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1:16

s-o-l-o-v-i-s. Hello!

1:26

I'm Ted Saudis and this

1:28

is capital allocated. This show

1:30

is an open exploration of

1:32

the people when process behind

1:34

capital allocation. Through conversations with

1:36

leaders in the money game,

1:38

we learned how these holders

1:40

of the keys to the

1:42

kingdom allocate your time and

1:44

their capital. You can join

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Com. All

1:52

opinions expressed by Ted and Podcast Guess are

1:54

silly their own opinions and do not reflect

1:56

the opinions of Capital Allocators or their friends.

1:58

This podcast is for. informational purposes only

2:01

and should not be relied upon as

2:03

a basis for investment decisions. Clients of

2:05

capital allocators or podcast guests may maintain

2:07

positions in securities discussed on this

2:09

podcast. A

2:11

long time ago, 33 years to be

2:14

exact, Mike Milken pled guilty

2:16

to six counts of violations of

2:18

securities laws, went to jail for

2:20

two years, and received a lifetime

2:22

ban from the securities industry. He

2:26

was, at the time, the most

2:28

successful and powerful man on Wall

2:30

Street, and remains one of the

2:32

smartest and most successful backers of

2:34

talent in finance, cancer research, and

2:37

education. Most of

2:39

us have formed beliefs about Mike based on

2:41

accounts in the media or books written like

2:43

Den of Thieves. We might

2:45

think Mike was guilty of insider trading, for

2:48

example. The way

2:50

we form beliefs is problematic and rooted

2:52

in survival from a time long past.

2:55

We hear something and almost always

2:58

immediately believe it's true. Danny

3:00

Kahneman calls that System One thinking.

3:03

Here's one example. We think Mike

3:05

was guilty of insider trading. In

3:08

fact, he was not. His

3:10

plea of guilty did not touch

3:12

insider trading. And another,

3:15

the attorney general who aggressively pursued

3:17

Mike to bring him down, and

3:19

presumably catapult his own political ambitions,

3:22

was none other than Rudy Giuliani,

3:25

himself indicted, arrested, and

3:27

disbarred some 30 years later.

3:30

Last week, Mike discussed how he emphasizes

3:33

research and facts in his work. This

3:36

is System Two thinking. It requires

3:38

us to think on our own without being

3:40

infected by the beliefs of others. So

3:43

what really happened to cause us to have

3:45

such negative views about a man who has

3:48

done so much for the world. My

3:51

guest on today's show tells a very

3:53

different story based on facts from being

3:55

in the room where it all happened.

4:00

Mike Milken's personal attorney since 1983,

4:03

having joined Drexel three years before

4:06

the US Attorney General first subpoenaed

4:08

Mike. He wrote a

4:10

book last year entitled, Witness

4:13

to a Prosecution, The Myth of

4:15

Michael Milken, that describes

4:17

his account of what happened based on

4:19

the facts. Our

4:21

conversation covers Richard's perspective on

4:23

the history, motivations, and proceedings

4:26

that led to both Mike's

4:28

imprisonment and the public perception

4:30

of him that formed as a result. I

4:33

encourage you to set aside any

4:35

preconceived notions you have about Mike Milken

4:37

and listening to this conversation. I

4:40

hope you enjoy the show. And if you

4:42

do, this week, if you happen to be

4:44

in a married or committed relationship, and

4:47

one night you turn to your partner and say,

4:49

hey, babe, what do you think? And

4:51

they turn back and say, sorry, hon,

4:53

not tonight. I have a headache. Why

4:56

not turn a lemon into lemonade by

4:58

responding? I have a

5:00

bitter idea. Let's listen to the Capitol

5:02

Allocators podcast together. You

5:05

can snuggle up and share a

5:07

night of stimulating intellectual bonding. Thanks

5:09

so much for spreading the word to your partner.

5:13

Please enjoy my conversation with

5:15

Richard. Richard,

5:18

thanks so much for joining me. Thank

5:20

you for having me, Tim. Looking forward to the discussion.

5:23

I'd love you to take me all

5:25

the way back to your original relationship

5:27

with Mike. Going

5:29

back a long time to before when you

5:32

were born, probably, dad, I met

5:34

Mike's brother, Lowell. Lowell and I are the same age.

5:36

He's my closest friend in the world. We

5:39

became close friends when we were in the first grade.

5:41

I was six years old at the time. Mike

5:44

was the older brother, a couple

5:46

of years older. In those days, a couple of

5:48

years was a generation. But I

5:50

certainly grew up much at their

5:52

home as Lowell grew up at my home. As

5:55

kids, we went to camp. And

5:57

actually, my parents' backyard, they had a large yard.

6:00

and there was no camps in

6:02

the San Fernando Valley really at that time.

6:04

And a lot of parents got together and

6:06

decided they would fund a camp. My

6:09

older brother and myself and Mike were on

6:11

the camp. So we were campers together probably

6:13

from the time I was nine years old.

6:15

So we've interacted pretty much

6:17

from that time on. We all went

6:19

to college together at Berkeley. By that

6:22

time, that generation of two years really

6:25

shrunk. Then we just got to know each other

6:27

really, really well. What was he

6:29

like as both a kid and in college?

6:32

He was always an outgoing guy, a leader.

6:34

People were drawn to Mike. He

6:36

had a competitive nature, but he was always

6:39

easy to get along with and very

6:41

popular in school. He was head cheerleader

6:44

in high school. I think he was the

6:46

prom king at his prom, but he

6:48

didn't have any errors about him. So he

6:50

never saw that part of him. He

6:53

did really well in college. The story people

6:55

like to tell is when he was in

6:57

his last quarter at Berkeley. He needed whatever

6:59

it was, 10 units to graduate. And

7:02

he had worked at Tuchros, the accounting firm

7:04

in Los Angeles during the summer. And

7:07

he stayed in LA and continued to work

7:09

for the accounting firm during that quarter. He

7:11

came up a week before finals, bought

7:13

the books, read the books, looked at notes

7:16

of other people he knew, and passed all

7:18

his classes. So he

7:21

was always a person that was easy to admire.

7:23

And he worked hard. So

7:25

if you circle forward now

7:28

to 1983, when

7:30

you joined Drexel, where was

7:32

Mike at the time and what was Drexel when

7:34

you joined? Mike had moved

7:37

from New York to Los Angeles in

7:39

1978 and moved his

7:41

whole department with him. So you knew at

7:43

the time that he was successful in what

7:45

he was doing since he was allowed to

7:48

move a department. He and his

7:50

wife were both from Los Angeles. I think

7:52

they always wanted to move back to LA. And

7:54

his father had cancer. They had two children

7:56

at the time, two or three children, and he wanted his

7:58

father to get to know him. his grandchildren, so

8:00

he did come out at that time. I

8:03

think Drexel was starting to take off. I

8:06

think in the late 70s

8:09

was around the time that they started the

8:11

new issues of high-yield

8:13

securities for companies that couldn't get investment

8:16

grade ratings. So

8:18

Mike was known as being pretty successful as

8:20

he moved back to Los Angeles in 1978.

8:22

By 1983, there

8:26

was a lot of articles written. I think

8:28

there was a cover story in Forbes magazine.

8:31

Mike himself always was media shy. I don't

8:33

think he ever cooperated or gave

8:35

an interview in any of these articles,

8:38

but clearly a lot of

8:40

transactions were getting done. I as

8:42

a lawyer, from the time they moved out

8:44

to 1983, started doing

8:46

more transactions of investments

8:48

that Mike and other people

8:51

in the department were making. So

8:54

it was natural when they asked me,

8:56

do you want to leave the practice along?

