Editing Michael Milken (section)

===Indictment and sentencing===

[[File:Milken Family Foundation Award - 39881905411.jpg|thumb|Milken in 2018]]
In March 1989, a [[federal grand jury]] indicted Milken, [[Lowell Milken]], and Bruce L. Newberg, a former Drexel junk bond trader, on 98 counts<ref>''Los Angeles Times Archives'' (March 30, 1989). [https://www.latimes.com/archives/la-xpm-1989-03-30-fi-916-story.html  The Milken Indictment: The Insider Chronology.]</ref> of [[racketeering]], [[mail fraud]] and [[securities fraud]] and sought $1.845 billion in forfeitures.<ref>United States v. Milken, No. 89 Cr. 41 (KBW) (S.D.N.Y. 1989).</ref><ref>Wood, K. M., Hayes, R. S., & Carroll, J. (1990). United States v. Michael Milken, (S) 89 Cr. 41 (KMW) (S.D.N.Y. November 21, 1990). Federal Sentencing Reporter, 3(3), 158–166. https://doi.org/10.2307/20639317</ref> The indictment included a long list of misconduct, including [[insider trading]], [[tax evasion]], [[stock manipulation]], [[tax fraud]], stock parking (concealing "Drexel's ownership of 6f securities by causing the securities to be secretly purchased or sold through affiliates of [[Ivan Boesky|Boesky]] or Princeton/Newport for the purpose of gaining secret and unlawful advantages and profits in corporate takeover contests"), and other crimes.<ref>[https://www.sechistorical.org/collection/papers/1980/1989_0413_USBoeskySupplemental.pdf  United States of America, v. Ivan F. Boesky, Defendant. No. 87 Cr. 378(MEL). United States District Court, S.D. New York. December 16, 1987.] ''see'' footnote 11, citing United States v. Milken, No. 89 Cr. 41 (KBW) (S.D.N.Y. 1989). 7.</ref> One charge was that Boesky paid Drexel $5.3 million in 1986 for Milken's share of profits from illegal trading. This payment was represented as a consulting fee to Drexel. Shortly afterward, Milken resigned from Drexel and formed his own firm, International Capital Access Group.<ref name="HC"/><ref name="April Fools"/>

Milken's protege [[Terren Peizer]] had worked as a [[junk bond]] salesman for Milken, managing an account with which Drexel had an illegal arrangement that included insider trading and phony tax losses.<ref>{{Cite web|url=https://www.tampabay.com/archive/1990/10/20/dow-up-again/|title=Dow Up Again|website=Tampa Bay Times|date= October 20, 1990}}</ref><ref>{{cite web | url=https://books.google.com/books?id=z-gCAAAAMBAJ&dq=Terren+Peizer&pg=PA45 | title=New York Magazine | date=September 16, 1991 }}</ref><ref>{{Cite book|url=https://books.google.com/books?id=a9_Z413-J1IC&dq=Terren+Peizer+%22first+boston%22&pg=PA258|title=Den of Thieves|first=James B.|last=Stewart|date=2012|publisher=Simon and Schuster|isbn=9781439126202}}</ref><ref>{{Cite web|url=https://www.nytimes.com/1990/11/28/business/witness-against-milken-settles-sec-charges.html|title=Witness Against Milken Settles S.E.C. Charges|first=Kurt|last=Eichenwald|date=November 28, 1990|work=The New York Times}}</ref><ref>{{cite book |last=Kornbluth|first=Jesse|title=Highly confident: The Crime and Punishment of Michael Milken|page=213|year=1992|publisher=[[William Morrow and Co.]]}}</ref><ref>{{cite book|url=https://books.google.com/books?id=2xclCwAAQBAJ&q=dancing%20at%20the%20predator's%20ball%20peizer&pg=PA143|title=Hit & Run: How Jon Peters and Peter Guber Took Sony for a Ride in Hollywood|isbn=9781439128046|last1=Griffin|first1=Nancy|last2=Masters|first2=Kim|date= 2016|publisher=Simon and Schuster }}</ref> Peizer provided material evidence to prosecutors against Milken.<ref>[https://www.sechistorical.org/collection/papers/1980/1989_0413_USBoeskySupplemental.pdf "DEFENDANT' SUPPLEMENTAL MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR REDUCTION OF SENTENCE Pursuant to Rule 35(b)"], ''US v. Boesky'', United States District Court for the Southern District of New York, April 13, 1989.</ref> At Milken's pre-sentencing hearing for [[securities fraud]] in 1990, Peizer testified against Milken in exchange for [[Legal immunity|immunity]] from both [[criminal prosecution]] and [[U.S. Securities and Exchange Commission|SEC]] sanctions.<ref name="NYT4thImmunity">{{Cite news |last=Labaton |first=Stephen |date=December 10, 1988 |title=4th Drexel Employee in Immunity Bargain |language=en-US |work=The New York Times |url=https://www.nytimes.com/1988/12/10/business/4th-drexel-employee-in-immunity-bargain.html |access-date=November 25, 2020 |issn=0362-4331}}</ref><ref>{{Cite book|url=https://books.google.com/books?id=gm5QDwAAQBAJ&dq=%22milken%22+%22peizer%22&pg=PA11|title=Banking on Fraud: Drexel, Junk Bonds, and Buyouts|first=Mary|last=Zey|date=September 29, 2017|publisher=Routledge|isbn=9781351314831}}</ref><ref name="auto3">David A. Vise (September 12, 1989). [https://www.washingtonpost.com/archive/business/1989/09/12/new-charges-against-milken-expected/d86dabac-98f1-4a91-a2a4-628b939860c5/ "New Charges against Milken Expected"], ''The Washington Post''.</ref>

