The Man Who Fell to Earth

MARIE BRENNER

MICHAEL MILKEN

How could a genius be so blind? How could the man who revolutionized the way America does business in the eighties now be facing a ninety-eight-count indictment? And why has Rudolph Giuliani pursued him with such relentless passion? MARIE BRENNER penetrates the astonishingly modest Milken family home, the U.S. attorney's bulletproof office, the closed corporate world of Drexel Burnham Lambert— and discovers for the first time the roots of Michael Milkens tragic flaw

You're going to bang Drexel, I know you are. You're going to say Mike and Drexel were greedy, aren't you?" a Drexel Burnham Lambert partner asked me some time ago.

"Were you greedy?'' I asked him.

"Of course we were. But so were a lot of other people on Wall Street. The story of Mike Milken and what happened at Drexel Bumham is a lot more complicated than just a case of simple greed."

The case against Michael Milken, his brother, Lowell Milken, and one of his traders, Bruce Newberg, is the largest securities-fraud case ever mounted by the United States government. It focused dramatically on Milken, the isolated genius who perfected the junkbond market, in December 1988, when Fred Joseph, the urbane head of Drexel Burnham Lambert, was asked to look at a group of financial spreadsheets, the bond trader's road maps. When Milken and his brain-trusters in L.A. heard about it, they jokingly asked, "Could he read them?" But the perusal didn't take place in the handsome offices of Joseph's Broad Street investment bank. It happened behind the bulletproof metal security doors guarding the lair of the famously righteous U.S. attorney for the Southern District of New York, Rudolph Giuliani, who has since resigned his post to run for mayor of New York City.

"The guys in Beverly Hills became so arrogant. They just all got too damn rich!'

It was then, according to friends, that Joseph ended eighteen months of defiance; he decided to "crater" before he was "RlCO'd"—threatened with a racketeering indictment, which would have put Drexel out of business. He reputedly protested, "Mr. Giuliani, why are you going after Mike Milken and us on these petty trades? These infractions are the kinds of things Lehman, Salomon Brothers, Lazard Freres, and Gus Levy and Goldman, Sachs—everyone—did for years. Why didn't you go after Gus Levy and Goldman, Sachs?" Giuliani is said to have replied, "There are two reasons, Mr. Joseph. The first is that Gus Levy is dead. The second is that I didn't catch him."

Giuliani, out campaigning, cannot remember the conversation, but the fact is that Drexel, having paid $650 million to the government, the largest penalty in American history, was now off the hook on six felonies, and Milken, the man known as the "secret ingredient," who had made the company's fortunes, was still on—for ninety-eight. "What does your settling mean for Michael?" a close friend asked Joseph. Joseph is said to have replied, "Maybe Mike should just confess to anything. It would be better for all of us.. .. There are 10,000 jobs at stake." "What do you think Mike is going to do, leave the country and run and hide?" the friend asked sarcastically. "I don't know," Joseph said, "they've changed the rules in the middle of the game." "Fred, you've been taken hostage by Giuliani and you should just quit," the friend told Joseph.

When I interviewed Milken at his home in Los Angeles recently, I found him, as always, speaking in metaphor. "What does this nightmare since my indictment feel like? I will answer that I feel as if I am in Star Wars and they have just blown up the planet of ObiWan Kenobi. My life has been turned upside down. You grow up assuming you have certain rights; then you discover you don't have them. A lot of people have projected their own feelings onto me, and I am tired of it." In another conversation, he speculated, "Whatever I say or whatever you write, someone will twist later, someone in court, I mean. Everything in my life is suddenly twisted. ... I think of myself as a doctor. So many companies and people need help. Now my hands are tied behind my back, and they've put a blindfold on me."

The saga of Drexel Burnham and Michael Milken and their indictment by Rudolph Giuliani and his assistant U.S. attorneys has become a duel of Dreiserian dimensions, a complex moral tapestry of two zealots, each surrounded by fervent admirers. "Mike Milken is being tried because of Henry Kravis's living room!" one of Milken's supporters told me last fall. "Mike Milken," said an admirer of Giuliani's, "is the biggest criminal on Wall Street." The larger questions of greed and ethics and the wobbling moral compass of this era are inevitably raised. "Just because something isn't illegal doesn't make it right," the financier Ted Forstmann told me. Conversely, the question is now often asked: If something doesn't pass the smell test, is it necessarily a criminal offense?