8:59

We're putting together a small consulting group to

9:02

help structure and oversee our

9:04

investments. I was ready to do it. John Ligato

9:06

So you joined in 1983. How were those first couple

9:09

of years for you? Mike Mcconaughey They were

9:11

fascinating. I actually realized that

9:14

thinking as a client, working on

9:17

transactions, trying to structure deals, working

9:19

with lawyers is a different,

9:21

really mindset than

9:24

actually representing a client as a lawyer. So

9:26

it took me probably at least a year

9:28

before I felt that I'd made the transition

9:31

is basically how I thought about things day

9:33

to day. But it was fascinating. I

9:35

went to a lot of road shows, a

9:38

lot of major companies that became

9:40

major companies that were doing financings

9:42

for Drexel was becoming out there,

9:44

meant a lot of interesting people.

9:47

They had a bond conference,

9:49

a research conference every year

9:51

where they brought in all the buyers,

9:53

all the companies, and then also some

9:55

people from government and health

9:57

in different areas, not that different. from

10:00

what the Milken Institute Global Conference has

10:02

become to look at the world. It

10:05

meant a lot of really interesting people during that period

10:07

of time and learned a tremendous amount. So

10:09

a couple of years in, your role shifted. And

10:12

so why don't you take me to what happened? One

10:15

afternoon on a Friday, November of 1986,

10:19

when the market closed, somebody came down

10:21

to my office and says that just

10:23

he was came across the tape. Ivan

10:26

Boesky is pleading guilty to

10:28

a crime and he's paying a huge penalty,

10:31

which really is huge news.

10:34

I had worked on a

10:36

transaction where we had invested

10:38

in a financing that

10:41

Drexel did for Boesky the prior

10:43

March. And I

10:45

got a phone call that there

10:48

were federal marshals downstairs and others

10:50

serving subpoenas that

10:52

related to that transaction and

10:55

referred to a statute I'd never heard

10:57

of called RICO. They

10:59

came from the US Attorney in Southern

11:02

District in New York. This was something I had no

11:05

prior relationship with, no

11:08

prior knowledge about, and

11:10

it changed our lives dramatically. What

11:13

happened from there in Mike's involvement

11:16

in all this? The

11:19

first thing we did is we realized that this

11:21

was something that we didn't know anything about. And

11:25

we needed to get advice from people

11:27

that didn't know something about it. And

11:29

it was late in the afternoon, that

11:31

Friday, November 14, that we

11:33

gathered. And one of the names

11:35

that Mike had mentioned that he

11:37

had met before was Edward Bennett Williams,

11:40

who at the time was probably the

11:42

best known defense lawyer in

11:44

the country. He was one of

11:47

the founders of the major law firms that still exist

11:49

today at Williams and Conley in Washington, DC. We

11:52

reached out and we got him on the phone to

11:54

try to talk to him about what should we do?

11:57

What are we thinking about? I had a good

11:59

conversation with him. him, we called

12:01

other lawyers we knew to get recommendations

12:03

since this was all centered in Washington,

12:05

D.C. in New York City to

12:08

get names of lawyers on

12:10

the East Coast and plan

12:12

that next Monday to

12:14

be in New York and start interviewing

12:16

lawyers. What were your expectations

12:19

at the time? Quite frankly,

12:21

I didn't know what to expect. My

12:23

expectation was pretty naive. I was probably

12:25

most people. Number one, I

12:27

used to think that if the government was investigating you,

12:29

they must have had a good reason. And

12:31

if they didn't have a good reason, they'd figure that

12:34

out and you'd move on with your life. In

12:36

my probably polyanic view of the

12:38

world, felt that we're going to

12:41

get into the latter situation. There was some

12:43

confusion here. Boesky must have

12:45

said something to them but when they found out

12:47

it wasn't true, we'll just get back on with

12:49

life but we got to get lawyers to make

12:51

sure we do this the right way in retrospect,

12:54

quite naive. And what happened

12:56

is that played out? Well

12:58

we got involved in an investigation.

13:00

We hired lawyers. We had

13:03

subpoenas. We started complying

13:05

with those subpoenas, gathering documents, trying to

13:07

figure out what was going on. We

13:10

entered into something which I'd never heard of before

13:12

called a joint defense agreement. Drexel

13:14

got lawyers. Mike got lawyers. His brother

13:17

got his lawyers and others that got

13:19

subpoena got lawyers. I learned from

13:21

all of them what the

13:23

process was and realizing just

13:25

almost immediately the incredible power that

13:27

the government had in a criminal

13:30

investigation. I remember saying to one

13:32

of the lawyers, these subpoenas

13:34

are so broad. They're asking for stuff

13:36

that's really confidential and I'd rather object

13:38

to some of these things. I don't

13:40

really want to produce all these files

13:42

and things they want. And

13:44

this one lawyer who worked with us

13:46

from Paul Wise, who was a former prosecutor in

13:48

the Southern District of New York, said

13:51

to me, do you realize that

13:53

if the U.S. attorney wants to

13:55

tomorrow, They could take the

13:58

subpoena, they can back up a truck. The

14:00

make an empty out every file in this

14:02

building. I'll say this is

14:04

not a civil litigation. I

14:07

just don't remember that to this day and

14:09

we're going to be now going through

14:11

this process, trying to figure out what

14:13

was going. You. Have really no

14:15

rights as a person under investigation, You.

14:18

Don't have a right to ask them

14:20

questions when they subpoena documents. You don't

14:22

get a copy of the subpoenas.mystic if.

14:25

They. Should see the people to appear in

14:27

front a grand jury to take testimony. You

14:30

don't get a copy that testimony. You.

14:32

Know that find anything out or she's

14:34

have to do was awfully. If their

14:36

lawyers are cooperating with your lawyers, you'll

14:39

get some secondhand knowledge of what's capital.

14:42

He. And that's how and started out. And then

14:44

we had the other issue which was the

14:46

media. All. The sudden. Articles.

14:49

Repairing the paper that we got the subpoenas

14:51

that there was insider trading that they're looking

14:53

at. This they're looking at that. Obviously

14:56

some leaking information to the media

14:58

and for a number years now,

15:00

we're not constant a loser trying

15:02

to figure out what's going on.

15:04

what are they looking at? What?

15:06

Are we giving them? What are others

15:08

giving them? And where's this investigation going?

15:11

So. It sounds like. On request,

15:13

you're providing a lot of information, but

15:15

you don't even know at this point

15:17

in time. What They're accusing

15:19

my cover? Drexel over there, right? right?

15:22

We. News Insider trading. it's as to get.

15:25

Earlier that year Guy named Genesis

15:28

mean. Had planned guilty to

15:30

insider trading. She. Actually was

15:32

working at Drexel in their corporate finance department

15:34

at the time, but most of things he

15:36

pled guilty to was related back to time.

15:39

I think he was a canopy by. He

15:42

apparently put together a group of

15:44

people have more years other bankers

15:46

they were exchanging information in trading

15:48

on this information. On. Deals at

15:50

the new are coming up. And

15:52

he pled guilty. You. Never knew he

15:54

was under investigation to the he pled guilty.

15:57

And then come along November. And

16:00

day. Ivan Boesky. A

16:03

and. He. Didn't read any articles that there

16:05

was an investigation. With. He pled guilty

16:07

and again and was about insider trading. Then.

16:10

You got our subpoenas. Don't.

16:12

Forget that other two cases. It wasn't

16:14

in the newspapers till they made their deal to

16:16

lay pled guilty. Where. The newspapers

16:18

almost from day one, so we knew

16:20

that we wanted more than Sarah trading.

16:23

But we started looking at every transaction

16:25

that Boesky might have been involved in,

16:27

any transactions he might have been involved

16:29

in with track salts and try to

16:31

figure out what somebody might be saying

16:33

happened. from there were more subpoenas came

16:35

in, they may be looking something else.

