Viewpoints : Meting Out Justice to Michael Milken

Michael Milken, the former Drexel Burnham Lambert junk bond king who pleaded guilty in April to conspiracy, securities law violations and tax fraud, will be sentenced this week by U.S. District Judge Kimba M. Wood in New York.

Milken made a fortune for himself and others during the merger mania of the 1980s, but his fall led to the demise of Drexel and has been followed by the crash of the junk bond market. He faces as much as 28 years in prison, but some celebrities and such figures as Los Angeles Police Chief Daryl F. Gates say that his sizable charitable donations and lack of a past criminal record should make him eligible to pay his debt to society through community service instead of prison.

Bernard Black, associate professor of law at Columbia University, specializing in securities issues:

I don’t see evidence that Milken did what (convicted insider trader Ivan F.) Boesky did, which was frequent, repeated trading on inside information on his own account. That would lead me to a conclusion that you shouldn’t hit him any harder than you did Boesky.

On the other hand, I don’t think we know a fraction of what happened at Drexel, and I don’t think we ever will. My instinct is that 95% of what he did was legal, but I don’t know.

You probably ought to put him in jail for a couple of years. He’ll be out in nine months on parole, and that’s about right. One year or two. It shouldn’t be 10, and it shouldn’t be five.

Many people are outraged that he made $550 million in one year in salary alone, his last year’s compensation from Drexel. That doesn’t bother me as long as he earned the money. Most of the money is not from what he is charged with doing. If he’s a terrible person, it’s because of the things he did wrong, not because of the money he made.

I also see him as a sort of tragic figure because a lot of what he did probably did create value, and he just got carried away. It’s tragic because if he hadn’t done the 5% that was illegal he could have kept on doing the 95% that was legitimate for a long time to come.

Steven Brill, president of American Lawyer magazine:

I say, all right, this guy is a systemic criminal just the way the government says he is, he’s just as bad as they say, but he’s also been involved in the kind of community service and is as multidimensional as his defense attorneys say.

But if his attorneys don’t want him to go to jail, they should have promised something better than what they submitted for community service. They had him going to Watts to lecture kids on drug abuse, and why Michael Milken has a special calling to do that is beyond me.

If I were the judge, I’d say to him, “Here’s my idea of how you can avoid jail: You’ll get a 10-year prison term unless you come back to me with a plan to establish a not-for-profit community action corporation in the ghetto. You’ll work full time, take public transportation to get there and put any other investment dealings aside. You’re going to have to become obsessed with this the way you used to be with the junk bond business.

“And you have to show how you’re going to improve drastically 100,000 lives in the next 10 years, through programs on drug abuse, employment and housing. I want a specific plan, with tangible, year-by-year goals, just like a business plan someone would give you for your junk bonds. There will be a board of three people to monitor your progress, with a report on how you’re achieving your goals every six months. If you fall behind on any of these goals, you go to prison for the 10 years.”

The plan is like what Michael Milken or some other businessman would require from somebody wanting money from him. It’s sort of turning his own standards on him.

Alan Bromberg, professor of law at Southern Methodist University, where he teaches securities law:

One aspect to consider is Milken’s sentence relative to the sentences that all the other people have gotten and how serious his crimes are relative to theirs. In that sense, Milken is probably going to come out with a lighter sentence than Boesky.

It’s probably going to be in the five-year range, maybe a little on the high side of that. Boesky got three years, of which he served two-thirds.

If you look at it in terms of the strength of the government’s case--which originally charged him with 90-odd counts and was going to come back with a superseding indictment for more, but then Milken got a plea for six counts--it was pretty much a bust. They weren’t able to prove what presumably were the strongest counts the government had that he didn’t plead to. If you look at it that way, you might say an appropriate sentence is in the two- to three-year range.

Another factor is that Milken was an enormously creative person who did a lot of positive things, more so than the other white-collar criminals. I do think he made a substantial contribution to the financing of growing businesses in this country. If that counts for anything, that should bring the sentence down to an even lower range. I think although it’s turned out badly at the moment, the whole junk bond idea was an innovative and valuable one.

I do think he has to go to jail. Otherwise, things that look very bad and may have had very bad repercussions will go unpunished, or will go so lightly punished that people will not consider that they were at all serious violations. And while I don’t think they were as serious violations as Congress and some other people think they are, if you have laws you should obey them. I would be amazed if he did not do some prison time.

Peter M. Saparoff, attorney specializing in securities law for Gaston & Snow in Boston:

Some sort of rather hefty fine would be in order as well as some sort of community service. I like the idea of taking his financial skills and putting them to work for people for free. If it would require a sufficient amount of his time to accomplish it, it would probably be more beneficial to everyone in the long run than sending him to jail.

Irving Einhorn, former regional administrator for the Securities and Exchange Commission in Los Angeles, now in private law practice handling securities matters:

I don’t think community service is appropriate. Even if he gave away a billion dollars, he broke the law. I don’t know what kind of message community service sends other than to tell people that he had a lot of money and a lot of friends among influential people. He had a lot of money to give to charity and made a lot of people rich, and therefore it’s another example of people buying their way out of things. The rich get away, and people who don’t have that kind of money get sentences.

A stiff sentence for him--which is what I think he deserves--would be 15 years. And, of course, that could be reduced--cut in half, or less, if he cooperated, which he is not doing now.

His plea agreement contained a provision that said he was not bound to cooperate and tell the real story of what happened. I think that shows a lack of contrition and a lack of remorse.

Also, I don’t know how many counts the government could have proved, but a plea agreement does not mean he is only guilty of those particular things he pleaded guilty to.

Milken sat at a desk in the middle of a room where all this activity was taking place, and he knew what was going on. He dominated and controlled this operation. All these things were going on around him, and his attorneys said he knew nothing. I think that’s silly.

When you want less than the maximum sentence, you tell the judge that you are contrite. An agreement where you are not going to cooperate is a slap in the face. It rings hollow to me. So because of that, if I were the judge, I would give him a sentence on the heavy side with the proviso that “if you decide you want to cooperate and tell your story, come back to me and we’ll talk about a reduction in your sentence to reflect the fact that you are now showing some contrition and some remorse.”