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Secrets Of The Junk Bond Sphinx


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SECRETS OF THE JUNK-BOND SPHINX

HIGHLY CONFIDENT: THE CRIME AND PUNISHMENT OF MICHAEL MILKEN

By Jesse Kornbluth

William Morrow -- 384pp -- $23

Michael R. Milken, Drexel Burnham Lambert Inc.'s onetime junk-bond king, is almost certainly the most reviled financial villain of the past decade. He has become the personification of the abuses of the 1980s. Yet it's far from clear why Milken broke the law. Money? Power? Ego? Some murkier pathology? It's even unclear what laws he broke. Were they just the handful of narrow offenses to which he pleaded guilty? Or, as the prosecutors charge, far-reaching perversions of the takeover game and the junk market?

Although flawed and far from definitive, Highly Confident, by Vanity Fair Contributing Editor Jesse Kornbluth, provides intriguing insights into Milken's motivations. Milken rarely talks to the press, and when he does, his comments can be maddeningly cryptic and evasive. Yet Kornbluth managed to secure some 400 hours of interviews with Milken, who at times spoke with candor. Kornbluth also gained extensive access to Milken's friends, associates, and attorneys.

Not suprisingly, Highly Confident is highly sympathetic--often too sympathetic--toward Milken. That is in distinct contrast to the best-selling Den of Thieves, by Wall Street Journal editor James B. Stewart. Stewart's take on Milken is one-dimensional: a callous criminal driven solely by avarice. Kornbluth offers a more complex, measured, and probably more accurate portrait.

To Milken's friends, and Milken himself, his wrongdoing stemmed not from the pursuit of personal gain but from a need to please that led him into almost obsessive accommodation of clients' desires, even when those desires, as was the case with Ivan F. Boesky, meant breaking the law. As Milken told his probation officer: "In my desire to please customers, I went too far."

Milken may well believe that was all there was to it. He appears extraordinarily nonintrospective. "In 25 years of reporting," Kornbluth says, "I have never encountered a man with less interest in his own psyche." Yet it's clear from the book that Milken's apparently accommodating behavior served more noxious ends. While he wanted to please people, he was even more anxious to control them. He wanted to do every trade and deal possible. In his heyday, the junk market was a kind of extension of his personality, a vast network of issuers and buyers held tightly together with an elaborate system of often questionable quid pro quos. It was, in essence, an instrument of Milken's power--and only secondarily of enrichment.

Why did he cross the line into illicit activities? Kornbluth suggests the thrill of running his empire "blinded him to such mundane considerations as bookkeeping and disclosure regulations and other, seemingly trivial securities laws." But Ned Kennan, a psychologist hired by Drexel Chief Executive Frederick H. Joseph to profile the firm, interviewed Milken before his fall and concluded that, as Kornbluth puts it, Milken had "an almost pathological enjoyment of his apparent divinity." Kennan told Kornbluth that "I sensed that he was a borderline schizophrenic who reintegrates reality in a way that best suits him."

Whatever the case, Milken proved remarkably defenseless to unrelenting pressure from prosecutors, as well as to incessant criticism in the media. The extent of his slow psychological crumbling is one of the book's chief revelations. Each accusation, each plea bargain by a colleague wounded him deeply. Each legal setback sank him further into despair. Eventually, says Kornbluth, he just couldn't take it anymore. When U.S. District Court Judge Kimba M. Wood, who presided over his case, called a presentencing hearing, Milken's lawyers wouldn't let him testify. The most powerful figure in American finance had become, says Kornbluth, "befuddled, indecisive, and easily rattled." His lawyers "saw no way to put this fragile and miserable man on the witness stand."

Had Kornbluth focused entirely on Milken, his book would have been much more satisfying. Too much of Highly Confident is a retelling of 1980s financial excesses that were much better detailed in Den of Thieves, despite its strong tilt toward Milken's prosecutors. And while Thieves is taut and compelling, Highly Confident is diffuse and sloppily organized, replete with digressions and anecdotes lacking context.

Kornbluth fails, further, to explore evidence that Milken's misdeeds may have extended far beyond the offenses to which he pleaded guilty. Allegations to this effect will get a detailed airing in A License to Steal by Ben Stein, scheduled for release in November. Stein's charges, many of which have been published in Barron's, often seem somewhat hysterical. For instance, he has likened the junk market to a "classic Ponzi scheme." Yet the junk market rebounded from the bad slump that followed Drexel's demise in 1990 and has been flourishing since. In something of a preemptive strike, Kornbluth spends several pages impugning Stein's character and credentials. But he ignores the possibility that many of Milken's crimes remain unprosecuted.

Unfortunately, the full scope of Milken's transgressions may never be revealed. The government has completed its probe, and most civil litigation has been settled. According to Kornbluth, the only man who knows all the facts is heavily into denial. Despite his guilty plea, Milken today believes he didn't really break the law. We can probably expect an autobiography after Milken gets out of jail next spring. Doesn't sound like a best-seller.CHRIS WELLES


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