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Milken Back In The Stock Manipulation Game?
Michael Milken has fought a long and hard battle to cleanse his public image, and take on the appearance of a benefactor to the sick and the uneducated, an all around good guy and positive force in the world. Most people have bought the careful and expensive spin job. Hardly anyone remembers the 80 or so criminal counts brought against him by Giuliani, under RICO. Very few mentions about him going to Federal Prison for felonies are to be found. It would appear that history goes to those with the fattest wallets.
The message boards have been abuzz with speculation involving Mr. Milken, following a one hour conference call and presentation by Overstock.com CEO Patrick Bryne. In that call, he articulated an illegal stock manipulation scheme that was run by a "Master Mind", and which involved hedge funds, the media, influential investors, and private investigators Kroll Associates.
The Kroll connection got me thinking, as did the speculations that the Master Mind was a play on words, where the initials signaled the identity of the arch criminal directing the game. MM = Michael Milken. If that was the case, what corroborating evidence could be found to either destroy the idea, or support it?
In Den of Thieves, a book by James B. Stewart about the Drexel Junk Bond days, we get a glimpse of the seamy side of Wall Street and the evil that some men cheerfully do. in it, particularly, we get a connection made between two of the players in the Bryne piece: Jules Kroll, founder of Kroll, and Michael Milken. From the book: "They hired a private investigator, Jules Kroll, to unearth damaging information about Boesky. They portrayed Boesky as a liar who couldn't be trusted, and as a far greater criminal than the government had admitted." Kroll has since then been a speaker for the Milken Foundation, and is David Einhorn's neighbor.
Einhorn is mentioned repeatedly by Bryne, and so much so that it is worth commenting on the fact that his proximity to Kroll, his connection to Barron's (his wife was an editor there - Cheryl Strauss Einhorn), and his participation as a short seller in many of the companies targeted by Bryne's "cartel" is suspicious.
Bryne also claims that Kroll has him under investigation, and makes a compelling argument for that. He apparently went to their offices, and wanted to sign an NDA so that he could hire them - which they spent an hour dodging (they can't sign an NDA on someone they are investigating). If Kroll features in this, it would be another eyebrow raising issue given his history and association with Milken and Einhorn.
The second tier up from the Master Mind is a box marked "Bottom Feeder - Final Owner". This is the money guy with beneficial ownership of the sleazy hedge funds that engage in illegal activity, and supposedly directs the operations on a tactical level, with the Master Mind directing it on a strategic level. Bryne said, on his conference call, "Now, can I tell you who that designated bottom feeder was who was supposed to end up with our company? Can I tell you? I can." I can. Another fun play on words? I can. Icahn? Carl Icahn? The billionaire takeover specialist and corporate raider? If true, and Bryne's vision is correct, we have Carl Icahn acting as the money guy and tactical point, Milken acting as the Strategic thinker, and Kroll acting in much the same role as he did for Milken in the 80's - digging up dirt and doing corporate espionage on target companies.
Icahn was aided by Milken while Milken was at Drexel, and he assisted Icahn with several notable takeover financings, so that connection is solidly made.
Milken was involved is a very similar, highly involved and complex manipulation scheme when he was arrested and indicted in the 80's. From Riskglossary.com:
"The SEC and the US Attorney's office for Southern Manhattan conducted parallel investigations that soon extended beyond the immediate participants in Levine's ring. Abuses were widespread. There seemed to be an entire web of relationships among professionals exchanging information and other favors, including the parking of stock, the accumulation of stock to pressure firms' management, and stock price manipulation. Levine's ring provided investigators a point of entry to this web. Famous market participants were soon embroiled in the investigations, including investment banker Martin Siegel of Kidder Peabody, arbitrager Robert Freeman of Goldman Sachs, and arbitrager Ivan Boesky, who ran his own trading firm.
Inexorably, the investigations led to Milken. At the center of his junk bond universe, Milken was engaged is numerous abuses. He traded on and exchanged inside information gleaned from his junk bond underwriting. He was engaged in stock parking and colluded with Boesky and others to manipulate the stocks of takeover targets. He actively misled regulators."
What we have here is a template description for the abuses that Bryne discusses, updated for modern technology. Collusion, stock manipulation, insider trading and front running, "an entire web of relationships among professionals exchanging information and other favors"...Isn't that what Bryne described to a tee? A web of media, class action attorneys (Milberg Weiss being the most visible, having sued every major Rocker Partners short), cronies with pull at regulators, finance and trading assistance from the big brokerage firms, inter-related hedge funds, etc.
This is almost the exact same scheme.
So why does is the media silent about this, and why are our lawmakers and regulators absent? Why is there not a full scale criminal investigation underway to ascertain if there is any truth to Bryne's description of the manipulation ring?
In the original Milken case, Arthur Levine, a relatively minor figure in the scandal led to Boesky, who ultimately led to Milken - that scheme's Master Mind. Levine had a network of asociates that traded on inside information using offshore accounts; again, exactly like what Bryne describes in his scenario.
There are far more similarities in Bryne's allegations than there are dicrepencies with the original Milken scam ring, and it seems plausible that the same criminals, having gotten a wrist slap the first time, are back in business in a big way today. So much so, it is impossible not to believe that the DOJ, FBI and SEC absolutely must open investigations immediately.
All of these views are the opinions of the author.
Send E-Mail to: milken1@webspawner.com
Copyright © 2005 Richard Tetley, Phd. All Rights Reserved