On April 24, 1990, Milken pleaded guilty to six counts of securities and tax violations.<ref name="forbes-p" /> Three of them involved dealings with Boesky to conceal the real owner of a stock:<ref name="ThreeFelonies" />

*Aiding and abetting another person's failure to file an accurate [[Schedule 13d|13d statement]] with the SEC, since the schedule was not amended to reflect an understanding that any loss would be made up
*Sending confirmation slips through the mail that failed to disclose that a commission was included in the price
*Aiding and abetting another in filing inaccurate [[broker-dealer]] reports with the SEC

Two other counts were related to tax evasion in transactions Milken carried out for a client of the firm, David Solomon, a fund manager:<ref name="ThreeFelonies" />

*Selling stock without disclosure of an understanding that the purchaser would not lose money
*Agreeing to sell securities to a customer and to buy those securities back at a real loss to the customer, but with an understanding that he would try to find a future profitable transaction to make up for any losses

The last count was for conspiracy to commit these five violations.

As part of his plea, Milken agreed to pay $200 million in fines. At the same time, he agreed to a settlement with the SEC in which he paid $400 million to investors who had been hurt by his actions. He also accepted a lifetime ban from any involvement in the securities industry. In a related civil lawsuit against Drexel, he agreed to pay $500 million to Drexel's investors.<ref name="NYT-drexel-sues-milken">{{cite news |newspaper=The New York Times |date=September 12, 1991 |url=https://www.nytimes.com/1991/09/12/business/drexel-sues-milken-seeking-repayment.html |title=Drexel Sues Milken, Seeking Repayment |access-date=February 11, 2017 |archive-date=February 4, 2017 |archive-url=https://web.archive.org/web/20170204192423/http://www.nytimes.com/1991/09/12/business/drexel-sues-milken-seeking-repayment.html |url-status=live }}</ref><ref name="NYT-milken-to-pay">{{cite news |newspaper=The New York Times |date=February 18, 1992 |url=https://www.nytimes.com/1992/02/18/us/milken-to-pay-500-million-more-in-1.3-billion-drexel-settlement.html |title=Milken to Pay $500 Million More In $1.3 Billion Drexel Settlement |access-date=February 11, 2017 |archive-date=February 4, 2017 |archive-url=https://web.archive.org/web/20170204192358/http://www.nytimes.com/1992/02/18/us/milken-to-pay-500-million-more-in-1.3-billion-drexel-settlement.html |url-status=live }}</ref>

