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Mike Milkin, NPR, Milken discussed on Planet Money

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Coming up after the break crime and punishment support for NPR and the following message come from Washington wise investor and original podcast from Charles Schwab that explores how decisions made in Washington could impact your finances and portfolio. Listen AT SCHWAB DOT com slash Washington. Wise are you sometimes confused by the economy befuddled by the financial system troubled by the trade war? We are here to help with the daily ten minute briefing on economic news of the day. Npr's the indicator from planet money. Listen now at this point in the story Mike. Milkin is making a ton of money. Things are really going his way. And James Stewart you are getting a bunch of scoops at the Wall Street Journal and you're suddenly thinking that something's wrong here. What was the first shoe to drop? I remember vividly the the day in. May nineteen eighty six where the news came over the old ticker that this investment banker at Drexel Milkins firm down Slovene had been arrested on charges of insider trading. I knew Dennis Levine He was one of these people that was in my orbit but the SEC. When they arrested him put out a list of something like thirty five deals that he had insider traded on and I looked down the list and he had he dennis. Wien hadn't worked on any of them and I thought if he hadn't worked on any of those deals how did he know to insider trade? Where was he getting the information? So I knew immediately there was a network. There was a conspiracy was more than just muscle. Being there. Were other people in the the orbit. And they were feeding him information that he was sent investing on and presumably he in turn was feeding them the deals he was they weren't so brazen as to actually trade in the deals they were working on. That was too obvious and the prosecutor for the government is a familiar name. Rudy Giuliani Really Juliane. Securing this like the mob cases which he was famous for. Yes exactly and you know. There are many similarities. Except at least from what people tell me that it was much easier to kind of flip these you know. Ivy League trained white collar Bankers and lawyers and it. Is You know mafia lieutenants but Yes Rudy Giuliani was running this. He was getting immense publicity He was getting a lot of public acclaim for this. Crackdown on Wall Street. Crime and he did oversee The prosecution of this which led straight to milken. So what did they end up? Getting milken on you know the Milken as the founders have long said well way away. We didn't do any insider trading but In some ways what they ended up getting Milkin on was more insidious in insider trading insider trading as a very discreet crime. What milkin was doing once he crossed the line into the hostile takeovers as I said the Securities and Exchange Commission has strict laws about how you have to announce a takeover bid when you have to announce that you've acquired a certain number of shares and Milkin was helping clients and organizing his clients to buy up shares. Amass these positions that could be used to then threatened company without going through any of the disclosures. It was a common name Ford at the time was called parking that you would get a friendly investor to buy. Say you know four point. Nine percent of the target company five percent was the threshold at which you had to make a public disclosure. And then you get another friend to do another four point nine percent and so you organize these people and you're way over the five percent. No no one of them had it and that was a violation of these requirements. There were other elements of this. He ended up pleading guilty to six felonies. One of them was attacked. Count But they were essentially of violations that were used further the takeover efforts of his clients so they never got him on insider trading he according to the government never insider treated the the government had evidence. they clammed insider trading. But it was. It never came to trial. It was never by pleading guilty avoided a broader charges and he was never convicted of insider trading. And by the way I personally always felt if there was any insider trading was almost kind of incidental. I mean he I will. Milken did not need insider trade to make immense amount of money. He made one year. I believe five hundred fifty million dollars and by doing you know his bond business. One of the big questions is often wondered. Did he ever need to do any of this illegal stuff? I I doubt it just to be clear. He did plead guilty to six felonies including conspiracy and securities fraud. Moore you if you've tried to get an interview I have. And what are we get back? I got many emails from his spokesperson. Jeff they basically enumerated. The ways in which milkin disrupted finance writ large democratized access to capital and has been giving philanthropic Lee his whole life just to jump back into the story He was sentenced to ten years in prison diagnosed with cancer and released early and when he got out he couldn't trade because he was banned from securities trading for life and then he realized his new mission in life rehabilitating his image. I would say that started the day he walked out of prison. And it's been a multi decade effort When he came out of prison he was still a billionaire. May Be multi billionaire and he. He started launching a number of Philanthropic missions one of them was related to education and teaching one of them now that he himself had cancer was aimed at healthcare prostate cancer in particular and then he started this sort of think. Tank Milken Institute. But I think it's also important to recognize that within a very short period of time the SEC later allege he was violating his lifetime ban. And I did a lot of work on this as well. Okay so keep published. Nfc EAVES and his lawyer sued you. One of his lawyers sued me for libel over one paragraph in what was a roughly five hundred page book. And I can't tell you how many pages of legal documents that spawned. The case went on for for many years What did that feel like? Well the first couple of years it it bothered me a little bit. I I would go. It was very interesting. I'd go to get a mortgage. You know to buy a place to live or something like that and so on the application form. There's a line that says do you have any contingent liabilities. I would say yes and then say how much I'd say thirty five million dollars. Well that was the that was always the end of that. Although then they'd always say well. We're going to have to get our supervisor. You know so i. Fortunately once I explained it all day I was able to get a mortgage and Then ultimately we did when really resounding victory in light other to defenses one that you weren't now even if you were wrong as long as you weren't negligent you got off but the judge knowledge. Saudi wasn't negligent. He said that I was correct that the book was accurate and he even went and more and said I could have said something worse that the truth was worse than I actually rug so it was quite a remarkable opinion blurbs. Your book but this is symbolic of what essentially milk has been doing since he got out of jail which is marshalling both his money and his friends and the finance forces to silence critics but also to eventually get what he got from. President trump to get a pardon He had an unrivalled network of very very wealthy and influential supporters. Who immediately started beating the drums? This was all unfair that you know people are just jealous of him. It was just the Wall Street Lee trying to bring him down and started efforts to get him apart. And I've actually seen this in all the years I spent covering bonds people on Wall Street love Mike Milkin. They think he's a genius. They think he revolutionized finance by creating this whole market and they think all of his philanthropic works also changed the world and clearly milkin felt that the conviction was this huge wrong. That needed to be righted. Even if it meant people like cert- talking about all the bad stuff again so If we were to tell the story of Michael Milk into young young kids who perhaps dream of going to Business School someday. What's the moral of the story? I used to say that the milk and story showed that even if you're the richest man in the world you can't buy your way out of legitimate criminal charges and now. I'm going to have to change that narrative because it's looks to me like in granting him apart and trump has not the message that if you are the richest man in the world and you have enough powerful well-connected friends and donors to my campaign. Yes you can buy the result that you want James. B Stewart is a columnist at the New York Times he is a professor at Columbia University and the author of the book. Denna thieves do you have to change the title now. Not Changing the title. Maybe I'll ride a little abalon but I'm not changing the title. You you may be able to buy a pardon that you cannot rewrite the facts. We always love to hear what you think of the show. So you scrape US planet money at NPR DOT ORG or on the socials wherever at planet money. Today's show was produced by Nick. Fountain edited by Bryant Our Stat. Our senior producer is out split mark for the dirtiest Tuesday read around Massachusetts who subscribed to the planet money newsletter. Npr Dot Org Slash planning newsletter. And if you'd like to spend your days tracking down the Michael Milkin of this world and leaving voice messages. May I suggest applying next intern? Applications are open now. You can find them on our website. I'm Robert Smith and I. Mary childs this is NPR. Thanks for listening..

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