Michael Milken may have a great career ahead of him--in the securities business.
The junk bond pioneer on Tuesday agreed to a settlement of government charges that bars him for life from "any association" with securities firms. But even as Milken entered his plea in an emotional court appearance, securities law experts were acknowledging that Milken may be able to build a considerable business dispensing investment advice to individual and institutional clients--even securities firms.
"This is not necessarily a death sentence for his career," said Ira Sorkin, a criminal defense attorney who was formerly head of the Securities and Exchange Commission's New York regional office. "Far from it."
A spokesman for Milken said any discussion of career plans was "premature" for the former head of Drexel Burnham Lambert's junk bond department, who last year set up a firm to help arrange financing for growing companies. But some of Milken's former clients were predicting that Milken could assemble a considerable client list if he chooses to expand the new firm or launch some other enterprise.
In a press conference in Washington, SEC Chairman Richard C. Breeden tried to stress that the commission would do all it could to keep Milken from returning to the industry in which he stood "at the center of a network of deception, fraud and deceit." Asked what kind of business opportunities may lie ahead of Milken, Breeden said: "The business he will probably be in is serving his sentence."
Breeden said the SEC believes that a "substantial" jail term should be imposed on Milken. He pointed out that he expects much of Milken's time in the years ahead will be taken up giving evidence to the government and preparing to defend a raft of civil suits that aggrieved investors are expected to bring. Breeden said the SEC wanted to impose the "broadest possible bar" on Milken.
The lifetime ban from the industry means Milken won't be able to become a director, officer or other employee of a securities broker-dealer, municipal bond dealer or mutual fund company. He won't be able to take a job as a registered investment adviser, nor can he underwrite securities.
But securities lawyers point out that if he steps carefully around a welter of regulatory restrictions, Milken may still have considerable latitude to act as an investment adviser. Under the Investment Advisers Act of 1940 he can, for example, give investment advice to as many as 14 companies or individuals without being registered.
"If he can find 14 billionaires, there's nothing to stop him," Sorkin said.
Indeed, he could even become a consultant to a securities firm, although the SEC might check such an arrangement carefully to make sure a consultancy wasn't a cover for some more important role, said one government source.
Milken's new firm, International Capital Access Group, will probably be able to continue at least some of its activities if Milken chooses to keep it going.
The company's initial announced purpose was to help minorities and unions find financing. Milken has since said the company would also help existing companies find new capital and refinance debts, sometimes in exchange for equity stakes in those companies.
The SEC's ban wouldn't limit Milken's ability to invest his own capital, nor would it prohibit him from acting as an intermediary between client companies seeking loans and commercial banks, said the government source. In some cases, the SEC bar might limit Milken's ability to act as a middleman between client firms and investment banks, however.
If Milken does choose to go back into business, one resource he'll have to offer is an invaluable list of client contacts put together over nearly two decades.
Some of those contacts predicted Tuesday that while the felony convictions might make some companies hesitant to do business with Milken, others might nonetheless gladly line up outside his door.
Brian Greenspun, president of the Las Vegas Sun newspaper, said he expects that many public companies--especially companies in regulated industries--might be wary of relying on Milken in the future.
But, he insisted, "I would have no problem going to him if his advice could help us, and I'm sure there are easily hundreds of others who feel the same way. . . . He's the most clairvoyant financial thinker. We'd do it in a heartbeat."
Greenspun's companies turned to Milken and Drexel for junk bond financing to raise money for its Las Vegas cable-television operation.
Samuel J. Krasney, vice chairman of Banner Industries, a Cleveland manufacturer that was rebuilt with junk bond financing, said it is "very possible" that Banner would turn to Milken again someday if the financier were available. "He's one of the great figures of financial history," Krasney said.
He predicted that Milken could rapidly build a large financial consulting firm if he chose to do so. Milken could, for example, do a brisk business giving advice to companies on how to reduce the heavy debts they took on in the 1980s, he said.
"He could be called in for advice by Mexico, Peru, who knows--maybe Russia," Krasney said.
Former clients and others predicted that the resurrection of Milken's reputation may be hastened by his outside interests, including the Milken family's foundations, charities that have assets of $350 million.
Some predict that after he has served his jail time, if there is any, Milken may also speak out frequently on the financial and charitable topics that interest him.
Times staff writer Robert Rosenblatt in Washington contributed to this story.