Giuliani and Milken and, for that matter, the assistant U.S. attorneys who are working on the case, as well as Milken's former traders and associates, appear to have mirror characteristics. They are, in the main, children of the baby boom, highly ambitious creations of the postwar era, from modest backgrounds. "Outsiders," they call themselves. Giuliani and Milken also seem to share a striking personality trait: both are relentlessly Manichaean in their vision of life. "I am going to get that guy!" Rudolph Giuliani reputedly said of Milken during a question-and-answer session after a speech at the City Athletic Club in New York long before Milken's indictment. "How do you plead, Mr. Milken?" Judge Kimba Wood asked the financier in April, when he was arraigned in Manhattan federal court. "Your Honor, I am innocent!" Milken said in a fervent voice which boomed with utter conviction through the packed space of Courtroom 318.

Milken has not been entirely alone. In April, ninety business leaders pledged their support in an advertisement that read, "Mike Milken, We Believe in You." The signers included Roger Stone, who had been helped by Milken to build Stone Container into the world's largest corrugated-paper company; Ralph Ingersoll II, the young editor and press lord, helped by Milken to strengthen his newspaper empire; William McGowan, financed by Milken's bonds to create the MCI telecommunications business; Nelson Peltz, catapulted by Milken from a $50 million vendingmachine-and-wire-and-cable-company owner into control of the $1.9 billion American National Can Company; Richard Grassgreen of Kinder-Care, built up with Milken bonds to head the largest child-care-services company in the world.

Milken did a lot for American business. He created an entirely new capital market by evangelical work among the money managers of the pension funds, the insurance companies, and the thrifts, convincing them that it was not only profitable but safe to lend money to companies outside the magic Fortune 500. He changed the way capital was allocated in this country. His high-risk "junk" bonds opened up $3 trillion to thousands of small and middle-size companies—and, much later, fueled the rocket engines of the raiders.

Notably absent from the advertisement were some of the more flamboyant members of his raiding bomb squad: Ronald Perelman, the Pantry Pride man who had tweaked the Wall Street establishment by taking over Revlon and becoming, in the spring of 1989, the richest man in America; Saul Steinberg of the Reliance Group, whose profitable raid on Disney had been financed by Milken; and Carl Icahn, who had had to turn to Milken when PaineWebber fell down on raising the money for his takeover of TWA.

Milken is an action junkie. He is imbued with the notion of endless possibilities, very California, anti-elitist. He appears to believe he can see the future, for he seems rarely to contemplate the past and how its burdens might affect the present. His personality is oddly contradictory; Milken is an eccentric "monster brain," as one friend called him. In private, he is immensely compassionate. At the same time, in business, he is capable of reckless zeal as a competitor. Everyone who meets him always remembers the intensity of his gaze. "When Mike was staring at papers, there was a weird light that seemed to come from his eyes—that's how focused he was," one of his partners told me. He was so lost in his theories and calculations that his wife, Lori, began to worry about him behind the wheel of a car.

At four in the morning, before he had a driver and bodyguards, Milken would skitter down the San Diego Freeway in his Mercedes from his modest house in the San Fernando Valley toward his office in Beverly Hills, inhaling proxies and 10-Ks, actually peering at the fine print in the darkness as he drove through the inky miasma of L. A. and dialed London, Tokyo, Boston, or New York. At that early hour, Milken was already conducting business at sixty miles an hour, presumably figuring which time zones he could reach, whom he could speak to through the static of the international phone system about the possibilities of ESOPs, LBOs, IPOs, warrants, new finances, refinances, "converts," and debentures. His speech was often maddeningly slow and deliberate, until his theories ran away with him. "What we have here..." he would often say. What we have here. Milken and his traders would arrive at the Drexel office a good hour before the opening of the New York Stock Exchange, by 5:30 A.M. Pacific time.

"What we have here" that morning, that particular day, might be the possibility of revamping Brazil or Mexico by rescheduling its debt, or of raising a billion or two for cellular telephones, or for Hispanic TV. Milken might raise Jimmy Goldsmith $1.1 billion to bid for Crown Zellerbach, or T. Boone Pickens $3 billion for UNOCAL. "At one point Mike realized we could take over anything in the country," Fred Joseph told me, "and we had better think about what we were doing." Milken might even be visualizing ways to profit from cheap Indonesian labor, Eurodollars, oil futures, or Third World refinancings; the scope of his financial imagination matched his ability to convert his investing customers into acolytes.

In Beverly Hills, often by four A.M., the limos of the C.E.O.'s would be lined up on the cobblestone driveway at Drexel. Milken invariably carried two sixty-pound canvas bags full of stock offerings, proxy statements, 8-Ks, and 10-Qs—his work from the night before. Sometimes, in the morning fog, he would walk right by the security guard, who would call out "Hi, Mike" as the unhearing Milken took the elevator to the fourth-floor trading room. "We knew to stay out of Mike's way at that early hour of the morning,'' a Drexel partner told me. "He was so lost in thought he could run you over with those goddam bags."

The Milken table was set with paper napkins the local Gelsoris sells, 300 fnr $2.09.

