Michael Milken Reconsidered

Witness to a Prosecution is a strange book. It poses as the comprehensive, detailed legal reevaluation of the travails of Michael Milken, the pioneer of high yield financing who the Department of Justice aggressively pursued in the late 80s and became a symbol of Wall Street greed and excess. The book goes into agonizing detail about the investigation, trial, and even obscure stuff like like the back-and-forth over sentencing memoranda that took place between the prosecution and defense.

Press play to hear a narrated version of this story, presented by AudioHopper.

If that material sounds dry—especially since anyone who followed the high profile case knows how it ended—it kind of is. Richard Sandler, a childhood friend of Michael and Lowell Milken who served as in-house counsel during the entire ordeal, includes incredibly long quotes from both sides, including some very revealing ones by the prosecution years after the case took place, culled from a law school class Sandler occasionally teaches at Stanford.

What’s going on here? It’s not intended to be a legal thriller. This is a book about friendship, loyalty, devotion, and fairness. And on those scores, it succeeds wildly. And even kind of breaks your heart. Especially if you’re someone with intimate connections to the Milken case.

Like me.

The 1991 book Den of Thieves by James Stewart, which chronicles the devilish hubris and infinite greed of a band of insider traders, is as much a reason I became a business journalist as anything else. And I know Rudy Giuliani, the original federal prosecutor of Milken, as well as anybody knows him. I worked for him for a decade as his biographer, speechwriter, co-writer, and trusted confidante. He influenced me tremendously, and I looked up to him and admired him greatly, and still do.

However, there’s something that never made sense to me about Milken’s prosecution, or about Den of Thieves, even when I was 23 and scribbling notes on yellow stickies on virtually every page. As the most successful of the bunch, Milken is portrayed as the kingpin of the insider trading ring that also included infamous names like Ivan Boesky, Dennis Levine, and Marty Siegel. But Milken never traded on inside information. This isn’t one of those “he was never convicted of that particular charge” technicalities. It was that no one never even suspected him of doing it. Milken eventually pleaded guilty to six counts following a massive investigation that purposely targeted his brother as leverage–one good line in the book has Lowell Milken’s lawyer saying, “I do not believe Michael Milken did anything wrong, but Lowell Milken did not do anything.”

Milken’s crimes amounted to a few technical violations of obscure and vague regulations that had never before resulted in prosecutions, let alone prison time. I am an experienced market participant and an obsessive follower (and sometimes chronicler) of Wall Street justice. I could not in 1991 and I cannot now, having read at least six books about Milken, explain what crimes he committed.

By contrast, take Boesky, or any of the other main characters in Den of Thieves. They obtained information that wasn’t publicly available (often through bribes) and traded on that information. And sometimes declined to pay taxes on the money they received as bribes. The crime is straightforward and the victims are obvious–other market participants and the US Treasury.

But they never accused Milken of insider trading, never accused him of tax underpayment, and the only conceivable beneficiary of his “crimes” was Drexel Burnham Lambert, and not by much. I haven’t won as many Pulitzer Prizes as Stewart, but I’ve been doing this almost as long and almost as carefully as he has, and I still can’t figure out what Milken did to warrant such a disproportionate sentence—or arouse such anger and contempt from a public willing to believe the worst of a guy whose real crime seems to be that he earned a ton of money.

In Den of Thieves, Stewart describes his maximum bad guy thusly: “And then there is Michael Milken, whose crimes were far more complex, imaginative, and ambitious than mere insider trading. In 1986, Milken earned $550 million in salary and bonus alone from an enterprise that had been tainted with illegal activities for years. When he finally admitted to six felonies, he agreed to pay $600 million — an amount larger than the entire yearly budget of the Securities and Exchange commission.”

Got that? Milken did not commit insider trading. His “crimes” were so complex, imaginative, and ambitious that you cannot name them. And then the next sentence makes clear that Milken’s real crime is earning $550 million. Milken made the most money and therefore had to pay.

The book successfully portrayed him as the human epitome of greed–it didn’t help that his alliterative name made some believe he was the human model for Wall Street villain Gordon Gekko (and I believe there was a heaping tablespoon of anti-Semitism in the public perception as well). The courts sentenced Milken not to the one to two years every previous person even close to similar had received, but to 10 years plus a ludicrous 1800 hours of community service a year for three years.

