If they can raise the money, the kids from the Marina del Rey Middle School are going to put on a dance this winter.
If they can raise the money.
That’s not so easy these days, what with the recession cutting into family budgets and unemployment at nearly 10 percent. And these are not rich kids. Most are from the inner city. A lot of them come from a graffiti-scarred public housing project just down the block. All of them are menaced by gangs, guns and drugs.
They need advice. But where can 6th, 7th and 8th graders in a poor urban school get some on raising money for their venture?
Well, there is a guy here who breezes around the school’s hallways in a baseball-style cap and a T-shirt who claims to know a thing or two about financing and says he is ready to help out.
“The kids will have to run a budget, they’ll get a checkbook, they’ll have to operate out of a checkbook,” he says in a steady but near-whisper of a voice. “They’ll have to solicit donations. They will have to run it as if they were in the party planning business.”
The man in the baseball cap is Michael Milken, the master of corporate financing and takeovers in the 1980s, the king of the junk bond market who personally made more than a half-billion dollars in a single year, the man who was convicted of violating federal securities laws and sentenced to 10 years in prison, the man who for many became emblematic of a decade’s greed and excess.
Milken, whom some blame for the collapse of the nation’s savings and loan system, was released from a federal minimum-security prison in Pleasanton, Calif., last March after serving two years of his sentence. Now he spends his days performing court-ordered community service as the administrator of an after-school program for underprivileged children.
“We’re going to . . . put on a dance,” he said sitting on top of a table in one of the school’s dimly lit corridors. “We’re going to put on an event.”
For a man who was a Wall Street pioneer, a “master of the universe” of the sort Tom Wolfe portrayed in his novel “The Bonfire of the Vanities,” who could raise billions of dollars by making a few phone calls, who was feted in boardrooms from coast to coast and hailed as a visionary of the information age, this could have been a humbling time.
But that does not appear to be the case.
Milken remains steadfastly uncontrite, maintaining that he never earned a cent dishonestly and that the crimes he was convicted of were merely minor violations of securities industry technicalities. And even though he has paid more than $1 billion in fines, penalties and settlement of civil lawsuits, he is still estimated to be worth around $1.5 billion.
Despite his fall from power and influence, despite two years in prison where he spent part of the time cleaning toilets, despite that separation from his wife and three children, despite the fact that he is suffering from prostate cancer, Milken marches through his days with seemingly undiminished resolve.
Now 47 years old with a slight paunch and a bald pate revealed when federal prison rules forced him to cast away the toupee he wore in palmier days, he appears to have as much enthusiasm for running this pilot project that serves about 350 kids as he did for financing the brushfire-expansion of the cable television industry.
Milken is a complicated man who must fight the image of being a greedy monster.
He is sometimes described as a chameleon, as one who can adapt his manner to almost any audience or situation. He is a maker of billions who for years has given much money and many days of his life to charity. He is a man who amassed a fortune, but never lived lavishly. He possesses a calculator mind that harbors an obsession with numbers, an obsession seen as clearly in the classroom as it was at his gigantic X-shaped trading desk at the Beverly Hills office of Drexel Burnham Lambert & Co.
Math magicians
“I can’t read your mind unless you think of the numbers,” Milken says as he plays the role of math magician to a group of kids in Mike’s Math Club, one of the after-school activities he runs at the Marina del Rey school.
Pacing across the floor with his right hand pressed against his forehead, as if to focus his thoughts, and with a thin smile on his lips, Milken pauses for a moment and then correctly identifies the two numbers one of the students had chosen at the start of a calculation. It’s a trick that Milken quickly teaches to the excited youngsters.
He multiplies multidigit numbers in seconds, finds hidden numerical triangles in a chalkboard puzzle at a glance, and fires the answers to the kid’s challenges with Gatling gun speed.
“My job is to get this group to bond together as a team and to take them to other classrooms with their special powers,” he says of the various tricks and mathematical shortcuts he demonstrates. “Today we are slowly learning some of these special powers. They will be faster then a calculator. These kids by the 10th week will be able to multiply any four-digit number by any four-digit number in their head in a matter of seconds. My job is to get them to think math is fun.”
He seems to be succeeding, judging by the enthusiasm of the eight new members of the club, and he seems to be enjoying himself.
“I’ve always felt, and I’ve been involved with schools for a long time, that you learn a lot (from teaching),” he said.
Alone in Watts
The ease with which Milken handles the kids is the product of years of work, going back to the early 1980s when he would leave his comfortable home in suburban Encino and take Mike’s Math Club to his volunteer work as a math tutor for children in some of Los Angeles’ worst neighborhoods.
