Tuesday, November 6, 2007


Cornell University law professor Jonathan Macey (now a professor at Yale) called the prosecution of Mike Milken "the vengeful response by America's business and regulatory establishment to Mr. Milken's phenomenal success." Macey wrote:

"As deplorable as Joe McCarthy's attacks on alleged Communists were in the 1950s, the government's attack on Michael Milken during the 1980s was even worse. It was more conspiratorial; it sent more people to jail, and it was, at bottom, an attack on such fundamental American values as entrepreneurship, individual responsibility and, ultimately, capitalism itself." (The Wall Street Journal, July 18, 1995)

Despite many erroneous press reports to the contrary, he was not guilty of insider trading and he didn't contribute to the savings and loan crisis. Upon his release, columnist George Gilder wrote, "The entire case against him has collapsed." Ethicist Norman Barry said the case involved "trivial offenses" and was "an affront to the rule of law." A detailed analysis of the Milken case can be found in the book, Payback, by Professor Daniel Fischel of the University of Chicago Law School. An April 2005 editorial in BusinessWeek concluded, "Milken's legacy is a favorable one in much of the business community."

John Steele Gordon, a prominent business historian and author of a definitive book on Wall Street, suggests that the government charges may have been a result of "ambitious prosecutors" lusting after a high-profile case. In April 1992, the lead prosecutor, assistant U.S. Attorney John Carroll, speaking at Seton Hall Law School, admitted that in the Milken case, "we're guilty of criminalizing technical offenses ... Many of the prosecution theories we used were novel. Many of the statutes that we charged under hadn't been charged as crimes before."

The judge found only one transaction that Milken pleaded to had any economic impact — and that was only $318 thousand. The editor of Forbes said he was "a scapegoat" and the U.K. newspaper, The Guardian, expanded that to "a high-profile scapegoat." However, Milken accepted responsibility for the specific actions to which he pleaded.

Writing in the London Sunday Times, columnist Irwin Stelzer said:
"Michael Milken transformed American industry as Ronald Reagan transformed the American political scene. [Milken] contributed mightily to converting American industry into a lean, mean, internationally competitive machine. Whether or not Milken, in the course of his assault on the status quo, bent or broke some of the rules governing financial transactions is still being debated, with his defenders persuaded that his punishment for violating such rules was more the revenge of the establishment than the just desserts of a willful lawbreaker."

On a web site about business journalism, former Wall Street Journal reporter Dean Rotbart wrote (April 2002) about what he called the "successful prosecution of Milken in 1989 on six obscure securities law violations":

"Most journalists covering Milken were far too shallow to explore the political and business interests that benefited from his prosecution and expulsion from the industry. Rather, the news media embraced the stereotype of 'greedy Mike' and created such a hue and cry for his beheading that the government had little choice to oblige … But as with most media stereotypes, time has demonstrated amply that Mike Milken isn't the man the media portrayed. Mr. Greed, it turns out, had always been a philanthropist and is today one of the nation's leading philanthropists ... Milken not only disproved his media critics long ago, he made them irrelevant."

In August 2002, Stephen Presser, the Raoul Berger Professor of Legal History at the Northwestern University School of Law, commenting on the "prosecutorial zeal" in the Milken case, said:

"[W]hen an administration or a prosecutor wants to make a political point, strict legalities and strict realities are hard to come by."

The late Robert L. Bartley, then editor emeritus of The Wall Street Journal, wrote (May 2002):

"Various politicians caused a savings-and-loan crisis and the 1990 recession by inflating deposit insurance and leaning on regulators not to clean up thrift balance sheets. Their fall guy was Michael Milken and his supposedly malign junk bonds, which in fact had almost nothing to do with the S&L problem and have since been universally recognized as a legitimate financing tool. Mr. Milken was coerced into a plea bargain involving six trading violations elevated into felonies. The 1990 recession did shake out a real insider-trading ring. Its mastermind, Ivan Boesky, got off with a three-year sentence by … fingering Mr. Milken and others; cases based on his information collapsed … Prosecutors and politicians want scapegoats, and often have the collaboration of businessmen. With … Milken, business competitors egged on prosecutors, as is happening today with Bill Gates. And the truly culpable parties can get off lightly by conning prosecutors with the promise of bigger fish."

More recently (May 2006), George Gilder, a contributing editor of Forbes magazine, wrote in the Gilder Technology Report:

"After five years of federal harassment of the high yield security market that he pioneered, Milken went to jail in 1991 on a tidal wave of journalistic and judicial blindness to what he was doing, aggravated by the ulcerating grip of envy at his success in doing it."

Finally, in a September 2006 Financial Times column, Norman Barry, professor of social and political theory at the University of Buckingham, wrote:

“In retrospect, most American economic observers say that Mr Milken was good for the economy; his actions led to the break-up of conglomerates and the necessary reorganisation of American business. His prosecution was more of a persecution.”

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