One aspect where Witness to a Prosecution succeeds is batting down a central nasty charge from the time. Many accused Milken of surrounding himself with disadvantaged kids as a cynical ploy to influence public opinion cooked up after the investigation began. The book makes clear via testimony from tons of people in his community that Milken had long been quietly supplementing the millions he’d always given to charity with real personal time and effort spent in inner-city classrooms. What is surely true is that Milken’s awkward appearances surrounded by Black children in photographs staged by PR reps made the narrative advanced by Stewart and others who questioned Milken’s sincerity easier to accept.

It’s worth offering some personal insight about Giuliani, as well. It is difficult for many today, given Rudy’s operatic involvements with Donald Trump’s legal team and controversial events of recent vintage, to remember how venerated and respected he was as a prosecutor before he ever entered politics. Rudy’s Brooklyn toughness, lightning mind and novel legal theories made him a feared adversary for anyone up to no good.

But what’s less well understood about Rudy, partly out of his own preference for maintaining a tough guy image, is how deeply contemplative he was about the prosecutions he undertook. Rudy suffered over many of the indictments he handed down as US Attorney for the Southern District of New York. He got some wrong, no doubt. (John Mulheren is one of them.) And to Rudy’s credit, he advocated for Milken’s pardon, an exceptionally rare instance of a high profile prosecutor arguing for the pardon of someone he himself prosecuted.

But I happen to know, from interviewing dozens of the people mentioned in this book, including people like Ted Olsen, who eventually represented Milken, as well, that Rudy was highly aware of what these investigations and indictments and convictions and prison sentences would do to the lives of anyone they targeted, whether it was a white-collar criminal or an organized crime boss. That’s what made him effective. Was he interested in publicity and making a name for himself? Of course. But as a serious Catholic – and a shocking number of these crusading prosecutor types are Catholic school products with a gift for seeing right and wrong in stark black-and-white definition – Rudy deeply examined whether the disruption to a defendant’s life was merited by the defendant’s conduct. By the time he arrived at yes, he was ready to cause that disruption because he was so persuaded of the harmful conduct.

It’s striking how many people who pilloried Milken for years and held him up as the literal embodiment of all that was wrong with Wall Street and American society eventually came to realize he hadn’t really done anything wrong. It’s unknown whether James Stewart, who used constant leaks from the SEC and the Southern District to skewer Milken, ever changed his view of his target as evil incarnate. I have written to him several times and tried to ask him this, but he won’t respond. But to see John Carroll and Rudy Giuliani come around was striking. And even Judge Kimba Wood seemed to undergo something of a bench conversion. She originally sentenced Milken to this outrageously long sentence, and immediately began advocating for different reductions of that sentence.

Over the years since the Milken plea, Sandler became close to Carroll, the lead prosecutor who Giuliani had assigned to the case. Carroll visited Sandler’s class at Stanford Law School on April 16, 2012 and did some powerful penance: “The criminal justice system is basically an exercise in raw power. I probably didn’t understand it when I was the prosecutor. I certainly understand it now. … It is very much an uneven game where the Government has enormous power … exercised by very young and very inexperienced people … a good prosecutor has to be energetic, black and white, zealous, ambitious—personally ambitious, because that’s what drives the engine.”

The book details the way those ambitions worked against Milken at every turn. His profile had simply risen beyond the point which any prosecutor, SEC lawyer, judge or reporter was willing to put up his hand and ask, “Are we being fair to the greed is good guy?”

Part of what makes that story so powerful, even as we know its ending, is the way Sandler, as a close and devoted friend, finally achieves the difficult task of humanizing the shy and awkward Milken. When their Rule 35 petition succeeds in reducing Milken’s 10-year sentence to 33 months, it means Milken would be released after about 24 months (he earned time off for good behavior by preparing his fellow inmates for their GEDs with his typical over-the-top zeal, including waking them up to study at 5 am). Sandler visits Milken in the California low-security prison after the hard-won victory. Milken surprises Sandler by ending the substantive part of their meeting 15 minutes early, unusual for someone who was all business, even in prison.

