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.
- Michael Milken is a philanthropist and chair of the Milken Institute.
- He joined Drexel Burnham Lambert in 1969 and traded in high-yield bonds which earned him the nickname "junk bond king."
- Milken served nearly two years in prison for securities fraud but was granted a full pardon by President Trump in 2020.
- Michael Milken is banned from working in the securities industry.
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.
Also known as high-yield bonds, they have higher rates of default but offer significantly higher returns.
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.''
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 Feb. 18, 2020, and as of Dec. 26, 2022, Michael Milken's net worth is estimated at $6 billion.
What Is the Milken Family Foundation?
Michael Milken co-founded the nonprofit Milken Family Foundation and the Milken Institute, an economic think tank that hosts conferences around health, politics, media, and culture.
Is Michael Milken an Author?
After being diagnosed with prostate cancer, Michael Milken co-wrote The Taste for Living Cookbook: Mike Milken's Favorite Recipes for Fighting Cancer with Beth Ginsberg.
Has Michael Milken Donated to Education?
In 2014, Michael Milken pledged $10 million to George Washington University to fund public health programs at the Milken Institute School of Public Health.
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.