US investment entrepreneur. Having joined Drexel Burnham Lambert in 1970, he led the firm into the 1980s using high-risk, high-yield bonds (‘junk bonds’) to finance corporate takeovers. In 1990, the year Drexel went bankrupt, Milken pleaded guilty to six felonies, including securities fraud and market manipulation; he paid over $1 billion in fines and restitution to clients, and served a 22-month prison sentence. He was released in 1993.
Milken's network of junk bond issuers and buyers fuelled the merger mania of the 1980s. By 1987 the junk bond market had grown to $150 billion and Milken's salary was estimated at $550 million. However, the previous year, one of Drexel's clients, US financier Ivan Boesky, was convicted of insider trading and implicated Milken in illegal takeover activity.
After his release from prison, Milken founded Cap Cure (Association for the Cure of Cancer of the Prostate), having been diagnosed with cancer in 1993, and, in 1996 with US computer entrepreneur Larry Ellison, founded Knowledge Universe, an online educational provider. In 1998 the Securities and Exchange Commission claimed that Milkin had violated a lifetime ban on securities trading order imposed in 1990 by brokering a deal between MCI and News Corporation. Milkin paid a $47 million penalty, without admitting liability. In 1999 he floated the consulting arm Nextera Enterprises.
Milken became an assistant to Drexel's chief executive in 1971, and then head of the fixed income research department. He has been criticized by some for virtually inventing junk bonds, which are secured by little more than the future promises of the very companies the bonds were being used to take over. However, he saw the potential of junk bonds, which, although considered speculative and below investment grade, offered high interest rates (offsetting any risk defaults) and provided a source of capital for hostile takeovers. Many acquisitions were LBOs (leveraged buyouts, in which shareholders were bought out with mainly borrowed money), where the surviving company would restructure or, in some cases, be so weakened by interest charges as to collapse altogether.
In addition to founding Cap Cure, Milken and his brother also raise money for medical and educational research.
Milken was born in California and grew up in suburban Los Angeles, the son of an accountant. He graduated from the University of California, Berkeley, and the Wharton School of Business at the University of Pennsylvania.
Milken, Michael (Robert)