UC Regents Agree to Review Milken Deal

Under pressure from two state senators, the UC Board of Regents on Thursday asked for a re-examination of a controversial contract that allows fallen junk bond king Michael Milken to receive 95% of the profits from sales of his videotaped class at UCLA last fall.

How long the contract review will take, however, is unknown. Although several regents appeared willing to rescind the contract--one suggested asking Milken to cancel the deal--the board agreed at the request of UC President Jack Peltason to defer the issue for study.

Milken’s involvement in an MBA finance class on the Westwood campus has been an undying controversy for UCLA, which faced national ridicule in November in a series of “Doonesbury” comic strips about the Milken classes. On Thursday, the subject sparked lively debate.

Some regents supported the Milken arrangement as an extension of academic freedom while another regent said it angered alumni and harmed public perception for the university to be in a contractual arrangement with a “high-profile crook” who shows no remorse.

After serving time for six securities violations, Milken co-taught 10 three-hour lecture classes at UCLA’s Anderson Graduate School of Management. Guest speakers included Assembly Speaker Willie Brown (D-San Francisco) and some figures from Milken’s junk-bond past.

As part of the class, UCLA signed a contract that allowed Milken’s new Educational Entertainment Network (EEN) to sell videotapes of the session to other universities and interested parties.

On Thursday, Sens. Quentin Kopp (I-San Francisco) and Patrick Johnston (D-Stockton) criticized Milken’s teaching stint as unethical and blasted terms of the contract that allow Milken’s network to use UCLA’s name for marketing but give primary control over the enterprise to the firm. After deductions for production costs, Milken’s network would give UCLA only 5% of the proceeds, they said.

Calling Milken an “unrepentant felon,” Johnston and Kopp charged that UCLA was duped by a financier whose sole interest was to use the school’s reputation to rehabilitate himself in the eyes of the public. They also said UCLA officials were seduced by Milken’s contributions to the Westwood campus--more than $3.3 million, including $40,000 shortly before the contract was finalized, according to records.

“The bottom line is that in this functional equivalent of a ‘junk-bond deal,’ Milken winds up with the ‘deal’ and the university winds up with the ‘junk,’ ” Johnston said. “He gets to use UCLA’s logo and good name in order to exploit the management school for his purposes. For all this, the university gets peanuts.”

UCLA Chancellor Charles E. Young bristled over insinuations that his school had sold out. “Somehow the notion that this (deal with Milken) is a payoff, to the extent that is implied, should be discounted out of hand,” Young said.

Young traced the evolution of the deal, saying the business school began negotiating with Milken last spring and the contract was signed by a campus business school official. The $40,000 contribution noted by Johnston was given to help defray costs of the class, and Young said he considered the terms of the contract “boilerplate” language.

Young acknowledged, however, that UCLA’s percentage of the proceeds might have been better than the 5%, explaining that the contract was negotiated under “time pressures” and while the administration at the business school was undergoing a change.

Young and Peltason said that interfering with the selection of controversial speakers such as Milken would compromise the cherished standard of allowing faculty members to choose their own texts, fashion their own courses and invite provocative speakers to stimulate student intellectual development.

But Regent William T. Bagley, a former legislator, differed with Young’s characterization of the contract, saying that its terms were “curious.”

David Flinn, a San Francisco attorney who is the regent-designate for alumni, sided with the senators by saying that the University of California lives in a fishbowl and that its reputation is damaged “the day we bring a high-profile crook to teach at our university.”

Avoiding the argument over academic freedom, Regent John G. Davies made a motion to “approach Mr. Milken and say, ‘This commercial arrangement creates a problem for us. We’d like to get out of it.’ ”

Davies was forced to withdraw the motion because such a governmental action requires at least 10 days public notice. Peltason also said he would prefer to have his staff review the Milken deal and other contracts and present a report to the regents, perhaps in time for their March meeting.

The lack of any immediate action left Johnston and Kopp unhappy.

“That motion became mush by the time the president and his like-minded regents were through with it,” said Kopp, a frequent critic of the university system. “How many contracts does the university have with an ex-con whom the SEC won’t allow to practice his profession?”

During the meeting, Regent Harold M. Williams--who has been the dean of the Anderson school and chairman of the Securities and Exchange Commission--said Milken had paid his debt to society.

The wrangling over Milken and his contract threw off schedule what was supposed to be a full-day session to agonize over the future of the nine-campus system. In a series of retreats and position papers, UC officials have been exploring ways to meet the goal of keeping the university’s quality among the best in the nation while operating on less money and serving an onslaught of new students.

The options laid before the regents in reports included the drastic step of no longer automatically admitting those among the top 12.5% of the state’s graduating high school seniors, as is now required under the state’s 1960 Master Plan for Higher Education.