How Lowell Can You Go?

This past August, Lowell Milken gave a $10 million donation to his alma mater, UCLA Law School.

Only to find the donation under fire because a law school professor, specializing in legal morality (an oxymoron if there ever were one), claimed that the money was tainted and therefore should not be accepted.

Eventually, UCLA Law School was able to accept the gift.  But why would a law school professor be up in arms about her school receiving $10 million?  Step with me into my time machine, and let’s return to the early 1980s in America.

Back then, any company in the country could borrow money from Wall Street…as long as that company was a blue-chip, gently aging Fortune 500, like AT&T, Coca-Cola, or Procter & Gamble, the kind of companies your grandmother would invest in.

If you were an up-and-coming company and you needed to borrow money to grow, to create jobs, to build an entire new industry, sorry.  Wall Street had nothing for you.

Enter Michael Milken, a Wall Street bond trader so immersed in his work that he wore a miner’s helmet on the train into the city each morning so he could read documents and prepare for the day.  Milken made a startling realization:  if you offered a higher interest rate on bonds for growing companies that weren’t yet Fortune 500-sized, those companies could now get funding.

Not only that, but those higher-risk, higher-yield bonds would actually make more money for the issuers than the bonds that Wall Street traditionally issued on behalf of the blue chip companies.

Milken’s firm, Drexel Burnham Lambert, quickly created–and then dominated–the market for higher-risk corporate bonds.   Entire new industries could get funding.  Investors had a new way to invest.  And Drexel, and Milken, made a fortune practically overnight.

His higher risk bonds by then had become known as “junk bonds,” a derogatory appelation stuck on them by Milken’s jealous competitors, who couldn’t compete with Drexel in this newly created, and highly lucrative, market.

Enter the bad guy.  An aggressive federal prosecutor realized he could make a name for himself by prosecuting “crime in the suites” — white collar crime, or dark deeds committed by wealthy people in the name of becoming wealthier still.  This prosecutor actually had three Kidder, Peabody employees walked off their trading floor in handcuffs, in full view of their colleagues, because one of them had received a cryptic message:  “Your bunny has a good nose.”

The message, the prosecutor decided, meant that the three men were engaged in insider trading.  A jury later disagreed and acquitted them, and the reputations of the three men were destroyed forever, but that meant nothing to the prosecutor, who by now was well known in New York.

His name?  Rudy Guiliani.

Giuilani saw that even if you couldn’t convict someone, you could get a ton of publicity just by going after a wealthy, successful Wall Street type.  So he set his sights on Michael Milken.

Milken was accused of a crime called “stock parking,” which no one — not Giuliani, not the judge in the trial, Kimba Wood, could have told you what it meant.  But the twelve mostly working class New Yorkers grasped one key fact:  Michael Milken was guilty of being rich as hell.

So they convicted him of “stock parking,” whatever that might be, and Milken went to jail.

If he hadn’t agreed to go to jail, the prosecutors would have come after his brother Lowell. So Michael surrendered his freedom, faced with the threat that his brother would be tried as well.

For a non-crime, just like Michael.

Guiliani rode his fame in the Milken case to become Mayor of New York, where he washed his sins in the aftermath of 9/11, his pain-stricken face topped by a Yankees cap on national television during the 2001 World Series.  In fact, Guiliani nearly rode 9/11 all the way to the White House.

And the Milkens?  After Michael served his time, he and his brother Lowell became two of the most generous philanthropists in American history.

Millions of Americans owed their jobs to the bonds Drexel had invented.  Entire industries cropped up because Milken had figured out a way to get them funded.  And then Lowell Milken gave $10 million to UCLA Law School, and Professor Lynn Stout had the temerity to say that the money was tainted and that the law school’s reputation for morality was on the line.

Please.

Winston Churchill once said that the best way to make history was to write it.

An even better way to make history is to rewrite it.

If Professor Stout can explain the crime of “stock parking” and show the world how Milken’s actions at Drexel constituted a violation of that law, then she deserves to be a professor of legal morality at UCLA.

And if not…

(New York Times Bestselling Author Michael Levin runs www.BusinessGhost.com, America’s leading provider of ghostwritten books.)

Comments

  1. Levi Strauss says

    Wow! Tremendous insight. Is there an honest politician any where? First we desperately need term limits. Then insider trading enforcement on Congress. No health or retirement for Congress other then what We the People have. Social Security, Medicare and 401K. The main place we need regulation and over sight is for Congress and the President. A term limit on the Supreme Court of 12 years and they’re out. We the people need to take back our Country. Corruption in voting should be a felony punishable by a mandated prison term. Take away all the minimum security jails. Tents and bologna sandwiches. That’s what most of us have to eat when you’re a working stiff. Great article

    • You have precisely hit our needs. Will we need a European country to come in and remove Obama like the UN did with Kadaffi? The senate adn house are afraid to move on his illegal activities and those of his gang of thieves.

    • Old joke: How do you know when a politician is lying? When his lips are moving.

      Actually, the problem goes much deeper than mere lying. A politician is a politician because he believes his thoughts and words can dictate what reality is without regard to what it actually is. Reality is to obey no matter what it costs.

      For example they gave us MTBE in our gasoline which eventually justified forcing the replacement of nearly every underground gasoline storage tank in the state. They ultimately were instrumental in poisoning a rather large fraction of the state’s ground water with a toxin that is likely to cause cancer. It was all done “for the children” in the name of saving them from led poisoning. We had no choice in the matter. That is until they said it was OK to switch to ethanol in our gasoline.

      Now there was a brilliant move. Our ethanol laden gasoline costs more than good old honest gasoline, does not go as far per gallon, costs more energy to produce and transport than it yields. Again we have no choice. It is said that it must be that way to conserve our fossil fuel resources. Let’s see, it costs more energy (mostly fossil fuel based) to produce than it delivers and it saves our fossil fuel resources? By such logic, one can consume one’s seed corn and still plant corn or become rich by borrowing far more from the future than you could ever pay back. They are well advanced on implementing that theory.

      Now there is a positive feed back loop with a real tipping point soon to happen. Reality is real and even politicians can’t duck that fact and get away with it. Meanwhile, We the People are busy working to replace the politicians with another set of politicians who will continue to do exactly the same. For example: Davis to Schwarzenegger to Brown. Is there a real difference other than their name and accent? What next? More of the same? It’s rather like painting the deck chairs on the Titanic shortly after it hit that iceberg. It might feel good but the final act will be the same.

  2. This Professor Stout reads like a pure stupid a$$.UCLA should do a better job of screening their personell. The charge of stocking parking if there is such a crime has never been explained by the judiciary. How is a crime committed if the judges and courts can not explain the crime? UCLA should send this so alled professor packing talking to herself.

    • If it were only that easy that would be great. However, it sounds like the Law School actually considered not accepting it, which leads me to believe that maybe no one in the School was screened. It would have been better to send her on her way to teach elsewhere.

    • Is it not ironic that Professor Stout is a specialist in ‘legal morality’. Yet she herself took money from previous Lowell Milken UCLA donations only a few months before trying to create this scandal in order to sell a few copies of her worthless book.

  3. John P, I have to disagree with your assessment of Prof. Stout.
    A$$es have mass and substance, she is just the hole – and entirely stupid.

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