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November 21, 1990, Michael Milken Sentenced To 10 Years For Security Law Violations, Today In Crime History

On this date, November 21, in the year 1990, Michael Milken, who was know as the “Junk Bond King”, was sentenced to ten year in prison for financial and security fraud violations.  His critics portrayed  him as the epitome of Wall Street greed during the 1980s.  Milken's compensation, while head of the high-yield bond department at Drexel Burnham Lambert in the late 1980s, exceeded $1 billion in a four-year period, a new record for US income at that time.

In March 1989, a federal grand jury indicted Milken on 98 counts of racketeering and fraud.  The indictment accused Milken of a multiple criminal law violations, including insider trading, the concealment of the real owner of a stock (a practice known as stock parking), tax evasion and numerous instances of repayment of illicit profits.  This was one of the first times that the Racketeer Influenced and Corrupt Organizations Act (RICO) was used against an individual with no ties to organized crime.

On April 24, 1990, Milken plead guilty to the following six felony counts of securities fraud and tax violations:

•Aiding and abetting another person to file an inaccurate statement with the SEC;
•Sending confirmation slips through the mail that failed to disclose that a commission was included in the price;
•Aiding and abetting another in filing inaccurate broker-dealer reports with the SEC;
•Selling stock without required disclosures;
•Agreeing to sell securities to a customer and to buy those securities back at a real loss to the customer, with an understanding that he would try to find a future profitable transaction to make up for any losses;
•Conspiracy to commit the above five violations.

As part of his plea agreement, Milken agreed to pay $200 million in fines.  At the same time, he agreed to a settlement with the SEC in which he paid $400 million to investors who had been hurt by his actions.  Milken also accepted a lifetime ban from any involvement in the securities industry.

On November 21, 1990 Michael Milken appeared with his criminal defense attorney for sentencing in a jammed courtroom in Manhattan's federal courthouse.   His criminal defense lawyer asked the sentencing judge to consider Milken’s more than $360 million in charitable contributions and other acts of generosity.  Milken stood before the judge, choking back tears, and said: "What I did violated not just the law but all of my own principles and values. I deeply regret it and will for the rest of my life, and I am very deeply sorry."

Before pronouncing the sentence the judge said evidence presented during a pre-sentencing hearing in October 1989 convinced her that Milken had committed additional serious crimes beyond the six felony counts he was being sentenced for.  Among them, the court said, were several acts of obstruction of justice relating to orders or suggestions to employees to destroy documents and evidence.  

While the court admitted that Milken was a man of "talent and industry," the judge said a long prison term was required to send a message to other possible securities-law violators.  The judge stated that Milken's misuse of his leadership position constituted "serious crimes warranting serious punishment and the discomfort of being removed from society."   Milken and his criminal defense attorney appeared to be stunned when the judge pronounced a sentence of ten years incarceration followed by three years of probation during which he was required to preform 1,800 hours annually of community service.

Sources and more information:

Milken Gets 10 Years, Los Angeles Times, November 21, 1990

Difficult Decision for Milken Judge, New York Times, November 21, 1990

Judge Stuns Milken With 10-Year Sentence, Los Angeles Times, November 22, 1990