16:38

As we would know they be looking at. X

16:40

y z transaction. That. We pull out

16:42

all our files on the x y Z transact. And

16:45

try to figure out what was going on. Since

16:47

the put it in context, who was

16:49

Boesky at the time? Animosity

16:51

was probably the most revered and respect

16:53

and risk are pretty sure I'm asked.

16:57

You. Have accounts with every farm

16:59

back. He did very little training was

17:01

Drexel. He was probably

17:03

the largest equity buyer. Of

17:05

security the stocks. At the time. For

17:08

any for a more she has. All.

17:11

This is happening. You're still not sure

17:13

what's going on. Why do you think.

17:16

Mike was the ones that they were

17:18

subpoenaing in going after. Will.

17:21

Clearly Ivan Boesky who made really

17:23

a great deal from so when

17:25

you really sink, I'm out. He

17:27

was really on the inside Information:

17:30

He was the largest purchaser of

17:32

securities he was buying sued volumes.

17:34

He was cane for the information

17:36

he was getting literally in suitcases

17:38

or bags of casts that he

17:40

was given to people. And.

17:43

Yet he only pled guilty to

17:45

one count. He. Got a

17:47

relatively life sentence. Because. He

17:50

was, as the government said, that, one

17:52

of the greatest clock raiders of all

17:54

time, and. Clearly. he was

17:56

saying that certain illegal transactions he did he

17:58

must have done with my Michael

18:01

Milken was probably the

18:04

most successful publicity

18:06

shy person financing on Wall Street.

18:09

He totally revolutionized the industry. The

18:12

idea of a new issue of a high-yield

18:14

security, our new issue of debt security for

18:16

a company that could not get an investment

18:18

grade was unheard of when Mike

18:20

came to the market. He studied

18:23

this area. He studied companies

18:25

that had below investment grade

18:28

ratings. He studied the company.

18:30

He met the management of the company.

18:32

He looked at the industry and

18:35

based upon that he started buying

18:37

securities that were at that

18:39

time at great discounts because most of

18:41

them probably had been originally investment grade

18:43

security. Got in trouble. Their

18:46

ratings dropped and their prices dropped in

18:48

the market. But Mike always

18:50

realized that if he was right about

18:52

a company, if the company is able

18:54

to pay its interest and

18:56

pay its principal and its due, that

18:58

he get paid no matter what it was selling for in

19:00

the market. And he was very

19:02

successful. The investments that he had made at

19:04

Drexel with the money that Drexel had given

19:07

him to invest, he had gone

19:09

out and talked to a lot of

19:11

major institutions and investors about this area

19:13

of the market. They started investing with

19:15

him through Drexel. They were

19:18

successful and he created

19:20

a marketplace where people were

19:22

interested in the securities that

19:24

he was recommending. Then they started

19:27

doing the new issues and

19:29

a whole industry had developed and

19:32

Drexel dominated the industry. No one understood it

19:34

as well as they did. Nobody worked as

19:36

hard. They researched it as much as Mike

19:38

and the team did. And

19:40

then they started representing people who

19:43

saw value in established companies

19:46

that they thought were undervalued. And

19:48

they were able to get financing from

19:50

Drexel, which they never could have gotten

19:52

before and started making tender

19:54

offers for companies. Some of these were

19:56

considered hostile because the company didn't welcome

19:58

it. And those

20:00

companies did not like the fact, they

20:03

called them corporate raiders at the time, that

20:06

these corporate raiders were coming after their

20:08

companies. They complained to their investment bankers.

20:10

Their investment bankers didn't like the fact

20:12

that this new industry had begun on

20:15

Wall Street and they weren't participating in

20:17

it, yet they were going after their

20:19

clients. So Mike

20:22

was an attractive target because

20:24

he really wasn't liked by a lot

20:26

of people in the business round table

20:28

and in the established firms. He was

20:30

getting a lot of publicity. He was

20:33

very successful. And so

20:35

people complained to the SEC, they complained to Congress,

20:37

and now you had a guy who

20:39

had admitted to committing securities

20:41

crimes saying that it somehow

20:44

Mike Milken was involved with

20:46

him. So how

20:48

did the investigation proceed from there?

20:51

It took a long time. We started this in the late

20:53

1986. We're getting all

20:56

these, as I say, leaks to the press going

20:58

on. You would find over a

21:00

period of time the different witnesses that they

21:02

would bring into the grand jury. Now,

21:05

the only defense you have if you go to the

21:07

grand jury is you could refuse to testify under the

21:09

Fifth Amendment. You could say, I'm not going to testify.

21:12

But they can make you testify if they give you

21:14

immunity. It's another major

21:16

weapon that the government has. So

21:19

if they say that as long as you tell the

21:21

truth, nothing you say

21:23

will we use against you personally,

21:26

we're going to give you immunity for prosecution

21:28

for anything you tell us along since it's true,

21:31

they started giving people immunity. Some

21:33

Drexel clients, some Drexel employees,

21:36

we didn't necessarily know what they were saying

21:39

if their lawyers would tell us. And

21:41

we saw the investigation was moving

21:43

in multiple directions. It wasn't just

21:45

insider trading anymore. There was

21:47

this whole idea of securities parking. Did

21:50

you sell a security to somebody with an agreement to

21:52

buy it back so that they really weren't at risk?

21:54

Did they sell you a security with

21:56

an understanding that you really didn't own it?

21:59

All these theories. that had not

22:01

really been subject to prosecution before.

22:04

We were learning about more and

22:06

more people were making their deals

22:09

to testify for the government, and we didn't

22:11

always know what they were saying. So we

22:13

always felt the risks were getting greater and

22:15

greater during this period. Now, there

22:17

were two investigations going on. You had the

22:19

Security and Exchange Commission doing an investigation, and

22:21

you had the Southern District of New York

22:24

U.S. Attorney doing a criminal investigation. So

22:27

the first movement was by the SEC. They

22:29

filed a complaint against Drexel, against

22:31

Mike, against his brother, against a few

22:33

others. I believe it was in 1988. They

22:37

alleged all kinds of different securities violations.

22:40

Some would have related to

22:42

insider trading, some related to the other things we

22:44

were talking about. And

22:46

then in 1989, the

22:48

indictment came down against Mike and his brother.

22:51

And the SEC complaint

22:53

and the indictment, Drexel made a

22:55

settlement with the government. We

22:58

think of the legal system as innocent

23:00

until proven guilty. And what

23:02

you're describing sounds

23:04

like a bunch of gathering information

23:06

up until these cases or

23:09

indictments are shown to you. You don't even know

23:11

what's happening. Is that how the process

23:13

works? Right. You don't get

23:15

any information from the government as to how they're doing

23:18

it. And at this

23:20

point in a high-profile, highly publicized

23:22

case, you're really not

23:25

innocent in the court of public opinion. The

23:27

articles are about, they must have done this,

23:30

they must have done that. The expectation now

23:32

is that you did something. The

23:34

other thing I learned is that

23:37

the Southern District of New York, they

23:39

consider themselves a crime office of the

23:41

Justice Department, and they can't be

23:44

wrong. Their job is

23:46

to protect their reputation. So once

23:48

they allow the information to be

23:50

linked, that this investigation

23:52

was heading towards the indictment against

23:55

whether it's Drexel or Michael Milken or ever

23:57

else, they can't be wrong. They're

24:00

going to prove that they're right and they're going to defend

24:02

themselves. One of the reasons I

24:04

wrote the book is so people understand that today

24:06

the process is no different than the process was

24:08

when we went through it. And

24:11

the government has tremendous power, prosecutors were

24:13

given this power, so they could put

24:15

away bad guys. But their

24:17

job is to see that justice is

24:19

done. Their job is to seek the

24:21

truth. And as was

24:24

said by the Supreme Court, it's not

24:26

to necessarily win a case. It's to

24:28

see that the guilty are punished and

24:31

the innocent are not. That's their job.

