THE MILKEN SENTENCING : How Judge Wood Determined Ex-Junk Bond King’s Penalty

I n sentencing Michael Milken, U.S. District Judge Kimba M. Wood took note of the vast disparities in the prosecution and defense views of him. She discussed the heated arguments made about him in letters sent to the court. She analyzed his defenses, taking into account his good deeds and his family’s suffering.

Then she delivered her conclusion: A 10-year prison sentence, community service and fines, she declared, was warranted.

Here are excerpts from her remarks:

* On the “unusual” and “stark contrast” between the government and defense views of Milken and his deeds:

“Defendant has claimed that his wrongdoing consisted of a few instances of overzealous service to his clients, mere technical disclosure violations and the . . . misconduct, which (he) characterized as accommodating a client who needed tax losses and taking a fee he thought his department deserved . . .

“It has also been suggested that defendant was forced to plead guilty to minor technical violations because the government, in bad faith, hounded him, charging him with a massive amount of other misconduct, which could, theoretically, take defendant years to defend, and because the government allegedly had indicted his brother to put unfair pressure upon (Milken).

“The government, in contrast, claimed defendant was one of the most villainous criminals Wall Street had ever produced and he abused his position as head of the most powerful department in one of the most powerful firms on Wall Street to regularly distort the securities market and enrich himself and (his firm), and, finally, that he obstructed justice.. . .

“The evidence offered (at the sentencing hearing) established neither the government’s version of defendant’s conduct nor the defendant’s own version. It established that defendant engaged in the additional misconduct of attempting to obstruct justice . . .”

* On the “extraordinary” letters sent to the court:

Some, “reflect a perception that we as a society must find those responsible for the alleged abuses of the 1980s, economic harm caused savings and loan associations, takeover targets and those allegedly injured by the issuance of junk bonds, as well as by insider trading and other alleged abuses, and punish these criminals in proportion to the losses believed to have been suffered. These writers ask for a verdict on a decade of greed.

“While I sympathize with the anxiety expressed in these letters, the suppositions upon which these views are based cannot enter into sentencing (Milken) . . . Our system of justice protects everyone from being sentenced on supposition . . .

“It is important to note as well that, although many of those who wrote . . . believe that defendant should be treated harshly, because they believe that he is the one responsible for the massive job losses and the financial failure of savings and loan associations, the government did not charge him with responsibility for those losses. For the government to prove such charges would have required (it) to try to isolate the effect of defendant’s actions from all of the other forces acting in the marketplace.

“For similar reasons, the court cannot take into account the claims of those who urge leniency for defendant because he allegedly created jobs and business opportunities or drew capital to its most productive uses. Determinations such as these would require information not before the court, and would, for example, require the court to speculate on how defendant’s clients would have invested their money absent his advice, and what effect those actions would have on job creations or loss, business opportunities and productivity.

“I note that these letters reflect a legitimate public concern that everyone, no matter how rich or powerful, obey the law . . . and that our financial markets in which so many people who are not rich invest their savings be free of secret manipulation. This is a concern fairly to be considered by the court.”

* On Milken’s wrongdoing:

“To the extent that your crimes benefited your clients, that is, of course, no excuse for violating the law. In addition, there is no escaping the fact that your crimes also benefited you, not necessarily by lining your pockets directly and immediately, but by increasing your clients’ loyalty to you, hence, increasing your edge over competitors and increasing the likelihood that your clients would pay for your services in the future.

“It has also been argued that your violations were technical ones to be distinguished from accumulating profits through insider trading and that your conduct is not really criminal or that it is only barely criminal.

“It was suggested that if you were truly disposed to criminal conduct, you could have made much more money by committing more blatant crimes such as repeatedly misusing insider information.

“These arguments fail to take into account the fact that you may have committed only subtle crimes not because you were not disposed to any criminal behavior but because you were willing to commit only crimes that were unlikely to be detected.

“We see often in this court individuals who would be unwilling to rob a bank, but who readily cash Social Security checks that are not theirs when checks come to them in the mail because they are not likely to be caught doing so.

“Your crimes show a pattern of skirting the law, stepping just over the wrong side of the law in an apparent effort to get some of the benefits from violating the law without running a substantial risk of being caught.”

* On the deterrent power of a prison sentence, Milken’s penalties and his future:

“I am sensitive to the view that you and your family have already been punished by (earlier) sanctions (prohibitions from ever working in the securities industry, a $200-million fine and $400-million restitution fund) . . . and by the emotional stress of living with the uncertainty of your status and your sentence since the prosecution began.

“I have given considerable thought to whether a sentence of lengthy community service would be an adequate penalty here. It would have the advantages of permitting you to work productively with others, which I believe you could do well rather than having you be warehoused in a prison. Nevertheless, I believe that a prison term is required for the purposes of general deterrence; that is, the need to deter others from violating the law and the possibility that the sentence given in one case will prevent others from violating the law (and) prison sentences are viewed as one of the most powerful deterrents to the financial community. . . .

“When a man of your power in the financial world . . . repeatedly conspires to violate, and violates, securities and tax laws in order to achieve more power and wealth for himself and his wealthy clients and commits financial crimes that are particularly hard to detect, a significant prison term is required in order to deter others.

“This kind of misuse of your leadership position and enlisting employees who you supervised to assist you in violating the law are serious crimes warranting serious punishment and the discomfort and opprobrium of being removed from society. . . .

“Mr. Milken . . . you are unquestionably a man of talent and industry and you have consistently shown a dedication to those less fortunate than you. It is my hope that the rest of your life will fulfill the promise shown early in your career.”