Witness to a Prosecution

From The Wall Street Journal:

In the popular perception of the typical white-collar case, a judicious government prosecutes a mendacious executive on a mountain of incontrovertible evidence. Think Bernie Madoff or Sam Bankman-Fried. Then there’s Michael Milken, the former “junk bond king” from the infamous “decade of greed.” If there were a Mount Rushmore of white-collar crime, all three men might have a place.

Thanks to Richard Sandler, however, you can now scratch one of those names off that list. In “Witness to a Prosecution,” Mr. Sandler, a childhood friend who was Mr. Milken’s personal lawyer at the time, walks the reader through Mr. Milken’s 30-plus year legal odyssey, beginning in 1986 with the federal government’s investigation, followed by his indictment, plea bargain, and prison term, right through to his pardon by President Donald Trump in 2020. The author tells a convincing and concerning story of how the government targeted a largely innocent man and, when presented with proof of that innocence, refused to turn away from a bad case.

I have always been more than a bit skeptical about Mr. Sandler’s underlying thesis—and the thesis of many of Mr. Milken’s supporters on this page. After all, Mr. Milken served nearly two years in jail, pleaded guilty to six felonies and paid a large fortune to settle with the government.

I have also read books, chief among them James B. Stewart’s “Den of Thieves” (1991), that seem to make the case for Mr. Milken’s culpability—the methods he employed as head of Drexel Burnham Lambert’s high-yield department, the alleged epicenter of the destructive “leveraged buyout” mania of the 1980s that cratered companies and led to mass unemployment; his alliances with smarmy corporate raiders; his supposed insider trading with the notorious arbitrageur Ivan Boesky. The list goes on.

After reading Mr. Sandler’s account, I no longer believe in Mr. Milken’s guilt, and neither should you. The author argues that most of what we know about Mr. Milken’s misdeeds is grossly exaggerated, if not downright wrong. What the government was able to prove in the court of law, as opposed to the court of public opinion, were mere regulatory infractions: “aiding and abetting” a client’s failure to file an accurate stock-ownership form with the SEC, a violation of broker-dealer reporting requirements, assisting with the filing of a false tax return. There was no insider-trading charge involving Mr. Boesky or anyone else, because the feds couldn’t prove one.

The witnesses against Mr. Milken, among them Mr. Boesky, led investigators on a wild-goose chase that turned up relatively little. One key piece of evidence linking the two men: A $5.3 million payment to Drexel from Mr. Boesky for what turned out to be routine corporate finance work that the feds thought looked shady.

When you digest the reality of the case against Mr. Milken, you find that much of it was nonsense. As Mr. Sandler puts it: “The nature of prosecution and the technicality and uniqueness of the regulatory violations . . . certainly never would have been pursued had Michael not been so successful in disrupting the traditional way business was done on Wall Street.”

That gets us to why Mr. Milken was prosecuted so viciously. The lead prosecutor on the case, Rudy Giuliani, was the U.S. Attorney for the Southern District of New York. It’s hard to square the current Mr. Giuliani, fighting to keep his law license while being enmeshed in Mr. Trump’s election-denying imbroglio, with the man who was then the nation’s foremost crime fighter, taking on mobsters, corrupt politicians and those targeted as unscrupulous Wall Street financiers.

Mr. Giuliani’s ambition for political office—he would later become mayor of New York City—made Mr. Milken an enticing target, Mr. Sandler tells us. The author suggests that Mr. Giuliani made up for his weak legal case by crafting an image of the defendant as an evil bankster and feeding it through leaks to an all-too-compliant media. “Michael Milken became the subject of intensive newspaper articles, press leaks, rumors, and innuendo for years before he was charged with anything,” the author writes. “I am sure Giuliani and his team of prosecutors believed that Mike would succumb to the pressure and quickly settle and cooperate and implicate others. When this did not happen, the prosecutors became more committed to using their immense power to pressure Michael and try to win at all costs.”

Link to the rest at The Wall Street Journal

2 thoughts on “Witness to a Prosecution”

  1. Since that time period, targeted prosecutions – those that are begun primarily to punish/destroy opponents (ideological, political, social) have become unfortunately quite common.
    In many cities, the DAs and courts are quite open about their bias.
    It is said that NO PERSON, however innocent, will escape a guilty verdict in Washington, DC, should they fall on the wrong side of the political spectrum. That is the meaning of “Washington juries”.
    That effort to convict, regardless of evidence, is abetted by the very evident bias of judges who openly support and donate to the other political side, make ALL rulings in favor of the prosecution, schedule court dates and submission dates, not on reasonable frameworks, but so as to make it impossible to evade the restrictions of a kangaroo court.
    The new-normal of overcharging – loading up dubious felonies in an effort to persuade defendants to ‘plea out’ to a limited number of them – is a tactic used when an honest charge wouldn’t have a prayer of convicting.
    Couple that with the so-called Patriot Act, that holds UNINDICTED persons incommunicado from their legal team, restricts all their communication and news from outside, and isolates them for months at a time, and it’s not hard to understand why many plead guilty, just to have an end to the torture and lack of a future.
    This is WRONG.
    America has always stood for a place where, no matter what, you could get a fair shot at an acquittal, should be facts be on your side or ambiguous. That approach is what strongly fueled the civil rights protests of the 1950s – and helped get most of America on the side of fairness.
    Even before we were a country, when the Redcoats in Boston were on trial, John Adams put his reputation on the line to provide a defense to the accused soldiers. https://www.history.com/news/boston-massacre-trial-john-adams-dan-abrams
    Part of that “old, dead, White Man’s history” that is no longer taught.

    • It’s not just the courts that are used to punish the enemies of the friends of the party (even when they might also be aligned to the party–that much is about who is owed the “favor”) but also regulatory bodies. In fact the latter have grown so ideologically driven career staff have been forced out regardless of their own orientation.

      No need to go much further than the FAA and FTC over the last three years.

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