24:34

What I found was these young guys,

24:36

they're not bad guys. They're young attorneys.

24:39

They're aggressive. They're trained to

24:41

believe in what they're doing. The guy

24:43

wouldn't be under investigation if he didn't do something wrong.

24:46

Now go figure out what it was. And

24:48

they use their power to win. It's

24:50

not a level playing field because they

24:52

have all the tools until you

24:54

get indicted. Until the day you

24:56

get indicted, you're not entitled to

24:58

any information. But remember I

25:00

talked about they give immunity to it. So

25:03

they go to a witness and they

25:05

say, we're investigating the ABC transaction. And

25:08

we see the transaction happen and we believe

25:10

that there was some illegal

25:12

understandings and agreements here. Can

25:15

you help us in proving

25:17

our case? Because if you can, we'll

25:19

give you immunity. If you

25:21

can, we don't want you to lie. So if you

25:23

can't, we won't give you immunity. But

25:26

if we learn later that you were involved in

25:28

these transactions and we do bring a case, then

25:30

we're going to indict you. This is

25:32

a RICO case. Under RICO, your

25:34

assets are in jeopardy as well

25:36

as your freedoms in jeopardy. They

25:39

have that tool. I go

25:41

to the same person and I say, look, you're

25:43

still working for Mike. Your bonus

25:45

is coming up in a few months. We'd

25:47

like your cooperation. This is what we believe

25:49

happened. And we really do believe this happened.

25:52

Do you remember it that way? This could be helpful to

25:54

us. It could be helpful to you. Get

25:56

indicted for obstruction of justice. I can't do that.

26:00

All the power, all the weapons are

26:02

in the hands of the prosecutor, and

26:04

if the prosecutor's goal is to win.

26:07

Somebody said to me early in the investigation, the

26:09

defense lawyer who had been in the Justice Department,

26:12

and if the government wants to get you, they're

26:14

going to get you. And

26:16

I can't believe how

26:18

committed the Justice Department in this

26:21

case is to Michael Milne. I

26:23

don't know why, but that's it, and

26:25

they want to get him. At the time, I

26:27

dismissed it. Later on, it

26:29

kept haunting me, that comment. You'd

26:32

like to think that knowing they have

26:34

that power, they wouldn't

26:36

proceed in such a way unless

26:39

they felt like they were doing

26:41

their job and seeking truth. So what

26:43

were their motivations in

26:45

going after Mike? Yes,

26:48

in fact, you don't think he did anything

26:50

wrong. Well, they

26:52

made a deal with Ivan Boesky, and

26:55

they made a deal predicated on him making other

26:57

cases for them. And

26:59

the prime case that

27:01

he was going to give them was

27:03

Michael Milken because of what

27:05

he'd accomplished and what his position was in the

27:08

industry at the time. So

27:11

they had an incentive to say, well, we

27:13

didn't make a bad deal. They

27:15

had an incentive to say that what this guy

27:17

was telling them must be true. And

27:20

if we could get other people to tell pieces

27:22

of it or whatever else, it must be true.

27:25

I think that's how they're trained. They're trained to

27:27

say, we made a deal with this guy. He

27:29

said this guy did this. We

27:32

bought onto it. Let's find out

27:34

if he did it. And by the way, it's in our interest

27:36

to find that he did do it. And

27:39

what's he doing in our office anyway? We

27:42

didn't tell Ivan Boesky to do business with

27:44

him. They did business together. So I

27:47

think the motivation is that's how they get

27:49

ahead. The prosecutor is – I can quote

27:51

him in the book who came to my

27:53

class later on – said

27:56

that the way that prosecutors get paid is not

27:58

in money. It's in

28:00

being successful and that helps

28:02

our career. The more notice the case

28:04

gets, the more important it is for

28:07

us to be successful. And the

28:09

problem is, Ted, at least

28:11

that I see, is they should be

28:14

trained to ask themselves, what

28:16

if we're wrong? We're

28:18

dealing with human beings. This

28:20

guy has a wife. All these

28:22

people do, they have children. If

28:24

we're wrong, what are we doing to their

28:27

lives? But they don't ask themselves

28:29

that question, at least in the cases that I

28:31

saw, they don't ask themselves that

28:33

question. So it's not that they're bad guys

28:35

and they're out to do something wrong. They

28:37

believe in what they're doing. They

28:40

believe their witness. One of the

28:42

flaws in the system is they never get

28:44

to know the person under investigation. They only

28:46

get to know the witnesses that they've immunized

28:48

or that have pled guilty to them. Those

28:50

are the only people they get to know.

28:53

So how does that work? Is there in

28:55

the process of getting documents and talking to

28:58

people? Is it they never interact with Mike

29:00

who is the subject of what became the

29:02

indictment? They never do. Certainly

29:05

as a lawyer, well, you know

29:07

what? We wanna cut this off, Mr.

29:10

Prosecutor. Why don't we bring

29:12

our client in to meet with you and you'll

29:14

see that he's telling the truth. So

29:17

you can do that. The

29:19

problem is nobody would do that because the risks

29:21

are too great. The risks

29:23

are too great that they won't believe them,

29:26

but they'll take something that he said and

29:28

they'll use it against them. And

29:30

now you're disclosing to them your

29:32

defense. The only thing that

29:34

they don't know at this point is what your

29:36

defense is. So now you're taking

29:39

the person that has all the power

29:41

who's trying to destroy your life and

29:44

you're telling them whatever you

29:46

wanna tell them, they're not telling you anything.

29:49

And so nobody does that. To me, that's the flaw

29:51

of the system. I really think it would work a

29:53

lot better if there was a method for

29:55

people to come in and talk and get

29:57

to know each other. They do have...

30:00

different things. There's something they nobody

30:19

ever brings the witness in early

30:21

on when they are really the subject

30:23

of the investigation. When the

30:26

indictment comes down, you now know what it

30:28

is they're targeting. What

30:30

happens from there in the process? I think

30:33

there were 12 transactions in the indictment.

30:35

98 counts. If there's one transaction and

30:38

you mail three letters, that's three mail

30:40

fraud. So now we study all

30:42

the transactions. We look into it so now

30:44

we have an idea what the charges are

30:46

and we start repairing our defense. That's

30:48

what we're doing. Meanwhile, the pressure

30:50

is building. You have these articles

30:53

that are not accurate that

30:55

are appearing almost on a daily or

30:57

weekly basis in major newspapers

30:59

and magazines about what a horrible person

31:01

you are. In this case,

31:04

you got your brother is under investigation

31:06

and then indictment and

31:08

he wasn't even involved in most of these

31:10

transactions. So you know he's there only

31:12

because he's got the same last name you have

31:15

which is borne out. History's proven that to

31:17

be true and you're looking

31:19

around and some people that work for you are

31:21

all getting immunity. People that work

31:23

at your clients are getting immunity and

31:26

now Drexel has settled. They've

31:29

pled guilty saying that

31:31

they didn't have enough information to

31:33

dispute the accusations. They settled with

31:35

the SEC and the US Attorney.