The game at Drexel was to see if one pre-dawn day you could beat Mike onto this fourth floor. It had a fine view of the hills—and of the electronic manifestation of the multibillion-dollar trading world Milken had created in junk bonds. Here sat approximately one hundred traders at three hundred video terminals, shooting rubber bands at one another on dull days, repeating the morning's jokes from New York, and swapping wisecracks: "They should find Mike guilty and make him secretary of the Treasury."

Here in Milken's Rube Goldberg fantasy, the vast, crazy electronic bazaar of sellers, buyers, and wares, was the most astounding inventory of high-yield trades Wall Street might ever have imagined. The entire history of highyields was contained in the mainframes connected to those tiny computers! Every trade! Every deal! Financings and refinancings! Zero coupons and PIKs! All of it banked, even Milken's way of tailoring the bonds for each buyer. "If you didn't want a dog," as one trader phrased it, "Mike would find a way you could trade the dog for two cats. He just wanted to keep the game going." In this atmosphere, the generally distant Milken seemed to be at least as focused on his traders as he was on his technology.

"He was like a scout leader," a friend told me. "He even had unusual rules, such as forbidding profanity."

Already at dawn the traders' phones, with 150 lines, would be blinking, blinking. The electronic machinery was like the Blob: after a while it seemed to take on a life of its own. It perfectly encapsulated the life of Milken. A man obsessed, he was like a nuclear physicist isolated at Los Alamos in 1944, so focused on the splitting of the atom, so assured that his work would help to win the war, that he couldn't see that he might be creating a lethal instrument capable of jeopardizing his own security.

Milken speaks in metaphor, and sometimes metaphor speaks for him. When he drove, he was apt to bang into concrete embankments and walls. Warned repeatedly by friends and colleagues, even by his own brother, Lowell, to stay away from another obvious danger, the arbitrageur Ivan Boesky, because of the indecent and fraudulent aura which clung to him, Milken was mystified. "I don't understand what you're talking about," he would say. "Ivan's numbers always make a lot of sense."

Milken was blind even to the obvious possibility of future public outrage over his salary. For Milken, making the immense amounts that he did—$294 million one year, $550 million another, $1 billion put away in bonuses and equity deals—money appeared to be not only primal but also a way of keeping score of his achievements, the way a crazed kid might collect baseball stats. Milken was reared to believe that money was simply "a state of mind." He now says he never demanded a fee and doesn't understand why the government is treating his salary as if it were a criminal offense. It is mentioned on the second page of Giuliani's indictment.

During the recent evening I spent with Michael Milken at his home in L.A., a deceptively simple notion occurred to me: Milken was so isolated by his grand financial vision that he was positively myopic. We had been sitting out on the Milken patio looking in the direction of his children's playhouse. You could smell the eucalyptus and bougainvillea, which seem to burst out in Southern California in late May. The setting, too, was deceptive. Long ago, Milken had returned and burrowed into this neighborhood not far from where he had been reared. We were in Encino, a pleasant suburb in the San Fernando Valley, the New Jersey of Los Angeles. "You see, the houses here can be just as expensive as in Beverly Hills," valley matrons often remark defensively about local real estate. Mike Milken's two closest friends live nearby; one he met in third grade, the other, who lives directly around the corner, he met two years later in Cub Scouts. Milken's wife, with whom he fell in love when he was fifteen years old, was in the kitchen making dinner. She also grew up close to this place. "We're in a time warp here," Judith Sherman Wolin, a close friend of Michael and Lori's, told me.

"The corporatefinance would wheel Mike in— he was like this supersonic robot."

The Milken house has no grand sweeping vistas or elaborate gardens. A great deal of the lawn is taken up by a small swimming pool and a secluded tennis court. All the neighboring lawns are similar—modest patches of grass with carefully tended borders of azaleas and crocuses. Milken's terrace has just enough room for a table and four chairs with pink-and-white-striped cushions. The house, one of several that share a cul-de-sac a few blocks from Gelson's Market, is hardly the setting in which I expected to encounter the mysterious billionaire.

I found myself engaged in—conversation would be a misnomer—listening to a solidly built man with a forehead that protrudes over a small nose. This causes his features to appear lopsided in photographs. The financial press has often likened Milken's achievements to those of J. P. Morgan, but Milken has neither the physical stature nor the presence of the great financier. Often at Drexel, Milken, no stranger to polyesters, was teased about one particular pair of shabby blue patent-leather shoes. He was too avid to think about clothes or possessions or parties. His face is framed by dark curly hair enhanced by a toupee. In unfamiliar situations, Milken's opaque, closely set eyes often dart from side to side, as if he perceived the possibility of danger.

Milken talks almost exclusively about finance. When he is not interested, he is a poor listener. Sometimes he speaks in platitudes: "The cup is half full." "I don't like to knock others; I say, 'Things can be better.' " "Talk to me about your hopes and dreams," he used to tell company chairmen.

