Essential California

February 19, 2020

Good morning, and welcome to the Essential California newsletter. It’s Wednesday, Feb. 19, and I’m writing from Los Angeles. On Tuesday, President Trump granted billionaire Michael Milken one of the few things money can’t buy: a presidential pardon. The former junk bond king spent the better part of the 1980s generating an ungodly sum of money from his X-shaped trading desk in Beverly Hills, and the better part of the ’90s seeking redemption for his financial crimes through high-profile philanthropy. At the apex of his power, Milken earned $550 million in a single year. That was more than four times the operating budget of the Securities and Exchange Commission — the agency whose far-reaching investigation would soon topple Milken’s position at the top of the financial world, and ultimately land him in a prison cell. It is difficult to overstate just how high Milken — a poster boy for ’80s-era greed who partially inspired the Gordon Gekko character in the movie “Wall Street” — had soared as he rewrote the rules of corporate finance, or the magnitude of his fall back to earth. Which brings us to that fall. In March 1989, Milken was indicted on 98 counts of racketeering and securities fraud. The indictment accused him of a prolonged pattern of insider trading, stock market manipulation and defrauding clients. At the time, this newspaper termed the case to be “the nation’s biggest securities fraud investigation ever,” according to an article that also called Milken “the J.P. Morgan of his generation” and “the most significant and visionary figure in American business in the 1980s,” responsible for unleashing a revolution how businesses raise capital to finance growth. (All of that, by the way, was in a single sentence of the story. There’s plenty more where it came from.) Milken pleaded guilty to six felonies in 1990 and was sentenced to 10 years in prison. He served a little less than two, and then embarked on one of the great image rehabilitation campaigns of our time. In fact, if yours is a cultural purview more familiar with the middling 2010 “Wall Street” sequel than the era of the 1987 original, you might be forgiven for knowing Milken only as a prominent L.A. philanthropist, whose name adorns his eponymous institute and its annual global gathering, a local school and a cadre of other charitable endeavors. The once fallen businessman is now firmly ensconced in the conference class of thought leaders and think tanks who preach the gospel of capitalism and operate at the global nexus of business, politics, philanthropy and purchasing carbon offsets for private jet flights. Here’s a quick look back on Milken’s long quest for redemption. By early 1993, Milken — who was still worth several hundred million dollars — was out of prison and living in a ramshackle Hollywood halfway house. Both the surrounding neighborhood and his reputation were thoroughly un-gentrified, and he had a shared room. But at least his window looked out on the barbed wire-encircled warehouse of a company for which he was once the principal financier. By 1996, he had survived a serious bout with prostate cancer and was back in the same Encino house that he and his former high school sweetheart purchased in 1978. He was immersed in charity and doing consulting work for a select group of billionaires, but still needed permission from his probation officer to cross state lines to film a “Today” show spot. Most of all, he was trying desperately to “cleanse his blackened reputation” and “shed his image as a late 20th century robber baron,” according to The Times. The curtain truly rose on his second act in 1998, when the Milken Institute held its inaugural global conference. By then, Milken 2.0 had donated millions to cancer research and built a commercial educational empire. In the conference’s second year, the Economist took a look at the turnout and declared Milken’s social standing to be “fully restored.” The annual event now draws comparisons to Davos. The late ’90s also marked the Clinton-era beginnings of Milken’s decades-long quest for a presidential pardon, which continued through the Bush administration and into the Trump years. According to my colleague Laurence Darmiento’s story, proponents of the Milken pardon inside Trump’s circle are said to have included financier and 10-day communications director Anthony Scaramucci; financier Gary Winnick; Jared Kushner, Trump’s son-in-law and senior advisor; Treasury Secretary Steven T. Mnuchin; and Rudolph W. Giuliani, Trump’s outside counsel. Ironically, Giuliani led the case against Milken in his prosecutor days.