31:38

This is before you've even been indicted. You

31:40

talk about the other central proven guilty. As

31:43

part of their settlement, they had

31:45

to fire Michael. They had to

31:47

separate from him. Then they had

31:49

a provision in the settlement the SEC that

31:52

said that no employee of Drexel was

31:54

allowed to talk to Mike about

31:57

any business transaction Drexel was involved

31:59

in. So now you

32:01

have a person that hasn't even been

32:03

indicted, let alone proven guilty beyond a

32:05

reasonable doubt, who has now been

32:07

declared guilty by the firm that he helped build

32:10

and work for because they're going to get rid

32:12

of him and they're not allowed to talk to

32:14

him. So now you

32:16

have the entire firm against you where you work,

32:18

you're not working there anymore, which is what you

32:20

did every day for 14 to 18 hours a

32:23

day. Your

32:25

brother's exposed, you're exposed. You

32:28

know what you did and didn't do, but

32:30

then you've got Ed Williams who unfortunately passed

32:32

away early on this, but who

32:35

said to me early on, everything

32:37

I've seen shows that Mike is

32:40

innocent here. But my biggest

32:42

fear is I can't

32:44

tell a jury that this

32:46

guy made this much money

32:49

because he made an incredible amount of money, is

32:51

not guilty of something, that's my concern.

32:54

And now he's exposed to 20 to 40 to

32:57

80 years of prison because

32:59

of RICO and everything else.

33:02

And the pressure's building to a point where he

33:05

says, everybody else is making a deal, what

33:07

are my options? When Drexel settled,

33:10

what did they admit to the

33:12

government in that? They

33:15

admitted, I'm certain of the transactions that were

33:17

in the indictment. They said that we don't

33:19

have the information to dispute it and

33:22

therefore we are willing to plead to

33:24

have done, I don't remember the counts

33:26

exactly what it was. They paid a

33:28

very large fine. They paid $650 million

33:30

out. Part

33:33

of that went as a criminal penalty

33:35

and part of that went as an SEC

33:37

discouragement fund because they settled with both

33:39

the SEC and the US Attorney because they had anyone.

33:42

It could have been some of the transactions, it could have

33:44

been a 13-D violation. I don't know. I

33:46

mean a lot of this stuff was very regulatory, but

33:49

the biggest issue was the fact that Mike

33:51

was now gone from Drexel. He

33:53

wasn't there anymore and the

33:55

firm had an interest in

33:57

being cooperative with the government. In fact, had a…

34:00

The firemen to cooperate with the government. And

34:02

so were the from. Been fighting the

34:04

charges before. It was not cooperating

34:06

on it. All the forces were

34:08

coming against us. Why? Did you

34:11

think at the time that Drexel agreed

34:13

to settle if they didn't think there

34:15

was anything that had and done wrong?

34:17

A. Couple things that happen: Government data

34:20

from Cop Prince in Newport which

34:22

was at Drexel quite. The. Prosecutors

34:24

of the time had told the principles

34:26

and the lawyers for Prince in Newport

34:29

that they're going to run over them.

34:31

They're going to destroy them unless they

34:33

helped them against Michael Milken. And.

34:35

Another case it was under investigation. time

34:37

again it up frame into the in

34:39

relationships. And. They.

34:42

Brought a Rico case against President Airport which

34:44

is very respected for. Case

34:46

went to trial and Prince in Newport

34:48

lost. The. From was out of

34:51

business before the first witness was caught in

34:53

the trial. Because. Under Rico

34:55

you could create a freezing

34:57

of assets and is a

34:59

financial institution that's very, very difficult.

35:01

So even though Prince in

35:03

Newport case was reversed on

35:05

appeal, And then the

35:07

government every tries. Sachs.

35:11

Out of business. Before. The

35:13

trial started really got the attention. The

35:15

Drexel. What's. Gonna happen with

35:18

our lenders. If we go to trial

35:20

on a Rico case, what are we

35:22

gonna do? Likewise,

35:25

There was a particular assistant that worked

35:27

in the High Your Mind department who

35:29

was indicted for perjury. They went after

35:32

her as an important case in that

35:34

she was that innocent individual that the

35:36

government and was the Fpr. The postal

35:38

inspectors came to our house and nine

35:41

o'clock one night and start asking questions

35:43

and then she starting answering. That she

35:45

stopped answering and then later front of

35:48

a grand jury. They said she was

35:50

perjuring herself and went after her and

35:52

they convicted her. That also send

35:54

a message to Drexel that none of our

35:56

employees or six. So. Tracks

35:59

or scare there. go out of business if

36:01

they didn't do something. They had

36:03

10,000 employees and they felt their obligations

36:05

went beyond just one person. So

36:08

whether I agreed with them or not really is an

36:10

important, but that's why they

36:12

decided to settle. You've

36:15

mentioned this RICO hearing. What

36:17

is RICO? RICO

36:19

is the, I think it's called

36:21

record hearing, investigation, corruption, whatever

36:23

act. It's an act that was passed

36:25

by Congress that was really

36:28

intended to give prosecutors even greater

36:30

powers when it came going

36:32

after organized crime. Under

36:34

RICO, if you're a

36:36

criminal enterprise, they

36:39

could freeze all the assets of

36:41

the enterprise during the investigation and

36:43

you have to forfeit all those assets if

36:46

you're found guilty. The amount

36:48

of time that you would have to

36:50

spend in prison for every count of

36:52

RICO you violated is much higher. So in

36:54

the securities fraud, it's five years. So

36:57

it's 20 years. So it's

36:59

a very powerful statute. That

37:02

really was not designed to be used against

37:04

a financial firm. In fact, when

37:06

I talked to Ed Williams that first day in November

37:08

of 1986 and I read him the

37:11

subpoena and he heard it had a

37:13

RICO in it, he says, it doesn't

37:15

surprise me. That's not what RICO's for.

37:18

But Rudy Giuliani, who is the U.S.

37:20

attorney for the Southern District of New

37:23

York is the biggest piece of political

37:25

meat I have seen since Tom Dewey.

37:28

And for those that don't remember Tom Dewey, he

37:31

was U.S. attorney for the Southern District of New York

37:34

and he used his position for a political

37:36

career. He went on to be governor of

37:38

New York and later ran

37:40

for president of the United States, almost got

37:42

elected against Harry Truman in 1948. Rudy

37:46

Giuliani clearly had a political ambition,

37:48

became the mayor of New York.

37:50

And so we all know had aspirations to

37:52

become president of the United States. Now

37:55

that this is happening, Mike's been

37:57

fired from Drexel. He's off on the

37:59

side. Drexel is settled. What

38:02

do you do? Well, we prepare

38:04

to go to trial figuring that we

38:06

could win the trial, but we have

38:08

to convince a jury. But at the

38:11

same time, we started exploring the idea of how

38:13

do we cut our wrists. And

38:15

we started having conversations with the

38:18

prosecutors, and those discussions

38:20

got to a point where we realized

38:23

we probably could settle without

38:25

making cases. Don't forget, up to that time,

38:27

if you wanted to settle, the way you

38:29

settled with the government is you make cases

38:31

against others. That's what Mr. Browski

38:33

was able to do. That's how you

38:35

get a good deal in settling, make

38:38

cases against others. Well,

38:40

Mike didn't engage in criminal

38:42

activity, so he wasn't in a position

38:44

to make cases against others. Number one, number two,

38:47

I don't think his personality

38:49

is such that he could make cases

38:51

against others. So once they said

38:53

you don't have to make cases for others, we

38:55

started negotiating with them as to, so what do

38:57

we have to do? And

38:59

it came down to we need six counts because

39:01

Drexel put in the six counts, and you're going

39:03

to have to do the same thing. And you're

39:06

going to have to pay $650 million because Drexel

39:08

paid $650 million. We

39:11

said, look, we're not Drexel. We're not

39:13

a corporation. I don't care what they

39:15

did. We're not paying what they paid,

39:17

et cetera. And we

39:19

finally got to a point where we could pay,

39:21

I think it was

39:23

$500, and still had to be

39:25

six counts. And then they said one

39:27

of the counts has to be insider trading. So

39:29

we said, well, we're not pleading to anything we didn't

39:31

do, so let's not

39:33

talk any further. They said, well, okay, okay.