I noticed Milken watching me carefully, trying to determine what I was thinking of him, whether I was worthy of his attention, if I knew about ESOPs and IPOs, whether I truly understood the untapped potential of the Hispanic G.N.P.'s or the I.M.F. "Milken is always guessing at what people think," a close associate told me. "It is a big mistake. He has allowed himself to believe he can control people's thoughts."

The use of financial acronyms was part of the theater of his shyness, a Scheherazade of language which combined genius with arrogance. "What you have here is the need to privatize government industries," he told me, by which he meant that he, Milken, thought the Mexicans and the Brazilians should unload their nationalized telephone companies, copper mines, and ejidos, or farm collectives.

I asked about a historical example of vast hyperinflation that had occurred in Brazil. "It wasn't done properly," said Milken, and went right on. "Dummkopf!" Freud would snarl at his students. Milken, another superior intellect, often shows similar impatience.

I also asked him, "When did you realize how big your high-yield business would become?"

"I never really thought of it as big," he said.

"You raised almost $100 billion of capital."

"The debt level of Latin America is $400 billion," Milken replied coolly.

"When Michael first said to reschedule the Third World debt," said a media consultant, "it went through the financial market like a cannonball. Of course, if Michael had said the word 'sawdust,' all of Wall Street would have run out and bought timber futures."

There are no butlers, fine porcelains, silver, or paintings on display in the Milken house. There are red chintz sofas in the living room, a grand piano, and reproduction end tables. On one of them is an elaborate model of a cruise ship of the future which has skyscrapers of condominiums constructed on the decks in pastel balsa wood. This ship could accommodate 20,000 passengers at a time. "This will cost $1.8 billion to build, and I can't get anyone interested," Milken said disconsolately. Nearby is a bookshelf with novels by Gail Godwin, Renata Adler, Isak Dinesen, and other writers who particularly interest Lori Milken. Over the mantel is a large airbrushed family photo, Mike and Lori with their two teenage sons and one young daughter, with all imperfections wiped away by the portrait studio in the Town and Country Shopping Center on Ventura Boulevard. The bar has been converted into a small library for videocassettes. Michael Milken never has so much as a glass of wine.

Clark Gable and Carole Lombard used to live on this land. I imagined them taking an evening stroll into Milken's extraordinary monologues: what would they have made of the cruise ship of the future, the $1.8 billion that nobody would pay for it, or the notion of "privatization" back then, at the tail end of the Depression, when Mexico meant cheap maids, maracas, and Dolores Del Rio? Finally, I could not see Gable and Lombard in Milken's ample two-story cottage, which had been, in fact, the blue-shingled guesthouse down the lawn of their estate.

We helped ourselves to dinner in the kitchen, poured our own Kraft bottled dressing over a salad made with iceberg lettuce and served ourselves green beans and barbecued chicken from Pyrex dishes. Although Milken has earned an estimated $2 billion, he and Lori have an almost chilling indifference to living in any way other than they did as children of the San Fernando Valley thirty years ago. The table was set in the breakfast "nook" with stainless-steel flatware and paper napkins, not the fine-quality Servaides but the supermarket special, the Colortex hamper-size container, which the local Gelson's sells, three hundred for $2.09.

I had been warned by Milken's P.R. man, "Michael hates personal questions. He doesn't want to talk about his family. He believes those things should be private. He believes in strong family values." "Family values" and "private" are words that you hear a lot around Milken—a considerable irony given the extraordinarily public nature of marketing close to $100 billion worth of junk bonds and mounting raids on dozens of companies. It has always been difficult for him to understand that you cannot change the economy and expect to remain, as he says, "a private person." Milken's only title was vice president, and he refused to have his picture in the Drexel annual report. In a 1986 book called Takeover Madness, Milken is not even in the index; that is how effective he was. His obsession with privacy has been such that it is a common error to pronounce his name Mil-li-ken.

At dinner, I brought up the subject of Milken's father, Bernard, who died ten years ago. I asked Milken about his father's capacity for psychological survival in what I had recently learned was a harrowing life.

''When I was fifteen years old, a boy said to me, 'Your father has a terrible limp!' And I said to that boy, 'You're crazy!' He said, 'I am not. Your father walks with a brace! He's limping!' I went home that night and I really looked at my father. The boy was right. It was then I realized my own father was handicapped," Milken said. At this point in the conversation, Lori Milken, exasperated by yet another example of her husband's myopia, said, "For God's sake, Michael. Your father limped. Everyone knew that."

