UCLA’s Milken gift

Larry Ribstein —  23 August 2011

The NYT discusses a controversy at UCLA (mainly, it seems, involving objections by Lynn Stout) to the $10 million gift it just announced from Lowell Milken, Michael’s brother.  Lowell was accused many years ago in connection with his brother’s securities violations and escaped prosecution because of his brother’s plea deal. Steve Bainbridge comments in response to the NYT story, discussing this ancient history:

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.

I have more perspective in my paper, Imagining Wall Street.  There I note that Oliver Stone’s film Wall Street

may have helped create an environment that became increasingly unfriendly to takeovers.  In the year following the film’s release, Drexel and Milken were prosecuted, eventually culminating in the fining and jailing of Milken along with many others in the takeover game, and the demise of Drexel Burnham. Milken pleaded guilty and was sentenced to ten years in jail.68 [United States v. Milken, No. (S) 89Cr.41(KMW), 1990 WL 264699 (S.D.N.Y. Nov. 21, 1990)]  * * * It is hard to say how much of that attitude was based on actual events reported in the media, and how much on the fiction Wall Street helped create. Milken was prosecuted not for insider trading, but rather for technical violations of the Williams Act—that is, using Boesky to accumulate non-disclosed positions in target shares.69 [Id. at 4]

In short, there is a big question whether Lowell’s history is such as to taint UCLA by his gift.

But I am not unsympathetic with the idea that law schools are supposed to be teaching their students that ethics trumps money, and so should be careful about whom they take money from, and more generally the company they keep. Indeed, for that reason I wrote critically last year about Bill Lerach’s foray into law teaching.

The real question here is where you draw the line and who decides.  Is the decision to turn down a gift based on ethics or politics?  More to the point, would the same people who oppose the Milken gift also object to an association with Lerach?

And how do you balance those considerations against the institution’s needs?  Interestingly, Professor Stout has written extensively about the need to take the interests of all constituencies into account in corporate decision-making.  Where would UCLA’s students stand in the decision Professor Stout favors to reject the Milken gift?

Larry Ribstein


Professor of Law, University of Illinois College of Law

7 responses to UCLA’s Milken gift


    I read a bit further. Here’s what seems to be the story. Drexel helps Keating buy Lincoln S+L. Keating buys Drexel junk bonds, paying big commissions and maybe overpaying for the bonds. The junk bond purchases are bad for the S+L shareholders (=Keating?), good for Drexel, neutral for S+L depositors (whose deposits are being used for the purchase) and bad for the FDIC or whatever agency provided depsosit insurance.

    Suppose Drexel bought Lincoln outright. COuld it then invest in junk bonds legally?

    The FDIC was really angry about this. I don’t see how they have a legal basis, tho they did collect a lot in a settlement. The FDIC ought to have monitored the S+L to prevent imprudent investments. But ift he FDIC was fool enough to provide deposit insurance without regulating bank investments, then is it immoral to make risky investments?


    For Milkin’s side of the story, see http://www.mikemilken.com/myths.taf#myth5

    Question for Professor Stout: If UCLA accepts the gift, will you resign?


    Here’s the article Prof. Stout mentioned. I hven’t read it, but it makes what is a much more serious moral charge than parking stock. It’s charge seems to be suborning the execs of Savings and Loans to buy Millken-issued bonds at low prices contrary to the interest of their companies.

    Looting: The Economic Underworld of Bankruptcy for Profit
    Author(s): George A. Akerlof, Paul M. Romer, Robert E. Hall, N. Gregory MankiwSource: Brookings Papers on Economic Activity, Vol. 1993, No. 2 (1993), pp. 1-73Published by: The Brookings InstitutionStable URL: http://www.jstor.org/stable/2534564

    Douglas B. Levene 23 August 2011 at 6:26 am

    I accept the point that law schools should not accept money from crooks trying to buy respectability, but why does that principle apply to Lowell Milken? He was never even charged with anything. Why isn’t that the end of the story, without any need to get into whether or not the prosecution of his brother was justified. And even if you wanted to extend the principle to those who are merely accused by the press or other bystanders of highly immoral behavior, what unethical acts or crimes, specifically, does Prof. Stout think Lowell Milken committed?


      Lynn Stout says:

      1.Lowell Milken was charged by the SEC with multiple criminal counts, including racketeering,and was barred for life from the securities industry.

      2. More significantly, Lowell repeatedly refused to testify before the NYSE about the alleged massive scheme to manipulate the junk bond market at Drexel Burnham, where Lowell was senior vice president. Due to his repeated refusal to testify–hardly the response of an innocent person–the NYSE itself barred Lowell from holding a position with any member firm in the NYSE. The SEC was not involved with this determination. It was made by the NYSE, a private and pro-capitalism organization.

      3. The Milkens have paid enormous amounts of money to people–including some $30 million or so to Dan Fischel who wrote “Payback,” who knows how much to their lawyer Silverglade who also wrote a book defending them as well as a Forbes.com blog, and now $10 million to the “business faculty” at UCLA–to describe the Milkens background in a fashion that attempts to rewrite history by completely omitting any mention of these facts.

      4. Paul Romer and Nobel Prize-winner George Akerlof in 1993 published an empirical study in which they concluded that the junk bond market run by Michael and Lowell at Drexel was the largest market manipulation scheme in history.

      Not surprisingly, you won’t find any of these facts on the Milken’s Wikipedia pages or any of the blog sites. Which speaks volumes for the reliability of said sources.

        Douglas B. Levene 28 August 2011 at 6:24 pm

        Thank you for the reply, Prof. Stout. None of the facts described in your pars. 1 & 2 were mentioned in any of the news articles that I read about the proposed gift.


    I must say, Larry, I don’t really get it.

    Why should any law school feel that there is an ethical impediment in accepting a generous gift from a donor who may have once long ago been tainted by scandal – but never charged with a crime — while the media and most recently the courts are replete with documented proof that law schools are engaged in a wide pattern of brazen deception in recruiting its own students? See, for example, http://kowalskiandassociatesblog.com/2011/05/19/law-school-deception-part-iii-via-the-belly-of-the-beast/