“When I first met Mike in the early ’80s, he was down in Watts by himself in the middle of a place that a lot of people from Beverly Hills wouldn’t even know existed and he was teaching with the math club,” said Glenn Levant, executive director of DARE America, a Los Angeles-based organization aiming to help kids resist the pressures to experiment with drugs and alcohol (it stands for Drug Abuse Resistance Education).
Levant, a former L.A. deputy police superintendent who was among the candidates to replace then-Supt. Daryl Gates, is the supervisor of Milken’s community service time. He remains an admirer of a man he knew before Milken and junk bonds became almost as well known as Ronald Reagan and trickle-down economics.
“Before I even knew who he was I said, `Who is this guy?’ He was down in the Watts-Willowbrook area without any fanfare, without any big elaborate entourage, just with one person who was a teaching assistant. This stuck with us. This is somebody who is good at what he is doing.”
Starting with early days teaching in Watts, the poverty-bound neighborhood of central Los Angeles that erupted in the 1965 race riots, Milken has a well-chronicled history of charitable contributions and fundraising. He started a family foundation that funds such projects as special-education classes and inner-city tutoring for as many as 10,000 students.
It was the fortune made as he worked his way up from small-timer in a second-rate brokerage house in Philadelphia in the 1970s to manager of the Beverly Hills-based junk bond department of Drexel at the height of the dizzying 1980s that helped finance such philanthropy.
Milken and Drexel almost single-handedly transformed the high-risk and high-yield securities, known as junk bonds, into a powerful financial weapon that fueled the takeover mania of the `80s. As long as the economy expanded, everyone, including the people like Milken who sold the bonds, made money. But because these deals were so highly leveraged, when the economy slowed, some companies were unable to meet their interest payments and the deals collapsed into bankruptcy.
Smelling a deal
At its peak in the late 1980s, the junk bond market was a $200 billion behemoth. Milken was the “king” of junk bonds and Drexel the powerhouse in the market. When the firm collapsed amid allegations of insider trading and market manipulation by Wall Street figures tied to Milken and Drexel, the junk bond market lost liquidity and crashed (it has since recovered). Eventually, Milken pleaded guilty to six felonies.
While the courts, which barred Milken from the securities industry for life, may have been able to take the man out of Wall Street, they apparently could do nothing to take Wall Street out of the man. It takes only the whiff of a deal, even in a classroom, to bring his old instincts to the surface.
Just a few classrooms down from the one where Mike’s Math Club meets is one where 35 kids learn about the restaurant business through volunteers from the California Pizza Kitchen chain.
While chatting casually with managers from one of the company’s 38 restaurants, the conversation turns to expansion plans that include a goal of 295 outlets by 1995.
“How many employees in a typical location?” Milken asks.
One of the managers says an average store employs 55 people. Five seconds later Milken calmly says, “We are talking about 14,000 new jobs.”
Not only was the math done in an instant, but brought to the fore was a preoccupation with job creation, the thing he maintains was at the heart of all his financial maneuvering in the 1980s.
“This is a company (California Pizza) that hires kids right out of high school,” Milken said. “There is a lot of talent here (in the school) and our focus is to tell the kids that there is hope and opportunity for them and also to be proud, be proud of where they live, be proud of their neighborhood.”
Although he spends more than 40 hours a week working on the after-school program, he also teaches a course at the graduate school of the University of California at Los Angeles one night a week. The subject, predictably, is corporate financing.
“I am working a little bit on EEN, which is the Educational Entertainment Network,” he says of a cable television venture he is involved in. “I try to spend some time with my own kids,” he says about three children, aged 20, 17 and 12, who all suffer from epilepsy.
When he walks the breezeways of the Marina del Rey school, chatting with kids, cheering encouragement at frazzled volunteers, or talking with Levant about plans to take the DARE after-school program citywide, Milken seems in total control, almost as if he had been here all of his life, the master of a different universe.
“He is obviously a very, very bright guy and puts it to good use,” Levant said. Levant notices Milken’s ability to adapt to widely varying circumstances.
“When he is dealing with the president of SC (University of Southern California), or UCLA, a graduate school coordinator, a community service coordinator, or an individual volunteer who lives in the neighborhood here, he does have the ability to establish the appropriate level of rapport with them. That is a talent, too.”
Leaving it to history
So who is Milken?
Selfless math tutor to the deprived? Rapacious billionaire financial visionary? Or just another felon who still says he did nothing terribly wrong?
“I’ve seen this thing my entire life,” he insists. “When perception and reality meet and depart. History has a way of judging things differently than they appear in the short term. I think history will judge my actions correctly. Things have gotten kind of blurred.”
“I am 47 chronologically, about 200 otherwise,” Milken says before hopping into a Jeep Cherokee as the sun starts to set, on his way to an evening meeting with other volunteers from DARE.
Such are the days of Michael Milken’s low-flying 1990s.