One of the intriguing questions concerning Michael Milken's character is how a boy from a rather ordinary middle-class background developed the striving obsession with success that would form the very core of his being. Perhaps part of the explanation is connected to the extraordinary history of his father, bom Bernard Milkevitz in Kenosha, Wisconsin. Bernard's mother died in childbirth, and his father was killed in a car crash when the boy was seven. Then young Bernard contracted polio. Relatives raised him, and later, Milken's sister told me, he went into an orphanage. As a student at the University of Wisconsin, he sold peanuts and worked as a waiter in a sorority house, where he met his future wife, Fem, Michael's mother. In his spare time, Bernard trained to be an accountant, and during the war he and Fem married and moved to Los Angeles, where he could find accounting work easily and presumably forget about his past. There Milkevitz changed his name. The French have an expression, corriger la fortune—to correct one's fortune through the denial of the past. When I asked Michael about his father's history, he said, "He never complained. He never really discussed it."

Bernard and Fem Milken raised their firstborn, who was not only a boy but a genius and bom on the Fourth of July, and their second son, Lowell, and their daughter, Joni, with a transcendent belief in their own possibilities, as if they did not want to burden them with the grim reality of Bernard's childhood. Bernard Milken survived his life by thinking of his future and his family. Fem Milken has a similar quality. She is, Michael told me, a woman who reminds him of Auntie Marne, a powerhouse who always had "so many different activities going at once, all of which she wound up running."

Along with Bernard and Fem Milken's unquestioning love of their children, perhaps, came the inability of Michael, in particular, to assess the world realistically. When I asked him about his father's time in an orphanage, he answered, "It wasn't really an orphanage ... it was sort of a home... I prefer to think of it as a boarding school."

I reminded him that it wasn't a boarding school.

"That's how I would rather think of it," he responded. He was unable to take in the observation.

I was astonished to learn that Milken, always lost in his theories and numbers, operating in another zone entirely, was so determined to move forward into the future that he had never mentioned a word of Bernard Milken's tragic life history to his two closest friends, Judy Wolin and Harry Horowitz. "The past doesn't exist for Mike," Horowitz told me. "It's yesterday's news."

The fact that Michael Milken was under a ninety-eightcount indictment for allegedly trading on inside information with Ivan Boesky, hiding stock ownership for a variety of investors, and defrauding investors in one of the country's largest electrical-andmechanical-contracting companies, the Fischbach Corporation, with the controversial Victor Posner lent a certain moral gravity to the balmy spring night.

On the front page of the Los Angeles Times, that morning, had been the news that Tony Coelho, the California congressman, was being investigated for an unreported $50,000 loan from Michael Milken's former client and close friend Tom Spiegel of Columbia Savings and Loan. Coelho, who had based much of his sketchy career as House majority whip on his ability to shill money for the Democrats through special-interest groups, had used his $50,000 loan to purchase junk bonds from Drexel. Tom Bradley, the mayor of Los Angeles, was also being investigated, according to the Los Angeles Times, for his ownership of Drexel junk offerings. There appeared to be no direct link between Milken and Coelho or Bradley on these matters, but the mere mention of Drexel and Milken's bonds on the front pages added to the tension. A few days later, Coelho announced that he would resign from Congress.

I thought of the sagging cardboard boxes in the shabby hallways of the U.S. attorney's office in New York. The cartons rise to ceiling after ceiling, clogging the dusty halls. In the boxes, presumably, are the 1.5 million documents Drexel has been forced to yield. They are labeled by hand with felt-tip markers: "Insider Trading," "Milken," "Drexel."

Part of the special psyche of the U.S. attorneys, products of the finest schools and clerkships, is to revel in the grotty modesty of their surroundings. The parking lot is filled with battered Plymouths and VW bugs with stickers from Harvard Law. "These guys know they are hot stuff," a criminal lawyer remarked. "They are representing the government, the flag, and the cornfields. They have the virtues of Lincoln and Jefferson. Their rectitude is a form of tyranny."

Giuliani's prosecutorial zeal goes a long way back. He had a key but littleknown role, for instance, in the Alexander affair in 1975, when he was deputy to the associate attorney general in the Justice Department. The Justice Department was working with the Internal Revenue Service's strike force on a series of dirty tricks. Under a variety of code names—Leprechaun, Trade winds, Haven—they delved into the sex lives of a Florida judge and the Dade County prosecutor, and allegedly, on one occasion, broke into a motel room in the Bahamas. Donald Alexander, a Yale honors student and Harvard Law Review editor, who had been appointed by Nixon to head the I.R.S. just before Watergate, was horrified. He put a stop to it, and was rewarded for his integrity by having Giuliani move against him. Giuliani reportedly attempted to convene a grand jury to investigate the impeccable I.R.S. commissioner, former officials of the I.R.S. told me. "It almost ruined Alexander."

"I'm going to get that guy!" Giuliani reputedly said long before the indictment.

