive to cope with all these facets of his career, that he wants to put equal emphasis into the philanthropic,” she added.

CALIFORNIA’S BIGGEST GIVERS Charitable foundations ranked by asset value as of Dec. 31, 1987. Based on data supplied by the Foundation Center and the California Registry of Charitable Trusts 1. J. Paul Getty Trust $4,140,834,871 2. William and Flora Hewlett Foundation 661,185,000 3. W. M. Keck Foundation 640,481,151 4. Marin Community Foundation 430,000,000 5. James Irvine Foundation 423,008,466 6. Weingart Foundation 368,002,381 7. Henry J. Kaiser Family Foundation 359,265,215 8. Ahmanson Foundation 350,400,000 9. Norton Simon Foundation 288,429,821 10. Milken foundations * 280,922,195 11. Conrad N. Hilton Foundation 220,306,295 * Combined assets of three foundations