39:35

Well, one of them will

39:38

be conspiracy. We've got to find five transactions. Three of

39:40

them had to be with Browski. And

39:42

that's what we did. We actually found things

39:44

that played to none of which had ever

39:47

been subject to criminal prosecution before, many

39:49

of which hadn't probably even been enforced

39:51

as regulatory violations before. But we

39:54

found things that he could admit to. We

39:56

came to an agreement on the money. Most

39:58

people probably don't. Except this,

40:00

but like I said, I've known Mike my entire

40:03

life. Money was never the issue. Mike

40:05

made a lot of money because he knew what he

40:07

was doing and he was really good at it. His

40:09

view was he can

40:11

continue doing that. Whatever it costs to settle

40:14

is what it costs. We had to figure

40:16

out a number. He didn't want to

40:18

do what Drexel did because he just didn't want to be

40:20

painted with that picture. We came to a

40:22

dollar number to pay. We paid a way

40:24

to do it and we came to transactions to

40:27

play to. So he decided to settle. And

40:30

in the course of the settlement, we got to a

40:32

point where we got stalemated and they came back to

40:34

us and said, well, if

40:36

he'll settle, we will also drop

40:39

all charges against his brother, which

40:41

was unheard of in the Southern District, which

40:44

was a confirmation as to why he was in the

40:46

case in the first place. So

40:49

what were those violations

40:52

that Mike plead to that you said

40:54

hadn't really ever been prosecuted before and

40:57

might not even be regulatory violations? Take

41:00

one would be aiding

41:02

and abetting another person and filing

41:04

a false 13-D. So

41:07

what did that involve? Mr. Boeske owned

41:09

stock in a company called Fishback and

41:11

he had more than a 5% interest

41:13

and he filed the 13-D as he

41:15

was required to do. He complained

41:18

to Mike that it was

41:20

a bad deal because he'd asked Mike, what

41:22

did Mike think about it? Mike says it

41:24

might be a good deal because a client

41:26

at Drexel had made a public statement that

41:28

he wanted to acquire this company. So it

41:30

was in play and he

41:33

never acquired it. So Boeske complained to Mike

41:35

that he never acquired it. Mike's comment, well, you know

41:37

what I know. I didn't give you any information. It

41:39

was not my fault. And just to get him off

41:42

the phone one day, he said – and I know

41:44

this sounds kind of funny, but he said fine. If

41:46

you actually lose money on that, I'll make it up

41:48

to you. I guarantee you

41:50

didn't have any idea how he'd make it up to him,

41:53

the idea being that, hey, someday I'll find

41:55

a good security, something that I think is

41:57

valuable, I'll recommend it to you. But

42:01

anyway, the violation was since

42:03

a 13-D is supposed to

42:05

disclose everybody who has an

42:07

interest in the security, theoretically,

42:10

Mike Milken saying, I'll make it up to you means he

42:12

had an interest in the security. So

42:15

Boseky should have amended his 13-D. So

42:18

these are the kind of things he pled to. Do you

42:21

really think that Mike Milken was thinking at the time,

42:23

I wonder if he's going to amend his 13-D or not? But

42:26

he aided and abetted, and I don't think anyone's

42:28

ever gone for prison for a

42:30

false 13-D filing, let alone aiding and

42:32

abetting of another person by not amending

42:34

it. There was a net

42:36

capital violation that Boseky – apparently he went

42:39

to somebody else that he dealt with at

42:41

Drexel that worked for Mike and

42:43

said, I got to get some securities

42:45

off my books because otherwise my capital's

42:48

going to drop below the regulatory

42:50

requirement. So if you'll buy these

42:52

securities, I'll buy them back from you later

42:54

on in the law, which would be inappropriate.

42:57

Never prosecuted, but inappropriate. What

42:59

Mike led to is he didn't make the deal

43:01

with Boseky, but he heard about it. He

43:04

approved it, but instructed the person

43:06

to sell it back to him right away. I

43:08

don't want to keep it on my book. So

43:11

that was a net capital violation.

43:14

They were all things like I'll make it

43:16

up to you, whatever else. Interesting enough, when

43:19

the judge assessed the economic

43:22

damage to the marketplace from

43:24

everything Michael pled to, included

43:27

on the three counts that related to

43:29

Boseky, that the total

43:31

economic effect of these violations

43:33

was zero. Not

43:36

one penny was lost. With another

43:38

client, he had a high-yield fund,

43:41

and Drexel was charging Mike's

43:43

department with commissions. It was

43:45

paying to its salesman for

43:48

selling the fund. So he

43:50

went to the money manager of the fund and goes, look,

43:52

I'm paying all these commissions.

43:55

I want you to do certain trades where

43:58

I'll give you credit. rate

44:00

is done, there's a bid and an ask. It's a bond.

44:02

So your bid is 91 and a quarter. My ask

44:05

is 91 and three quarters. You

44:07

settle somewhere in between that. So

44:10

Mike's comment was on certain

44:12

transactions, if you're buying it, I

44:15

want you to buy it at the ask. And if

44:17

you're selling it, I want you to sell it at

44:19

the bid, all within the market,

44:21

but we won't negotiate and I'll give you credit.

44:24

And Drexel's management agreed that

44:26

he could do that. Well, what he

44:29

pled to was a mail fraud

44:31

because the confirmations on these trades

44:33

did not disclose that there was

44:35

a commission involved in it. I

44:38

promise you nobody's ever gone to prison

44:40

for recouping commissions on trades

44:42

before. So those are the natures, the

44:44

things he did. Should he

44:47

have done it and not done it? That's a different issue,

44:49

but should a person go to prison

44:51

for that? Another issue. So let's talk

44:53

about what happened after that plea

44:55

and maybe start with what happened to Drexel.

44:58

Drexel announced when they pled that

45:00

after they paid their fines and

45:02

penalties and everything else, they still

45:04

had over a billion dollars of

45:06

an incumbent equity capital in the

45:08

firm. So the firm was in

45:10

good shape financially to proceed. So

45:13

Drexel now was operating for the first time

45:16

ever since it had become a major player

45:18

on Wall Street without Michael Melton. What

45:20

had happened is to prove they could

45:22

still get deals done, they were taking

45:24

a lot of securities that they couldn't

45:26

sell into inventory and they

45:28

were financing it by issuing

45:30

commercial paper in the commercial paper

45:32

market. So in

45:34

financial parlance, they were

45:37

borrowing short and lending long.

45:40

When the commercial paper market dried

45:42

up for Drexel because they had

45:44

all these securities in their inventory,

45:47

they couldn't make their financial

45:50

obligations and within a

45:52

year, they declared bankruptcy. So

45:55

that also didn't help Mike because everybody said

45:57

it was Mike's fault that they declared

45:59

bankruptcy. though he was gone. And

46:02

then what happened with Mike after the plea?