Today, Alexander is a partner at Cadwalader, Wickersham & Taft in Washington. He refused to comment on "Brother Giuliani," as he called him. I asked Giuliani about this as he campaigned for mayor. He had a hard time remembering the affair before he commented. "Alexander wanted to throw the baby out with the bathwater. Always, with law enforcement, there is the potential for abuse. Let's just say that Alexander and I did not see eye to eye on law-enforcement procedures." (Oddly, a son of Alexander's works at Drexel Burnham in Houston, but he was not my source, and he refused to comment.)

I then asked Giuliani to explain to me how he had decided which Wall Street powers to prosecute, and why he had not only handcuffed a prominent Kidder, Peabody partner but also employed a headline-creating, full-dress criminal indictment, instead of leaving things to the traditional jurisdiction of the S.E.C.

"This is simple," he said. "In the case of Drexel Burnham, there was a continuous pattern of egregious behavior: insider trading, tax evasion, falsifying records—you name it! Ivan was telling the truth! Do you think these things work on magic?... I made a mistake when we used the handcuffs." (All charges against Richard Wigton, the Kidder, Peabody partner, were later dropped.)

Giuliani and I were riding through Flatbush, admiring the single-family houses. "Do you know what a house like that would cost in my neighborhood in Manhattan?" he asked me. "I bet $2 million! As we used to say when I was a kid in Brooklyn, 'Forget about 'em!' " Since leaving the U.S. attorney's office, Giuliani has been a partner at the prestigious law firm of White & Case. He is said to earn close to $1 million a year. Like Milken, Giuliani lives very modestly. He and his wife and child have a one-bedroom "convertible" apartment in a high rise near Gracie Mansion. Several times during the afternoon, Giuliani talked about people's salaries, as if he were obsessed with the subject.

"With the Drexel case, we waited and waited, until there was a successful conclusion," Giuliani told me happily. "We came out ahead on that one, and paid for the entire investigation! The U.S. government received $650 million! We made it very clear to them that if they went to trial, they would be convicted. . . . The powerful weapon that we had was the evidence, not the RICO statute."

"One of the great dangers of being an overzealous prosecutorial type," a former I.R.S. commissioner told me, "is that you begin to believe that everything is a conspiracy. And once you do, it is possible then to be convinced that everyone fits into your theories."

The man now leading Giuliani's prosecution of Milken as the head of securities-and-commodities fraud is Bruce Baird, the former chief of narcotics in New York. Three special S.E.C. lawyers are on loan to him from Washington. Baird and I discussed the overwhelming optimism of the great con men in Wall Street history—Eddie Gilbert, Bemie Comfeld, and Tino De Angelis, the salad-oil king. Twice I had to leave Baird's office when witnesses for a grand jury arrived. Walking out, I noticed what were perhaps two significant preparatory guides for the Milken case: The Bonfire of the Vanities on Baird's shelf and a fat volume, ABA Institute on Insid- er Trading. "Imagine having to understand what Milken was able to figure out about finance," remarked a prosecutor. "They're driving themselves crazy. It's funny at the U.S. attorney's office— they're just a few months ahead of Arthur Liman and his defense team trying to understand Michael's numbers.''

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Baird and his assistant U.S. attorneys, John Carroll and Jess Fardella, resemble their Wall Street counterparts; all have attended the same good schools, wear the same Brooks Brothers suspenders and fine shoes. On Baird's bulletin board, I noticed the mug shot of Michael Milken snapped on the day of his arraignment. Milken peers nervously into the camera, his perplexed gaze caught forever in a tiny square with ID numbers on a plaque under his chin.

The day I was at dinner in Los Angeles Milken had spent in meetings with Richard Sandler, another childhood friend, whom he employs as a lawyer, attempting to figure out how many of his second-level traders might be indicted and what new charges might be brought against him. Inevitably, parts of these discussions are about the government and whom it will be able to "turn" or "take hostage and torture," as well as who might ' 'crater' ' in the face of the ongoing investigations before the trial, which is tentatively set for next March. In New York, two more traders are now cooperating with the U.S. attorney. One of them, James Dahl, who sat near Milken at his famous X-shaped desk, reportedly once received a Mercedes from Milken at Christmas, in addition to his $1 million bonus, in recognition of his fantastic year.

Milken and his lawyers and friends frequently theorize about the motives of the U.S. attorney, and about why exactly Milken and his brother have been "singled out." The government is said to be loath to enter into years of court fights involving hundreds of millions of dollars to fight the Milken brothers and their stellar lawyers, who are determined to push their case, if need be, all the way up to the U.S. Supreme Court. Recently, yet another attempt was reportedly made by the government through a third party to persuade Milken to settle. "The deal was they would free Lowell if Michael would agree just to spend a year or two in some minimum-security jail. Can you believe that? Pure Sophie's Choice," a close friend of Milken's told me.