Critics of the government charge that the government indicted Milken's brother [[Lowell Milken|Lowell]] to pressure Milken to settle, a tactic some legal scholars condemn as unethical. "I am troubled by – and other scholars are troubled by – the notion of putting relatives on the bargaining table," said Vivian Berger, a professor at [[Columbia University Law School]], in a 1990 interview with ''[[The New York Times]]''.<ref>{{cite news |work=The New York Times |date=May 6, 1990 |url=https://www.nytimes.com/1990/05/06/weekinreview/tactics-in-wall-street-cases-troubling-some-lawyers.html |title=Tactics in Wall Street Cases Troubling Some Lawyers |access-date=February 11, 2017 |archive-date=February 4, 2017 |archive-url=https://web.archive.org/web/20170204192443/http://www.nytimes.com/1990/05/06/weekinreview/tactics-in-wall-street-cases-troubling-some-lawyers.html |url-status=live }}</ref> As part of the deal, the case against Lowell was dropped. Federal investigators also questioned some of Milken's relatives about their investments.<ref name="HC"/>

At Milken's sentencing, Judge [[Kimba Wood]] told him:

{{blockquote|You were willing to commit only crimes that were unlikely to be detected.{{nbsp}}... When a man of your power in the financial world{{nbsp}}... repeatedly conspires to violate, and violates, securities and tax business in order to achieve more power and wealth for himself{{nbsp}}... a significant prison term is required.<ref name="denofthieves">{{cite book|title=Den of Thieves|page=517|author=Stewart, James B.|year=1992|isbn=0-671-79227-X|edition=reprint|publisher=Simon & Schuster|url=https://books.google.com/books?id=xNHIpVJgcHgC&q=%22When+a+man+of+your+power+in+the+financial+world.%22&pg=PA517|access-date=April 22, 2016|archive-date=May 14, 2016|archive-url=https://web.archive.org/web/20160514213736/https://books.google.com/books?id=xNHIpVJgcHgC&pg=PA517&lpg=PA517&dq=%22When+a+man+of+your+power+in+the+financial+world.%22#v=onepage&q=%22When%20a%20man%20of%20your%20power%20in%20the%20financial%20world.%22&f=false|url-status=live}}</ref>}}

In statements to a [[parole board]] in 1991, Judge Wood estimated that the "total loss from Milken's crimes" was $318,000, less than the government's estimate of $4.7 million, and she recommended that he be eligible for parole in three years.<ref>{{cite news|title=Judge Who Gave Milken 10 Years Wants Him Eligible for Parole in 3|last=Eichenwald|first=Kurt|newspaper=The New York Times|date=February 20, 1991|url=https://www.nytimes.com/1991/02/20/business/judge-who-gave-milken-10-years-wants-him-eligible-for-parole-in-3.html?pagewanted=all|access-date=February 11, 2017|archive-date=May 8, 2016|archive-url=https://web.archive.org/web/20160508033759/http://www.nytimes.com/1991/02/20/business/judge-who-gave-milken-10-years-wants-him-eligible-for-parole-in-3.html?pagewanted=all|url-status=live}}</ref> Milken's sentence was later reduced to two years from ten; he served 22 months.<ref name="Case Studies in Business Ethics">Al Gini & Alexei M. Marcoux [https://books.google.com/books?id=pU9EAAAAYAAJ&q=%22Michael+Milken%22+released Case Studies in Business Ethics] {{Webarchive|url=https://web.archive.org/web/20160328222258/https://books.google.com/books?id=pU9EAAAAYAAJ&q=%22Michael+Milken%22+released&dq=%22Michael+Milken%22+released&hl=en |date=March 28, 2016 }}; accessed April 24, 2018.</ref><ref>[http://www.economist.com/node/17306419 "Stars of the junkyard - Twenty years after Michael Milken's junk-bond firm came crashing down, the financial revolution that it fostered lives on"] {{Webarchive|url=https://web.archive.org/web/20121019173049/http://www.economist.com/node/17306419 |date=October 19, 2012 }}, economist.com, October 21, 2010.</ref>