“Since you have to leave in a few minutes, there is something I want you to know. If the book Den of Thieves were to be made into a movie and was nominated for the Academy Award for Best Picture, and won, that would mean as much to me as a single grain of sand on the beach compared to my getting out of here.” I knew how upset he was about that book and was not sure where he was going with this comment. At that point, he stood up, looked me directly in the eye, and reached his hand across the table to shake my hand as he said two words with tears in his eyes: “Thank you.”

It’s a lovely moment in a book that otherwise hews closely to the plain narrative.

Those who consume this excellent book on audio should know that Sandler narrates the book himself, and that was a mistake on par with his decision not to immediately appeal Milken’s sentence. Sandler’s nasal voice and lawyerly patter eventually grew on me. But his insistence on saying the words quote and closed quote at the end of each quotation is unforgivable. Sandler should learn this trick that real narrators use. It’s called “inflection.”

Another interesting saga takes shape as Milken, long out of prison but longing for tabula rasa, seeks a pardon. Milken friends Ron Burkle and Haim Saban bend Bill Clinton’s ear and the president seems receptive. Until he faces pressure from the SEC – reportedly, Bob Altman and Robert Rubin led the efforts to oppose a Milken pardon. The book contrasts that disappointing result with more favorable treatment given to pardon recipient Marc Rich. The book makes clear the distinction that Milken pleaded guilty, served his time, then served what might be an all-time American record for community service of three years of full-time work, and surpassed it by doing an extra hundred. Rich, on the other hand, had fled the jurisdiction after being accused of far more serious crimes.

Eight years after Clinton declined, Sandler and Milken hired Ted Olsen to represent him in another try with President George W. Bush. Sandler doesn’t mention it and perhaps doesn’t know, but Ted Olson was one of Rudy Giuliani’s mentors and closest friends. At about that time with Bush leaving the White House, Ted Olsen was working on Rudy’s campaign while lawyering at Gibson Dunn. I saw him all the time in Washington and I wish I’d known he was working on the Milken pardon at the time.

There really could not be a clearer case for a pardon, at least a white collar pardon, than Milken. He never evaded responsibility. The charges against him were so novel that even the prosecutors who brought them later admitted they weren’t sure they made sense. He never engaged in enriching activities, like many of the people with whom he associated. (Judge Kimba Wood found that the total value of his misdeeds was $318,000, and that none of it went to him.) But more than that he lived an exemplary post-prison life by any standard. Not only did he exceed the ludicrous amount of community service sentence (I did the same, out of guilt, but also because, as I suspect Milken experienced, I just kind of grew to like it). He donated hundreds of millions of dollars to a wide variety of charities.

George W. Bush had a reputation for being particularly chintzy with pardons, and didn’t even pardon Scooter Libby, who totally deserved it, disappointing Vice President Cheney and the entire conservative base by only commuting Libby’s ludicrous sentence, not pardoning him. Like Clinton, he too declined to pardon Milken. The financier’s team didn’t even bother asking Barack Obama, whose anti-Wall Street rhetoric was so strong they believed they had no shot.

Milken and Sandler figured once Hillary and Trump were the nominees they’d reinvigorate the incredibly torturous and draining and embarrassing process of marshaling your friends to write letters about what a great guy you are in the pardon application. Milken had many friends in common with Hillary—including Bill, who seemed to regret pardoning Rich and not pardoning Milken. Milken also knew a few people who knew Trump, like Steve Mnuchin, and following Trump’s improbable win, began the process anew for the third time. This time, with no waiting till the last day, Trump simply called Milken in February 2020 and said you’re a free man. With typical Trump bravado, the president remarked this is a totally clean pardon, since “Michael had never done business with the president and never supported the president when he ran for office.”

Americans don’t seem to widely understand the pardon process. The popular view seems to be that it exists only for objectively innocent people, wrongfully accused. That’s not true. Alice Johnson, the signature clemency of the Trump era, surely participated in the drug adjacencies that led to her sentence. But she was more than worthy of mercy, because the punishment was so severe and out of proportion with the crime. The founders of our country were all serious, devoted religious people. They understood the value of the idea that there is a being above all others who can wave a wand and say with the force of law, “The slate is clean.”