46:04

Between the plea and sentencing, the

46:07

way the process works is the government

46:09

files a sentencing memorandum as

46:11

to what they think the sentence should be and

46:13

you file a sentencing memorandum as to

46:16

why this is an aberration, these aren't

46:18

that serious and why

46:20

the penalty should be much

46:22

less. In this particular

46:24

case, because Mike pled to six counts,

46:26

we were very concerned about the fact

46:28

that there was so much leeway in

46:31

what the sentence could be. And

46:33

we made a deal with the government that

46:35

at the plea, Arthur Lyman,

46:37

Mike's lawyer, would stand up and say,

46:39

Your Honor, because of

46:42

the circumstances of this case, we

46:44

have an agreement with the US

46:46

Attorney that they will not recommend

46:49

consecutive sentences. That means

46:51

you would be capping the largest sentence

46:53

at five years. And we figured

46:55

those capped at five years through our

46:57

arguments and through our sentencing memorandum and everything,

46:59

maybe we can get it down to two

47:02

or three. That was our goal. And

47:04

the government agreed. They stood up and told the

47:06

judge, that is true, Your Honor. We have in

47:08

the past done that, but we're not

47:10

doing it here. And our agreement was also they

47:13

weren't supposed to recommend a sentence. So we

47:15

filed sentencing memorandum. Now we were supposed

47:17

to exchange drafts of sentencing

47:20

memorandum, for whatever reason, which was

47:22

to me a huge mistake, we

47:24

never did. Their sentencing memorandum was

47:26

devastating. It keeps Mike and being

47:28

one of the worst human beings in history,

47:30

his entire life was supposed to

47:32

be a fraud and then markets and he did

47:35

this and he did that. And what he pled

47:37

to was just scratching the surface. And here's all

47:39

the other terrible things he did. And we want

47:41

you to take that into account. And

47:44

we filed a sentencing memorandum saying he never did anything

47:46

else other than these regulatory things

47:48

that he pled to. And look at the

47:50

life he's had, over 100 letters of

47:53

people of what he'd done in

47:55

philanthropy, what he had done in the community,

47:57

how he cared about people, how his

48:00

business was so legitimate and how he

48:02

changed the world and all these different

48:04

things. So the judge

48:06

is sitting here with these two different

48:08

memorandum and she decides to

48:10

hold the hearing called a fattico hearing.

48:13

Maybe the first time a fattico hearing has ever

48:15

been held in a white-collar manner. Anyway, she held

48:17

the hearing and she said, government,

48:20

you said he did all these other things. He

48:23

said he didn't do anything else. I'll give you 20

48:25

hours. Show me anything

48:27

else he did. Like one, two, three,

48:29

four, whatever you want, you pick it.

48:32

Show me he did anything and if you can

48:34

show me he did anything else, I'll

48:36

take that into consideration. We

48:39

thought that was not a fair process because

48:41

we had to prove a negative. They're

48:43

going to say we did something and all we can do

48:45

is we can prove we didn't. We

48:48

asked, can we use some time to

48:50

prove the legitimacy of his business and

48:52

what he accomplished? The court said no.

48:55

Can't do that. So they picked three

48:57

transactions. One they said was

49:00

insider trading. One they said it was

49:02

stock manipulation. One was they

49:04

bribed money managers and all these

49:07

different things. We

49:09

held this hearing. It went on for several weeks and

49:12

the judge concluded that they

49:15

proved not one thing that

49:17

they said that they could prove. He didn't commit

49:19

any other crimes to what he pledged. That's it.

49:22

Unfortunately in the course of the

49:24

hearing, you had certain witnesses

49:26

saying that, well, Mike

49:28

told me that I couldn't produce anything I

49:30

didn't have. Or Mike

49:32

told me if I want to get rid

49:35

of anything, now's the time to do it. When

49:37

they were asked, well, did you get rid of anything? No.

49:40

Did he ever come back to you and ask you if you got rid of

49:42

anything? No. Well,

49:44

what do you think he meant? Well, I'm not

49:47

sure. And then one person said he did

49:49

ask me to give a booklet I had about

49:51

my relationship with one of my clients to

49:53

somebody else and I never saw it again. Now

49:56

Mike didn't testify at Fatico

49:59

with denying it. Any those things happen. The

50:02

person. That. They. Said he

50:04

had the both a to deny that ever happened.

50:06

But. The judge concluded the and the

50:08

fat ago government sailed on. Transaction.

50:11

One Two and three. But. There's.

50:14

An indication here: Obstruction Of Justice.

50:17

And she gave him a ten year since.

50:19

Which. Number One negated what

50:21

we saw was x app of

50:24

five years because she gave him

50:26

two years on five counts to

50:29

see served consecutively that concurrently. It.

50:31

Was actually a deficit. Of

50:38

Inslee obviously got that. Me just. After

50:41

all this time. There's

50:44

been. Things written there were

50:46

books written about it at the time

50:48

I think the one that people know

50:51

best as Den of Thieves that talked

50:53

about all these things that certainly painted

50:55

might and a bad light and I'd

50:57

love to hear your response from being

51:00

near of a book like. That.

51:03

Book we knew was be admitted at the time

51:05

through by a then reporter for the was featured

51:07

on their James Stewart. We. Knew he

51:09

was writing a book because he was interviewees

51:11

many people as he could. He

51:14

had one point he reached out

51:16

to our media consultants and said.

51:18

We'd. Like to talk to somebody in

51:20

the militant group because. We're.

51:23

Willing to put he and his side of the story.

51:26

So. I met with the guy. Couple

51:28

types. And the way

51:30

he represented to me is. I.

51:33

Want to give your side of the story? I

51:35

want my readers to make up their own fine.

51:37

Said I will take the name of the book is readers

51:39

should make up their own money. But test

51:41

me Tommy I got these transactions. If you to

51:43

tell me your side I will put it in

51:46

the. So we

51:48

went to the transactions. We found that

51:50

his theory the transactions was told he

51:52

was at showed him why it was

51:54

wrong. And. He.

51:56

published a book and most of what i told

51:58

them was not in the book And if

52:00

it was in the book, it was in the

52:02

end notes of the book. It was not when

52:05

he described what he considered the wrongdoing in the

52:07

transaction. And what I found

52:09

very interesting about it is in the forward

52:11

of the book, he talks about how he

52:13

wrote the book and how many

52:15

people were interviewed. And he said, everybody

52:18

mentioned the book was either interviewed or had

52:20

a chance to be interviewed about what we

52:22

said about them. And if there

52:24

was a discrepancy between two people, I

52:27

would decide based upon my reporting, which one

52:29

was telling the truth, and

52:31

I would put the other side in the end notes

52:33

of the book. He said

52:35

the biggest discrepancy I found was

52:37

between Boesky and Milken. Now

52:40

if there was a discrepancy between Boesky and Milken, if

52:42

he talked to Boesky, then he heard from Boesky, I'm

52:45

the source for Milken. And

52:47

he said, I chose to believe

52:49

Boesky because he'd already made a

52:51

deal and he had no reason to lie, plus Milken

52:53

first said he was innocent and then he pled, which

52:56

I found interesting since what I pled to

52:58

isn't what he was indicted for. And

53:01

that's not how he represented to me when

53:04

he interviewed me. Pause, I

53:06

mentioned in that book, now he said everybody

53:08

mentioned in the book had an opportunity to

53:10

be interviewed about what they said about him.

53:13

He met with me twice, never

53:15

asked me one question about things he said about me

53:17

in the book, some of which are not true. So

53:21

to me, obviously, you could say that

53:23

I'm prejudiced. The book doesn't have a

53:26

lot of credibility. Clearly,

53:28

if he talked to Boesky and he

53:30

took Boesky's side of the story, that's

53:32

the basis under which he accuses Mike

53:34

of things that the government never accused

53:36

him of. But remember, the

53:39

judge who sends Mike, who held

53:41

the Fatiko hearing, wrote

53:43

a letter to the Parole Commission

53:45

on Mike's behalf, indicating

53:48

that she held the

53:50

Fatiko hearing and she did

53:52

not believe that any

53:54

further wrongdoing other than what he pled

53:56

to could be shown, even by

53:58

a preponderance of the evidence. as a result

54:00

of her fatty odor. This

54:03

happened and Mike

54:05

served his sentence a long time

54:07

ago, 30 something years ago. I'm

54:10

curious why tell

54:13

the story in your book now and why did

54:15

it take so long to decide to do this?

