Milken, Michael Robert (1946–)

Michael Milken was an executive and a star trader at the now-defunct investment bank, Drexel Burnham Lambert. He received the nickname “junk bond king” for the role he played in making Drexel the leader in the junk bond market. Junk bonds are speculative investments that carry a higher than usual rate of interest (i.e., high yield) because they are associated with a greater risk of default. Junk bond financing fueled the takeover market of the 1980s by making it possible for smaller firms to mount a hostile takeover of much larger firms. Junk bonds and the role that Milken played in popularizing them have defenders and detractors, both of which are passionate. Critics blame junk bonds for the collapse of the savings and loan industry and the debt that mounted in the 1980s, leading to recession in the early 1990s. These critics claim that the 1980s became a decade of greed and that Milken and his junk bonds are responsible for the financial and emotional costs that were incurred. Milken's defenders say that his financial innovations fueled the U.S. economy's rapid growth by providing entrepreneurial firms with the financing they needed. They also argue that leveraged buyouts and mergers made possible by junk bond financing helped make the U.S. economy leaner and more competitive in a global marketplace. His defenders and detractors agree on one thing—junk bonds made Milken a very wealthy man.

In 1989, the then Manhattan U.S. District Attorney Rudy Giuliani charged Milken with 98 counts of racketeering and fraud: Milken was then indicted by a federal grand jury. Facing serious federal charges of insider trading, Michael Milken pled guilty to five lesser securities and reporting violations. He received a 10-year sentence, which was later reduced to 2 years. Milken paid a $200 million fine, paid another $400 million in settlements relating primarily to civil lawsuits, and was banned for life from the securities industry. In 1998, he admitted to acting inappropriately as a strategic business consultant by advising MCI and Revlon on deals. He was fined $47 million for violating his probation. Despite these fines, Milken remained a multimillionaire.

Since his release from prison in 1993, Milken has spent his time as an entrepreneur and a philanthropist. Along with his brother, Lowell, and Oracle Corporation CEO Larry Ellison, Milken formed Knowledge Universe (KU), a more than $1.5-billion holding company that supports a vast array of educational enterprises throughout the world. Since being diagnosed with prostate cancer in 1993, Milken has devoted his philanthropic endeavors to funding cancer research. Since its 1993 founding, Milken's Prostate Cancer Foundation (PCF—formerly named CaPCure) has raised more than $230 million, making it the world's largest private sponsor of prostate cancer research. Rather than relying on basic science, PCF focuses on reducing the wait time for grant funding and funding therapy-oriented solutions. PCF holds researchers accountable for results and requires collaboration among institutions, business, and academe: This businesslike approach to philanthropy is often called venture philanthropy.