The NY Times reports that:
When the U.C.L.A. School of Law announced a $10 million gift from Lowell Milken to establish a business law institute in his name earlier this month, the university described him as a “pioneer in education reform” and a “leading philanthropist.”
Behind the scenes, Mr. Milken’s big donation has set off an internal debate at the school. ...
Wrong. There is no debate. Only one active member of the faculty is complaining:
“The creation of a Lowell Milken Institute for Business Law and Policy will damage my personal and professional reputation, as I have devoted my career to arguing for investor protection and honest and ethical behavior in business,” Lynn A. Stout wrote in a letter last month to the president of the University of California and U.C.L.A.’s chancellor.
Despite the Times' implication that there's some sort of debate roiling the halls, the truth is that everybody else is supportive of and appreciative of the gift:
“Save for one dissident professor, the entire business law faculty is grateful for this gift,” Kenneth N. Klee, a bankruptcy law scholar, said. ...
Lauri Gavel, a law school spokeswoman, also issued a written statement: “Only one member of the business law faculty has expressed anything less than gratitude — and that concern was surprising, given that this professor was involved early in the process, has been a beneficiary of the donor’s philanthropy, and did not raise objections until quite recently.”
Oddly, the Times reporters decided to also drag another gift to the law school--one wholly unrelated to the Milken gift--into the alleged debate:
The capital drive also led to the creation of the Stewart and Lynda Resnick Endowed Fund in Support of Public Interest Law. The Resnicks are the Beverly Hills beverage industry entrepreneurs who own Fiji Water and Pom Wonderful.
Last fall, the Federal Trade Commission filed a civil lawsuit against the Resnicks, accusing them and their company, Pom Wonderful, of making “false and unsubstantiated claims” that their pomegranate juice product helped reduce the risk of heart disease and erectile dysfunction.
Jill Gottesman, a spokeswoman for Pom Wonderful and the Resnicks, which are fighting the charges, has called the government’s allegations “completely unwarranted.”
Is the implication that unproven charges are supposed to have the law school blacklist a donor? I don't think so, but maybe the Times thinks (a) the donor is guilty until proven innocent and therefore (b) the law school is guilty by association.
The Times story points to several occasions on which universities have given back gifts:
In the 1980s, Princeton returned money from Ivan Boesky to build a Jewish Center after the government charged the Wall Street financier with insider trading crimes. Seton Hall removed the name of L. Dennis Kozlowski from an academic building in 2005, after the conviction of the former Tyco chief executive for looting his company.
But those cases aren't on point. Boesky and Kozlowski were convicted of crimes. Lowell Milken was never charged with a crime. To be sure, the Times tries to spin that as a problem:
Michael Milken and his younger brother, Lowell, were central figures in creating the booming junk-bond market of the 1980s and the subsequent collapse of the investment bank where they worked, Drexel Burnham Lambert.
In a controversial deal with the government, Michael pleaded guilty to securities law violations after the government agreed to drop criminal charges against Lowell. Michael served a 22-month prison term and paid $600 million in fines and restitution.
Some of us who were active in the field at the time--as I was--remember the story a bit differently. In our view, the government used threats to go after Lowell as one of the ways on which they coerced Michael into taking a plea deal.
As for the Milkens and their time at Drexel, Daniel Fischel's book Payback: The Conspiracy to Destroy Michael Milken and His Financial Revolution is sadly out of print but can be acquired as a used book and provides a useful contrarian account of the period. As Christopher Faille summarized Fischel's argument in a review (42-DEC FEDRLAW 45):
In the 1980s, the government frequently prosecuted individuals for insider trading even though they had come by market-useful information through no such underhanded means, but rather by inference from publicly accessible sources, diligently studied. On dubious statutory authority, the government began to contend that the simple possession of information, not generally available to those members of the investing public without an opportunity for diligent study, can render a trader a tainted “insider.” This taint, in turn, renders any exchange in the stock of a takeover-targeted firm a crime. It was against criminals of that alleged stripe that Rudolph Guiliani -- then U.S. Attorney for the Southern District of New York, now the mayor of New York City -- waged his high-profile holy war, which Fischel calls a “Reign of Terror.” It was pursuant to that, that he “got” Michael Milken. ...
t is not any sympathy for [Michael] Milken that should motivate a reaction against Giuliani's terror. Milken, after all, seems to have survived his imprisonment rather well, and (in a development too recent for inclusion in Fischel's book) has received a large consulting fee from Ted Turner for his part in negotiations between that communications magnate and the executives at Time-Warner. What ought to motivate a reaction is that the government of the United States has thrown the sporadic and unpredictable exercise of its coercive powers into the thick of boardroom conflicts, and has done so precisely in order to protect the grave inefficiencies that exist at the heart of our system of production. It has done so by criminalizing precisely the sort of trading that most threatens such inefficiency: trading by or in support of suitors in a takeover bid.
This is not to fully endorse Fischel's account. As Tom Smith has observed (22 Law & Soc. Inquiry 1041):
Fischel fails to persuade me of [Michael] Milken's innocence. ...
I complain above about Fischel's lack of objectivity in Payback, yet I must concede that what this takes away in the power to persuade, it makes up for in the power to fascinate. Fischel is especially passionate and effective in responding to the ridiculously overheated claims of journalists that Milken was some kind of Nazi (Barron's) or one of the greatest criminals of all time (Wall Street Journal reporter James Stewart).
Fischel is so angry in Payback, in fact, that he discusses things one normally omits for propriety, yet that probably need saying. For example, Fischel, more than any other writer I know of, accurately captures the class and ethnic (mostly anti-Semitic) animosity that underlay some of the bitterness of the political fight over the corporate control market. Milken, T. Boone Pickens, Carl Ichan, and the other control-market pioneers also came largely from modest, or at least not wealthy, backgrounds. They were not likely to fit in at Chase Manhattan or Dillon Read. ...
Payback is a strange book. The book strives at times for academic objectivity and respectability, but then gives in entirely to passionate advocacy for Milken and what Fischel thinks he stands for. He excoriates the unfair treatment Milken got from the press and prosecutors, but freely attacks the personal integrity of prosecutors and judges, often with less than convincing support. Fischel introduces the book with broad themes of economics, but leaves them quickly behind to give us the blow by blow of the prosecution and defense of Milken, Keating, and the other defendants.
Yet, for all these contradictions, the book is a tour de force. It is not really a scholarly effort, though only a brilliant scholar could have written it. Payback is really an indictment of Giuliani and the judges, politicians, and journalists who helped him bring Milken down.
At the very least, however, one can say that the history of the 1980s takeover market simply doesn't lend itself to nice, tidy ethical stories that have obvious implications for the standing today of those who were players in that era.
As for me, where do I stand on the supposed debate? I stand by what I told the NY Times reporters:
“We’re staring down the barrel of another round of cuts in California and relying on alumni giving is essential for us to be able to provide a quality education,” said Stephen Bainbridge, a U.C.L.A. corporate law professor. “If it wasn’t for these sorts of gifts we’d have even tighter budgetary constraints.” ...
Mr. Bainbridge, the corporate law professor, said that though he considered Ms. Stout a friend, he disagreed with her position.
“I believe that Lynn genuinely thinks that this hurts the school by giving Milken the U.C.L.A. imprimatur of being a good guy and an ethical person,” said Mr. Bainbridge.
“I think it’s unfortunate that we’re dragging up stuff that happened a quarter of a century ago — and for which any debt to society has long been paid — to taint something that is going to help our students tremendously.”
