NEW YORK -- Michael Milken, who sat atop Wall Street in the 1980s, was sentenced yesterday to spend the 1990s behind bars.
The 44-year-old financier, who wept during his court proceeding, received a 10-year prison sentence and was ordered to perform three years of community service, by far the harshest term handed out in the recent series of cases covering the biggest scandal in Wall Street history.
The decision came almost a year after Milken pleaded guilty to six felony charges related to securities trading violations and agreed to pay fines and penalties of $600 million, as well as be permanently barred from the business where he had made billions of dollars in less than a decade.
Yesterday's action culminated an unprecedented government investigation into Wall Street that began in 1986 with the arrest of speculator Ivan F. Boesky and investment banker Dennis Levine, both of whom have already completed jail terms. The probe stretched from the fringes of the securities markets to the core, touching almost every prominent firm in between.
Milken's former employer, Drexel Burnham Lambert, is now bankrupt, and the risky, high-yield "junk bond" market Milken created to raise billions of dollars in capital, is in tatters.
U.S. District Judge Kimba M. Wood rejected Milken's long-held contentions that his admitted crimes were technical and out-of-character, instead concluding that Milken was "a man of talent and industry" who nonetheless engaged in a series of "subtle" crimes, encouraged others to similarly "affect financial schemes." He then obstructed justice and "communicated" that others should do likewise, she said.
"Your crimes show a pattern of skirting the law, stepping just over to 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," Judge Wood told Milken, who faced a maximum 28 years in prison.
"When a man of your power in the financial world," she continued, "repeatedly conspires to violate . . . 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."
In a brief statement prior to the sentencing, a sobbing Milken told the court, "What I did violated not just the law but all of my principles and values. I deeply regret it and will for the rest of my life. I am truly sorry."
His wife, Lori, sat grimly nearby, staring straight ahead throughout the proceeding and occasionally closing her eyes. Milken's brother Lowell, who was dropped from the original indictment when Milken pleaded guilty, cried briefly during Judge Wood's statement and put his hand over his mouth as the sentence was read.
The decision was greeted in the large, crowded courtroom first by silence and then muttered statements of anger. A woman in a fur coat said "he didn't deserve it" and added those who testified against him "should fry in hell." Another, who said he was a longtime friend, glanced at the thicket of press and hissed "vultures" repeatedly before hurrying away. Several pins stating support were evident on bags and lapels.
"I was hoping the judge could come up with a more creative sentence," commented Metuka Benjamin, a director of eduction in a Los Angeles private school where Milken sporadically taught during the past year, echoing a number of similar comments by others.
Federal officials praised the decision, with Securities and Exchange Commission Chairman Richard C. Breeden saying, "This sentence should send the message that criminal misconduct in our financial markets will not be tolerated, regardless of one's wealth or power."
Milken was ordered to report to federal custody on March 4, 1991. Under the specific statutes used in the case, he could be released without serving any time in jail, though local attorneys suggest one-third to two-thirds of the term is common.
In Milken's case, however, a critical factor may be whether he retreats from his silence and begins cooperating with authorities. As part of his plea agreement, he promised to do so but only after sentencing. Prosecutors have recently questioned whether, devoid of any lever, Milken would do so.
The sentence was not inflated to encourage this, Judge Wood said, but neither had it been reduced on the expectation of future assistance.
Following his release from prison Milken must spend 1,800 hours a year working in a community service program determined jointly by the probation board and the court. Milken had requested that his sentence be limited to this, and other judges have accepted similar arguments for Wall Street criminals, limiting jail time to months rather than years.
Judge Wood responded that although social service was a more productive end for an individual than being "warehoused" in jail, incarceration "is viewed as one of the most powerful deterrences for white-collar crime."