54:18

It's an excellent question. It's something

54:20

I've been thinking about for a long time

54:23

and once you don't do it immediately, just

54:25

all of a sudden has a way of

54:27

just accelerating. So initially,

54:30

I wasn't going

54:32

to do anything because these other books were out

54:34

there and Mike had just served his sentence or

54:36

was even serving his sentence at the time and

54:39

I felt we were just up against a tidal wave. I

54:41

was going to let time pass and

54:43

then as time passed and some of the

54:45

same lies kept getting repeated, he went

54:48

to jail for insider trading or he went

54:50

to jail for fraud in the bond,

54:52

none of which is true. I

54:54

said, you know what? I was there. No one's ever

54:56

written that was there. I'm going to write something myself.

55:00

So I decided that the best way

55:02

for me to write is if I

55:04

could teach a class on the subject,

55:06

it would cause me to the discipline

55:08

of gathering all my notes, all the

55:10

information and getting it organized. And

55:12

about 10 years before I

55:14

wrote the book, a friend at Stanford said, I'll do

55:17

this class with you and we talked to Stanford Law

55:19

School, pretty respected law school and

55:21

the class was really well received and it

55:23

got me all my information plus the prosecutor

55:25

came to the class and I transcribed what

55:27

he had to say and other government and

55:30

other lawyers came and I had all the

55:32

information and I was going to sit down

55:34

and start writing the book. A

55:36

few more years went by. I taught

55:38

the class again. COVID happened.

55:41

I'm sitting at home. I just got done teaching a

55:43

class. I said, I'm doing it. And I sat down

55:45

and started writing the book. I think

55:47

it's still relevant today because

55:50

Mike is still a public figure today. Obviously,

55:53

people respect what he's done in

55:55

philanthropy. They have no

55:57

idea what he accomplished in the financial.

56:00

or what happened to him before. So

56:03

it just seemed like, you know what, it's

56:05

not too late. And plus there's a message

56:07

here, the prosecutorial process that

56:09

we were subjected to still exist.

56:13

The power of the prosecutor is still

56:16

there. It can be used for political

56:18

or other purposes as it

56:20

has been and probably continue will be. And

56:23

people should understand how one-sided it

56:25

is. So those are the

56:27

reasons that I still think it's relevant because

56:30

I think Mike's still relevant and I think

56:32

the process certainly is still relevant on what's

56:34

going on today. So I finally did

56:36

it. I'm glad I did it. Mike

56:39

was on the show last week. At

56:41

the end, I had asked him

56:44

about a life lesson that he learned he

56:46

knew earlier in life and he talked about

56:49

being media shy and not telling his story.

56:51

And if you don't tell your story, someone

56:53

tells it for you. I'd love

56:56

to ask you, knowing Mike as long as

56:58

you have, what do you think some of

57:00

the mistakes that he made were

57:02

that led to what happened? Mike's

57:07

nature is very non-confrontational.

57:10

I saw it growing up. I saw it in the

57:12

fraternity. Make this mistake would be when

57:14

somebody said it's your fault and it's not your fault.

57:16

Stop doing business with him. Rather than

57:19

say, I'll make it up to you. I'll figure it

57:21

out later, whatever else. That's a non-confrontational way because

57:23

someday I will make it up to you. But

57:26

I think that really ended up

57:29

hurting him. It's not a terrible

57:31

quality, not to be confrontational, but

57:33

to allow this to happen. And then the other

57:35

thing is what he pointed out, to

57:38

allow others to define you instead

57:40

of defining yourself, especially today

57:43

even more than it was 30 years

57:45

ago, is something that

57:48

you can pay a price for if circumstances

57:50

happen as they happen to us. Others

57:53

wanted to find you negatively and

57:55

as a person different than who you are. What

57:58

do you hope happens by telling others? this story

58:00

now? First and foremost,

58:02

that historically there is

58:04

a record of what really happened

58:06

by somebody who was there firsthand

58:09

and knows what happened. I

58:11

know for a fact that there are business

58:13

schools that teach finance

58:16

that when they talk about this

58:18

period will recommend a book like

58:20

Identities or something else. I

58:22

want there to be another resource. Certainly don't

58:24

have the power to eliminate other resources, but

58:27

I want there to be really a true

58:29

historical record. I think Mike deserves it and

58:31

his family deserves it. He's got children, he's

58:33

got grandchildren. I think there needs to be

58:35

an historical record. Number two,

58:38

I would like to see the process viewed

58:40

in a way so that

58:42

there's downside for

58:45

abusing the process on behalf of

58:48

prosecutors. So they at least think

58:50

about what I said earlier, what

58:52

if I'm wrong? Right now, you

58:55

go through a criminal process and you

58:57

go to trial and you get acquitted.

59:00

You still lost. There's a famous case, I think

59:02

the guy's name was not, I've been to secretary

59:04

of labor and he was accused of a crime,

59:06

went to trial and was acquitted. When they asked

59:08

him afterwards, how do you feel now? His

59:10

response was, tell me where I go now

59:12

to get my reputation back. Because

59:15

people believe the headline. They

59:17

never know the rest of the story.

59:19

They just remember, oh, that person was

59:21

indicted, must have done something. So if

59:24

you're under a criminal investigation, you have

59:26

nothing but downside. If

59:28

you're a prosecutor and you're wrong, you

59:31

have no downside. All you're

59:33

trying to do is help your career. I

59:35

like to see the process somehow more

59:37

balanced. I would love to see a

59:39

situation where the people

59:41

could get to know each other, the

59:44

people without there being a

59:46

downside to the person under

59:48

investigation by sitting down with

59:50

the prosecutor. This

59:53

is all about people. People are complicated,

59:55

but there are people. And I would like

59:58

to see prosecutors understand that the people. they're

1:00:00

going after have wives and they have families and

1:00:02

what if they're wrong. What

1:00:04

do you think might have happened? Speculation

1:00:07

to be sure. If the

1:00:09

Attorney General's office at the time in

1:00:12

the way you're describing had a

1:00:14

chance to meet Mike. I

1:00:16

think it would have changed dramatically. I think

1:00:18

they would have realized that he

1:00:20

doesn't seem to be this person that has been

1:00:22

described to me. Maybe he made a

1:00:24

mistake somewhere but maybe we shouldn't be

1:00:26

bringing a RICO prosecution here. Maybe this

1:00:29

should be an SEC manner. Maybe we shouldn't be

1:00:31

dealing with this at all. Let the SEC, they're dealing

1:00:33

with it. Let them deal with it. One

1:00:35

of the things I talked about in the book

1:00:37

that I was always sorry about was Mike didn't

1:00:39

testify at the Vatican. Nobody

1:00:43

explains what Mike does better

1:00:45

than Mike. He's very

1:00:48

persuasive. He's very knowledgeable. He

1:00:50

understands it. He's a great

1:00:52

advocate for himself. And

1:00:54

here he went to the most important

1:00:58

process of his life at that point

1:01:00

in time. Don't

1:01:02

forget he got prostate cancer later. But he's

1:01:05

going through there. He's going to be sentenced.

1:01:07

He's going to be subjected to whatever he's

1:01:09

going to be subjected to. And

1:01:11

everybody has discussed who he is but

1:01:13

him. Do

1:01:15

I think it would have made a difference if there was a

1:01:17

way to do it? Yeah, I think it would have made a

1:01:19

difference. Richard, really appreciate you

1:01:22

taking the time to tell this story

1:01:24

that is so different. What public

1:01:26

perception has been for so long about Mike?

1:01:28

Well, I thank you for the opportunity.

1:01:31

I think it's important for people to

1:01:33

know that everything you read isn't necessarily

1:01:35

true and that people are

1:01:37

people. And people have feelings.

1:01:39

People are complicated. This is a human

1:01:41

being. Thanks, Richard. Thank you,

1:01:44

Tim. Thanks

1:01:46

for listening to the show. To

1:01:48

learn more, hop on our website

1:01:50

at capitalallocators.com where you can join

1:01:52

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1:02:04

a good one, and see you next week.