The Resurrection

For a man who was forced out of the world's biggest financial marketplace in disgrace a decade ago, Michael Milken is keeping himself remarkably busy. The Eighties junk bond king of Wall Street, the financier who fuelled a frenzy of hostile takeovers with his innovative financing and easy credit, is keeping a characteristically low profile, but behind the scenes he is quietly building a new business empire.

Based in his native city of Los Angeles, as he was in his heyday trading high-yield securities for Drexel Burnham Lambert, he is gradually buying company after company to create a formidable stable of performers providing education services in hi-tech and consultancy, education being a $800bn market in the US alone.

Mr Milken's holding company Knowledge Universe - unifying the disparate forces of traditional education outlets, computer technology and mass media marketing - has ambitions to plough an entirely new corporate furrow and is already turning over $1.5bn a year. A large part of this is accounted for by CRT Group, a British-based information technology training and recruitment company which Mr Milken snapped up a few years back.

That may not sound as dizzying or glamorous as the high-jinks takeovers Mr Milken was engineering 15 years ago, but the more gentlemanly timbre of his new job description is partly the point. In addition to building up business muscle, he is also working overtime to salvage his tattered reputation and reinvent himself as an altruistic philanthropic guy whose involvement in the "greed is good" generation was just a terrible misinterpretation of his socially conscious soul.

Hence the existence of the Milken Institute, an economic and public policy thinktank that holds conferences and issues papers on such high-minded issues as the Asian economic crisis and the ways in which the Internet can broaden access to business financing.

Hence, too, the Milken Family Foundation, a non-profit philanthropic outfit with an interest in providing educational and professional opportunities to the dispossessed. And hence such ventures as last year's Taste for Living Cookbook, in which Mr Milken shares the secrets of how he cured his addiction to burgers and fries and plunged himself into a strict vegetarian diet featuring soy shakes and steamed broccoli.

Sounds unlikely? The strange thing is, it seems to be working. When Mr Milken speaks at economic forums these days, he is not treated like a pariah or raked over the coals for his past activities. He is heartily applauded. In business schools and in the specialist journals, a degree of Milken revisionism has set in, with prominent economists debating whether he really was as bad as his reputation, or whether in fact he revolutionised the marketplace for the better before damaging himself by over-reaching. A month ago, the financial news magazine Business Week ran a remarkably flattering profile of him, marvelling at his drive, his sense of purpose, his healthy tanned look, apparently untroubled by pangs of conscience and his renewed lust for business life.

In more senses than one, Michael Milken seems to be coming back from the dead. If you believe his version of events - and not everyone does - he was diagnosed with terminal prostate cancer shortly after he was released from prison in 1993 and given anywhere between 12 and 18 months to live. The fact that he is still among us and apparently so vigorous he puts down to his healthy diet, his daily regimen of yoga and meditation and his new-found appreciation for the wonders of life, such as the smell of honeysuckle and jasmine in the garden of his sumptuous home in Encino, on the northern slopes of the Hollywood Hills. Whatever personal travails he has been through, he certainly has not allowed the world to forget about his cancer. He has raised $75m for prostate research through yet another charitable foundation called CaP CURE. He has appeared on television with fellow prostate cancer sufferers including Norman Schwarzkopf, the retired general of Gulf War fame. Mr Milken himself says his cancer is in remission, and he is hoping for a breakthrough cure to see him into a ripe old age. His predicament invites sympathy, and as a result he has largely kept the media off his back. It may also have prompted some compassion from the courts, which let him out of prison two years into a 10-year sentence and, despite misgivings about a number of his subsequent financial dealings, agreed to terminate his probation period at the beginning of last year.

Whichever way you look at it, Mr Milken got off remarkably lightly given that he was the key figure in what the author and journalist James B. Stewart described in Den of Thieves, his memorable account of the 1980s Wall Street scandals, as "the greatest criminal conspiracy the financial world has ever known".

Together with the arbitrageur Ivan Boesky and numerous others, Mr Milken allowed his taste for predatory take-overs to lure him into a web of deceitful and illegal transactions that eventually brought ruin to his system of junk-bond financing and pushed his company, Drexel Burnham Lambert, out of business.

