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Sunday, 21 December 2014

From Bacon to Milken

Former junk bond king has more leverage than ever

Former junk bond king Michael Milken has more leverage than ever. Three decades after mastering the art of raising money, the man whose indictment on securities violations brought down Drexel Burnham Lambert now trades more heavily in intellectual capital.

This year, Carlos Slim, the world’s richest man, and one-time British Prime Minister Tony Blair joined familiar faces from his Drexel days at his annual Beverly Hills jamboree. These growing introductions and networks in areas such as education and healthcare arguably make Milken even more powerful than when he was the hub of high-yield debt.

The Milken Institute Global Conference and its approximately 3,000 attendees may as well be a giant game of Six Degrees of Michael Milken. Though his own program biography understandably omits any reference to Drexel and his time in jail, the panels are populated by the defunct investment bank’s vast diaspora. Among them: Joshua Friedman, co-founder of Canyon Partners; Jonathan Sokoloff, managing partner of Leonard Green; Ted Virtue, chief of MidOcean Partners and; Andrew Whittaker, vice chairman of Jefferies.

Beyond that is a long list of former clients roaming the halls of the Beverly Hilton, including media mogul Rupert Murdoch, casino magnate Steve Wynn and oil tycoon T. Boone Pickens. Some connections aren’t as immediately apparent.

A session about retail in a digital world, for instance, wasn’t an obvious link to Milken. He was sentenced to prison before the Internet had even been commercialized. Yet even here there was a connection. One speaker was the CEO of Claire’s Stores, owned by private equity firm Apollo,which was founded by former Drexel managing director Leon Black and where Milken’s son Lance is a partner. He also serves on the board of Claire’s.

And while Milken’s philanthropic efforts can help lure such luminaries as Bill Gates, the institute’s program staff has over the years helped steadily widen the guest list far beyond Milken’s Rolodex. In the 16-year run of the conference, sitting heads of state who generally prefer to schmooze in Davos have been rare, but Rwandan President Paul Kagame showed up for this one. Among the unexpected panels was one entitled “The Rise and Decline of Nations and Civilizations” with professors Jared Diamond, Niall Ferguson and James Robinson.

Financial, industrial and academic celebrities are accompanied by the Hollywood and Washington variety. NBA legend Magic Johnson talked AIDS research. Milken himself grilled U.S. House Majority Leader Eric Cantor and Senate Majority Leader Harry Reid together. Hockey icon Wayne Gretzky was on the program to discuss the business of sport with bankers. Lionel Richie and Paul Anka performed at an evening gala.

The ability to assemble each year leaders from so many walks of life with the custodians and managers of trillions of dollars is a rare accomplishment. The networking almost certainly enables capital to flow to biotech, education, technology and developing-nation projects they might not otherwise reach. In one small but visible example, Milken appeared to shock Blair during their one-hour interview by pledging $1 million to a multicultural school project being spearheaded by the former prime minister’s foundation – and on multiple occasions challenged the audience to raise the other $5 million being sought.

Even so, at least one of Milken’s relationships remains suspect. Earlier this year, Guggenheim Partners, which is underwriting the conference, said the Securities and Exchange Commission was investigating its ties to Milken, who accepted a lifetime ban from the securities industry in 1990. It’s a reminder of how Milken manages to embody the notion that some forms of crony capitalism are unsavory, while others can actually be quite productive.

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Context News

The 16th annual Milken Institute Global Conference is being held in Beverly Hills from April 27 to May 1.

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