Milken's friends study the indictments to determine how many counts are "Boesky charges," related to the allegations that Boesky paid $5.3 million to Drexel to cover his trades. The Boesky charges are important because many of them fall into the murky area of insidertrading laws, an area never completely defined by the S.E.C. "It's like being caught in a southern speed trap on a highway going to Florida, where the sheriff doesn't post the signs and it's only after they pull you in that you learn what that day's speed limit is," Ralph Ingersoll II explained to me. A few years ago, the law firm Skadden Arps reportedly prepared a memo on insider-trading laws. In it were three pages of areas that were permissible, four pages of areas that were clearly illegal, and twenty-five pages of matters the legality of which even experts could not determine.

The other charges, for stock-parking violations, are more ominous. "Parking," a fairly common form of hiding stock ownership for a variety of reasons, such as covering potential takeovers, has until recently been a rarely criminally prosecuted area, overseen by the S.E.C. The indictment alleges that the government taped Milken's trader Bruce Newberg in the following transaction: "The stock is sixteen bid, up from fifteen and three-eighths. I don't want this thing to be sixteen bid. I want, y—, y—, you know, to get rid of it. ... I want it down to at least fifteen and three-quarters and hopefully lower.

.. .And umm. . .you're indemnified, uh, you know, my—, it's, y—, you know what I'm saying."

The conditions of my meeting with Milken that evening in L.A., set by his lawyer Arthur Liman, were that I would not be allowed to raise any subject even remotely connected to the indictment. The inability to speak freely gave our dinner a surreal and controlled quality. I felt as if I were sitting at the side of a banned person bathed in silence in an equally fragrant suburb of Cape Town, which parts of Los Angeles uncannily resemble.

Even so, there were many clues to his evolution. Early in the evening, I wandered into Mike and Lori Milken's dining room. There, on the dining-room table, were stacks of brand-new maroon leather photo albums, about fifty in all. Michael's kid sister, Joni, who was wearing furry unicorn bedroom slippers, was there as well. "My feet are off the record," she said, laughing. Joni, as a favor to Mike and Lori, was pasting hundreds of photographs in these new albums embossed to appear old: "The Milken Family, Vol. I." "Do you mind if I have a look?" I asked her. "Help yourself," she told me. "Wait till you see Lori and Mike in high school and college. I've been working for weeks on this crazy project. The decorator thought it was a good idea."

I flipped through page after page of valley American graffiti, circa 1960: Mike with big white teeth and an eager smile, between his parents; Mike at the beach with his second-grade class; young, pert Lori Hackel and a bare-chested Mike, enthralled with each other, on a high-school picnic at Griffith Park. Corsages, proms, football games—Mike and Lori radiating the optimism of early love without the doubt of future misconnections.

Milken was obviously precocious. "Michael was doing double-digit multiplication in his head by the time we were in third grade. I can remember thinking, Whoa! Who is this kid?" Judy Wolin told me. "He was always trying to help us learn how to do it." By the time he was ten, he was helping his father prepare his clients' income taxes. In high school, he was popular, a cheerleader, a great dancer, already in love with Lori, and by the time he was in college he was investing money for his parents' friends. "The deal was that Mike would cover completely any losses, and whatever he made for them he would keep 50 percent," a friend told me, laughing at the obvious comparison with the vast profit percentages Milken was notorious for extracting when he became "the king."

"Can you believe that picture?" said Lori as she came into the room. We were staring at a photograph of Mike and her at Sigma Alpha Mu, the "Sammy" house; Mike was dressed as a pharaoh in full satin regalia, Lori as the queen. Lori remains physically very much as she was, a smallboned woman with dark hair and pleasant, even features. This evening she wore a cotton-lace sweater and matching cotton pants in Pepto Bismol pink, as if she were still presiding at A E Phi. Once, according to a story that went around about her, she was offered a Corot for $500,000. "Tell Saul Steinberg to buy it," she reportedly said, although now she denies this.

The Milken albums are filled with the minutiae of middle-class Jewish life: the gold-and-white napkins from Lori's wedding showers and her children's Bar Mitzvahs, snaps of Lori and Mike in Hawaii on their honeymoon. "Who didn't go to Honolulu?" she asked me. In Hawaii, their faces are radiant. They were clearly thrilled with their future, in love, innocents bound for Philadelphia and the Wharton School.

Mike, president of his fraternity at Berkeley and a Phi Beta Kappa, was already in his financial ether, oblivious even to the Berkeley riots. He had discovered the treatise that would change his life: W. Braddock Hickman's study of corporate-bond performance from 1900 to 1943. It demonstrated that the rewards outran the risks over a full portfolio of high-yield bonds, even through the Depression. The Hickman study, Milken told Connie Bruck, author of The Predators' Ball, a history of Milken's career, "was consistent with what I had been thinking about for a long time."

