UCLA law professor opposes naming institute after Lowell Milken

A $10-million gift to UCLA’s law school from alumnus Lowell Milken is stirring debate on the campus about the decision to name a business law institute for the former financier, who was linked to Wall Street’s junk bond scandal two decades ago.

A prominent business law professor has raised objections to the Milken gift and to UCLA’s announcement this month that it will establish the institute in his name. But other law school faculty, along with top UCLA administrators, say they welcome the donation, noting that Milken was not convicted of any wrongdoing.

As part of a 1991 agreement with federal regulators, Milken was barred from working in the securities industry but was not tried on criminal charges in the case that sent his older brother, Michael, to prison for securities fraud. In the years since, both Milkens have become prominent philanthropists and Lowell has been especially generous to education causes, including previous donations to UCLA.

Concerns about the latest donation were raised by UCLA business law professor Lynn A. Stout, an expert on corporate and securities law, in a letter last month to UC President Mark G. Yudof and UCLA Chancellor Gene Block. Stout said the gift posed “serious ethical problems and reputational risks for UCLA” and could damage her own reputation as well.

In an interview Tuesday, Stout said she also worried that Milken’s name on the new institute would imply that the law school endorsed him as a role model for its students. “I don’t think someone who has been banned from the security industry and barred from the New York Stock Exchange is an appropriate model for UCLA alumni and students,” she said.

Stout said she had been unable to learn the details of Milken’s gift agreement with UCLA and had no position on whether the campus should return the money. She said, however, that a gift from Milken that was not connected to business might be of less concern to her: “If he wanted to donate money to the university to cure cancer, that would be a different story.”

Block said Tuesday he was upset and surprised by Stout’s protest, which he described as unfair. In a telephone interview, the chancellor said the university carefully reviewed all proposed donations for any ethical issues and that Lowell Milken’s gift “passes with flying colors.”

“This is a situation of an extremely generous person who cares about students and is doing the right thing,” Block said.

Law Professor Kenneth Klee said Stout appeared to be alone among the law school faculty in criticizing the donation. “Everybody else here is thrilled with this gift,” said Klee, who like Stout is an expert on business law. He noted that the 1989 indictment against Lowell Milken was dropped the following year.

As for Milken being a role model, Klee said: “I think we would want more of our alumni to become leading philanthropists.”

In a statement Tuesday, UCLA Law School Dean Rachel F. Moran said she was “mystified” by Stout’s criticism of the gift. Moran noted that Stout had sought and received funds from an earlier Milken donation to offset the costs of a law school conference next month that the professor is helping to organize.

UCLA spokeswoman Carol Stogsdill said up to $49,000 from that previous, unrestricted Milken grant to the law school could be spent on the September conference.

Stout said that meeting, which she said is being organized by UCLA and the Aspen Institute, would receive some Milken funds but she said she would not benefit personally from her association with it. She said plans for the conference were made long before the latest Milken gift was discussed with law school faculty.

Other universities have faced dilemmas involving donors with controversial histories, or who later got into trouble. UC rules specify that the naming of a building or program “must be consistent with the university’s role as a public trust” and the school should consult legal officials if that trust is later violated.

Rae Goldsmith, vice president for advancement resources at the Council for Advancement and Support of Education, a Washington group that specializes in fundraising issues, said colleges typically review a potential gift to make sure it matches the campus’ missions and decide whether it presents any “reputational risks.” Goldsmith said she could not comment directly on the UCLA debate but said most schools accept and keep gifts only if the “benefits outweigh the risks.”

The outcomes can vary. In 2005, Seton Hall University in New Jersey removed the name of alumnus and donor L. Dennis Kozlowski from a building and a library rotunda. Kozlowski, former chief executive of Tyco International, asked for the removal after he was convicted of securities fraud and grand larceny, officials said.

In contrast, the University of Houston decided to keep endowed chairs in economics and political science that honor Kenneth Lay, the Enron Corp. founder who was convicted of fraud and conspiracy in 2006 and died soon after. Lay’s conviction was later vacated because he could not appeal.

larry.gordon@latimes.com