Who Is Michael Milken?

Michael Milken is a philanthropist and chair of the Milken Institute. He was an executive at the investment bank Drexel Burnham Lambert and is known for his use of high-yield junk bonds for corporate financing and mergers and acquisitions.

In 1989, Michael Milken was indicted by a federal grand jury and spent nearly two years in prison for securities fraud. Milken was pardoned by President Trump in 2020.

Early Life and Education

Michael Milken was born on July 4, 1946, in Encino, California. He earned a bachelor's degree from the University of California, Berkeley, and an MBA from the University of Pennsylvania. In 1969, Milken joined Drexel Burnham Lambert as director of low-grade bond research and remained with the company for 17 years.

Drexel Burnham Lambert

At Drexel Burnham Lambert, Michael Milken initiated a high-yield bond trading department, an idea that would eventually earn a 100% return on investment. Envisioning a path for investors to garner high returns by buying bonds issued by companies with low credit ratings, Milken helped Drexel Burnham Lambert launch an effort to underwrite junk bonds by convincing companies to issue them.

The bonds provided capital for companies unable to access credit and Milken raised a large amount of money from a sizable base of interested investors. Milken led Drexel Burnham Lambert's lucrative practices of leveraged buy-outs, hostile takeovers, and "junk" bond issues.

In 1987, Michael Milken's compensation topped $550 million and exceeded $1 billion over four years. Milken was nicknamed the "junk bond king" and at its peak, Drexel Burnham Lambert was the fifth-largest investment bank in the U.S.

Wall Street leaders pondered how Drexel Burnham Lambert could allow one executive to gain unregulated power. ''Such an extraordinary income inevitably raises questions as to whether there isn't something unbalanced in the way our financial system is working,'' said David Rockefeller, retired chairman of the Chase Manhattan Bank. ''One has to be concerned when the norms that have been accepted over the years suddenly become so distorted.''

Indictment

In 1989, Milken was indicted on racketeering and securities fraud in an insider trading investigation at Drexel Burnham Lambert. On April 24, 1990, Milken pleaded guilty to six felony counts of violating securities laws and was sentenced to ten years in prison. His sentence was later reduced to two years for good behavior and for cooperating with testimony against former colleagues. Michael Milken was also banned life from the securities industry by the Securities and Exchange Commission (SEC).

Drexel Burnham Lambert declared bankruptcy in 1990. Following his release from prison, Michael Milken worked as a strategic consultant which violated his probation, and he was subsequently fined.

Michael Milken was pardoned by President Donald Trump on February 18, 2020, and as of 2022, Michael Milken's net worth is estimated at $3.8 billion.

The Bottom Line

Michael Milken is a billionaire and philanthropist known for his investment strategy of high-yield junk bonds as an executive at the Drexel Burnham Lambert. Known as the "junk bond king," Milken served almost two years in prison for securities fraud.