Milken's legacy may prove to be for 'hard time'


November 25, 1990|By Thomas Easton | Thomas Easton,New York Bureau of The Sun

NEW YORK -- During the past month, the chambers of U.S. District Judge Kimba Wood were deluged by almost 100 calls a day inquiring about the timing of Michael Milken's sentencing.

With share prices and volume anemic, Wall Street may have lost its appeal to the public, but Milken's name had been assured a rakish spot in modern history. A worldwide network of cameras and pens was drawn to record the epitaph. They weren't disappointed. The man who epitomized the frenzy of one decade will be "warehoused" (in the judge's own words) during the next, giving the decision a poetic symmetry if nothing else.

The extended prosecution has made the actual case against Milken seem old before it fully ripened.

Nevertheless, the sentence comes at the moment Milken's most ardent supporters had long feared -- as many of his deals unravel. A recession has taken a toll on many businesses, and none more so than the ones with the most marginal financing -- and it was this group that Milken did most to create.

Now, his financial manipulations have taken a back seat to the damage he may have done to the nation. Rarely have individuals in the United States been tried for undermining the broad economy. After all, it's usually not against the law. But the idea is repugnant, and it has recently moved to the core of what is publicly perceived as the big case against Milken.

Is that unfair? In his final appeal to Judge Wood, Milken's lawyer, Arthur Liman, said, "A sentencing is a retrospective in which a person's entire works, good as well as bad, and a person's entire life, and not just the thin slice that's placed under the microscope in a criminal proceeding, have to be weighed."

For most on Wall Street, little would be available to place on the scale. Unlike many industries that have had extended periods of prosperity, the financial market produced few leaders during the 1980s with much to say. In the abundance of riches, and the reams of research papers, there was a paucity of ideas extending beyond return on investment.

Who were the heads of Goldman Sachs, Kidder Peabody, First Boston, Merrill Lynch, and Morgan Stanley? These institutions were until recently among the most powerful in the world. They could, and did, reallocate wealth and corporate control. Yet none will be recalled in the same breath as Thomas Watson, Alfred Sloan or J. P. Morgan, if they are recalled at all. As a group, they made a lot of money and not much else.

The prominence of Ivan Boesky's infamous "greed is good" statement may be because it exists in a vacuum of further thought.

Milken was different. Throughout the 1980s, Milken and the vast public relations campaign orchestrated by his former firm, the now bankrupt Drexel Burnham Lambert, were adept at painting a larger picture.Competitors were faulted for extolling an ideologically bankrupt establishment, and a new order was suggested premised on broadened access to capital.

The persuasiveness of Milken's message, and the success of his early deals, earned him billions of dollars in income, a notable result for a man who claims to have disdain for material possessions. He also picked up a coterie of fans. To broad social acclaim, he became a banker who could and would say yes to a marginal loan.

In retrospect, that message now appears erroneous. And, ironically, his most enduring legacy may be to refute the long-held pejorative image of the traditional banker who says no. The access to capital he championed is now seen to have bled society, rather than rejuvenated it. With every new announcement of a major default, his ideas appear more bankrupt.

All of this, of course, has little to do with the crimes for which Milken was sentenced -- six charges including a broad conspiracy count. But prosecuting businesses and workers has never been as straightforward as prosecuting murderers. Union-busting was tolerated in the early 1900s, scorned in the late 1930s through the 1950s, and now is tolerated once again.

That justice is arbitrary may be disconcerting, but given history, it certainly isn't surprising. Prosecutors have enormous discretion. There are few of them, and lots of crooks. They make no secret of their selectivity in choosing cases. The financial community probably did better than most in tempering action. ++ Despite its power and prominence, it was quick and effective in portraying itself as a victim, dampening attempts by prosecutors to use racketeering statutes. The man who led the investigation of Wall Street, Rudolph Giuliani, was replaced as U.S. attorney by a far less zealous man, Robert Obermaier, a white-collar attorney who earlier had a number of Wall Street's accused among his clients and had to recuse himself from the Milken case, among others.

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