Junk Bond King Victim of Envy, Legal Lynching

There was once a time when the United States had a fair and just legal system based on presumption of innocence and limits on the coercive power of prosecutors. Those were the days before the racketeering statute known as RICO, the ambitions of U.S. Attorney Rudolph Giuliani, the government’s blackmail of Drexel Burnham Lambert Inc. and the frame-up of its “junk bond” king, Mike Milken.

According to Ralph Ingersoll, chairman of Ingersoll Publications Co., Milken’s trial is a political trial, complete with the media equivalent of a KGB pre-trial beating and torture. Milken intends to defend himself in court, but if he were to ask the Soviet Union for political asylum, no one could blame him.

Milken, judged by his market value, is the most productive human in history. In 1987 he was paid $550 million in salary and bonuses--enough to spark the envy of billionaires David Rockefeller, the epitome of old, established wealth, and Donald J. Trump, the epitome of new money. Rockefeller thought Milken’s pay was evidence of an unbalanced financial system. Trump said, “You can be happy on a lot less money.”

Anyone who arouses the envy of billionaires hasn’t a chance with ordinary people. That makes him an easy mark for politically ambitious prosecutors such as Giuliani, who is expected to run for mayor of New York. Giuliani, playing on the proclivities of ordinary people to attribute such success to Milken’s greed and fraud, decided to ruin him as a steppingstone to his own ambition.

Milken’s other enemies include the entrenched managements of poorly run companies, old-line Wall Street firms displaced by Drexel and Milken’s genius, and young lawyers and journalists whose education consists of being indoctrinated to equate wealth with crime. The lawyers at the Securities and Exchange Commission and the U.S. Department of Justice sincerely believe that there is no honest way to make large sums of money and that a large income is proof of “white collar” crime.

Milken’s great crime is that he provided stockholders with a way to get rid of managers who run corporations for their own benefit. He developed a bond market to finance takeovers, thus putting corporate assets in the hands of more efficient management and forcing others to clean up their acts. Milken’s activities added billions of dollars to stock values, enriching shareholders, and that explains his high pay.

Yet in an unprecedented action in U.S. legal history, his firm Drexel was blackmailed with the approval of the attorney general. To avoid being prosecuted as a racketeer and having all its assets seized prior to trial or conviction, Drexel had to admit (probably falsely) that it was guilty of criminal actions, pay the government $650 million and fire Milken and withhold from him his pay for the previous year.

Since it has no real case against Drexel or Milken, the government’s tactics have been to force them into a plea bargain and admission of guilt in order to settle the case without trial. From the beginning, the U.S. attorney and the SEC took every possible step to ruin the reputations of their victims with two years of “leaks” and innuendoes prior to filing charges. Once charges were filed, the government tried to keep the basis of the charges as secret as possible from the indicted victim.

In a civilized land, such extraordinary breaches of legal ethics would bring down the government.