Mr Milken was indicted on 98 charges of racketeering and securities fraud and, after a protracted plea-bargaining process, agreed to plead guilty to six of them. His two years of jail were spent in a relatively relaxed low-security facility at Pleasanton, California, where his main complaints were boredom and being forbidden to wear his toupee.

Perhaps more seriously, he was also forced to pay more than $1bn in fines and repayments, but even a financial blow of that magnitude has not ruined him. According to various estimates, Mr Milken was still worth a good $700m dollars when he regained his freedom, and used that to found his new enterprises.

Knowledge Universe, financed by himself, his lawyer brother, Lowell, and the chief executive of Oracle, Larry Ellison, was founded in 1996 with more than $500m in start-up capital. As president, Mr Milken hired an old friend, Tom Kalinske, who as chief executive of the toy manufacturer Mattel had turned to him at Drexel in 1984 to finance a $231m bail-out package.

Today, KU covers everything from pre-schools and educational toys, to computer support programmes for students facing school-leaving exams, to retraining programmes for adults. One of its holdings is the British company Spring, based in The Wirral, which provides a range of consultancy services including vocational training and recruitment.

Although the precise purpose of KU's acquisitions has been shrouded in a certain amount of mystery - the company's phone numbers were not even publicly listed until recently - they have received considerably more publicity than Mr Milken's other financial dealings since he got out of jail, some of which have aroused considerable official suspicion, not least because he is barred for life from securities trading.

Through an entity called Entec Associates, Mr Milken was found last year to be buying up large volumes of stock in the entertainment software company 7th Level and reaping huge benefits as the price spiralled up, as attested by an official regulatory filing.

The New York Securities Exchange Commission has also investigated three high-level transactions in which Mr Milken is suspected of having played a role.

The most substantial of the SEC's allegations concerned MCI Communications' investment of as much as $2bn in Rupert Murdoch's News Corporation. Last year, the SEC accused Mr Milken of proposing and setting up the deal in violation of the ban on any activity associating him with a broker. Mr Milken responded to the allegations by paying the SEC $47m, representing the money he was accused of making on the deal plus interest.

Remarkably, such brushes with authority have raised barely an eyebrow. It helps that many of today's big media barons are friends with Mr Milken, from Rupert Murdoch (who

sits on KU's board of directors) to Ted Turner at CNN (now, thanks to Mr Milken, part of the Time Warner family). Mr Murdoch's New York Daily News, for example, does not ever let a Milken story go by without prominently reminding its readership that the judge who convicted him, Kimba Wood, happened to be a former Playboy Bunny.

The former junk bond king also has his own formidable network of public relations supporters, and has done since the height of the scandals that enveloped him in the Eighties. A reliable stable of academics and economists - the same names, cropping up again and again - works tirelessly to champion him in every forum possible and a huge effort is directed at making the verdict of posterity a kinder one.

In the revisionist version, Mr Milken entered the high-yield bond business to open the doors of capital investment to the most disadvantaged in society - a mission he had harboured ever since witnessing the 1965 Watts riots in Los Angeles and realising the black protesters were being unfairly excluded from the capitalist system.

The notion of a predatory bond dealer with a social conscience might seem somewhat unlikely, but evidently Mr Milken had a higher purpose when he steamed into his Beverly Hills office at 4am every day, squeezing every last fraction of a yield point out of the deals he made, pushing his staff until they dropped, and hiring top-flight entertainers and stunningly beautiful female escorts for the annual parties he threw at the Beverly Hills Hotel. Incredibly, too, the apologists still repeat the Milken mantra that junk bonds provide a higher rate of return with no increase in risk, a mantra that proved demonstrably untrue by the end of the Eighties on both counts.

If such arguments are being listened to, it is perhaps partly because Mr Milken still has a lot of powerful friends, and partly because people in the financial sector genuinely admire and envy his extraordinary, albeit foreshortened, success.

Some of Mr Milken's achievements are undeniable: he opened the way for a new range of financial and investment instruments, he understood faster than most the importance of computer trading, and he foresaw the rise of the hi-tech and media sectors in general.

So what if he turned out to be a crook? To many, he was a damn fine one. Whatever he achieves in his new incarnation may not quite match up to the halcyon days of the Eighties, but it will almost certainly be worth watching with a close, if somewhat suspicious, eye.