It was in Philadelphia that Michael Milken began to come into his own. He was hired part-time to work on the delivery of securities at Drexel Harriman Ripley, a sleepy trading house dating back to 1838 that had once been part of the J. P. Morgan empire. Immediately, he started telling the partners everything they were doing wrong. "Mike was like a bull in a china shop," one partner told Connie Bruck, but he also saved the firm $500,000 by speeding up deliveries. Before completing the requirements for his M.B.A., he was shipped to New York and was soon given a seat on the trading desk. In 1973, Drexel Firestone, as it was then called, was acquired by Burnham and Company, a third-tier firm presided over by I. W. "Tubby" Burnham, a man of such old-fashioned ways he still "made his own margin records for customers in a ledger book," as Anthony Lamport, a Drexel managing director, told me. He increased the capital Milken could invest from less than $500,000 to $2 million. Milken doubled it in a year.

In those days, not even two decades ago, a Drexel partner usually earned no more than $40,000 a year, before bonuses. Milken was a brilliant oddball at Drexel, an intense young man who had isolated himself in New Jersey with his toddlers; he commuted by bus and often used a lamp to read reports on the trip. He was not a part of the smart young Wall Street Jewish world of Mount Sinai benefits and the Harmonie Club. Traders were, in those days especially, considered another class; they rarely aspired to the distinguished banking legacy of the Loebs, the Lehmans, the Wertheimers, and Andre Meyer. "We all got the system down real fast," a member of the Harmonie Club told me. "Thursday-night dinners at the Century Country Club in Purchase, summer houses in Westchester County, services at Central Synagogue or Temple

Emanu-El. It was easy then." Lamport remembered Mike as "always buried in proxies, never shooting rubber bands like the other traders," trading his high-yields and making investments in small companies, such as, in one case, "a factory in Hungary that made light bulbs." He did well for Drexel, but perhaps his xenophobia prevented him from absorbing the style of the world he was to move into.

An integral and unspoken part of that style was modesty, shunning flamboyance, personally and professionally. The Rothschilds, for example, were said to be embarrassed by their riches. If they fixed the currency markets, they would then give England the money for the Suez Canal. Andre Meyer once remarked to a flashy client, "I could never afford a Rolls-Royce!" Part of this ethos was in adhering to the Jewish folk notion of kina hora, which means in Yiddish "May the evil eye not fall upon me." It is the equivalent of a Christian's knocking on wood, which once stood for the Cross. Years ago, if an Eastern European Jew said, "I had a good year," he would follow it immediately with the words kina hora! As if the very idea of bragging could bring down the heavens upon him. Almost every person I interviewed from Drexel who happened to be Jewish laughed ruefully when I brought up the phrase kina hora, as though their own meteoric success and deportment had indeed brought down the evil eye.

Many financiers now worry about the subtle anti-Semitism which is creeping into discussions of the Milken case. Fred Joseph has received a hand-scrawled letter with a predictable reference to "greedy kikes." Euphemistic expressions like "New York bankers" are now sometimes heard in the boardrooms of the Midwest. The distinguished Felix Rohatyn of Lazard Freres, a longtime critic of Milken, has met informally to discuss this troubling situation with other prominent Jewish leaders, such as Laurence Tisch, head of CBS, and Judge Simon Rifkind.

"This story is all about kina hora," one Drexel executive told me. But, like everything else that deals with the external world, Milken could not assimilate this notion. "I don't think I ever thought about it," he told me at dinner. "I don't think in those terms." Milken, personally modest and observant of his religion, sadly lacked that sense of history which could have alerted him to the possibility of peril in his professional life.

Milken was so focused on his numbers that he could not see that he was in danger of violating a societal code which distrusts the rapid accumulation of wealth unless there is a tangible product to show for it— oil, for example, or the Model T. No one at Drexel seemed capable of teaching him that the public is suspicious of the closed world of Wall Street, because it doesn't understand that often what a Mike Milken could create would be as potentially useful to America as the Ford car. "Mike Milken could not have happened at a white-shoe firm like Morgan Stanley or Goldman, Sachs," a client of Milken's told me. "At Drexel, there were no grown-ups around. Mike made so much money everyone looked the other way."

"Didn't you ever think, Good God, am I making too much money too fast?" I asked Milken. "I made my deal when I started at Drexel, and the money was never important to me," he replied.

Even at the height of the takeover spree, he seemed uncomprehending of the New York world of his tycoons, many of whom had by then ditched their first wives with their Larchmont bobs and Century Country Club mores. Milken, in love with the same girl since age fifteen, was perplexed by the tales of the new wives with their husbands' new fortunes, their walls covered with Sargent portraits, boiserie, and burled woods; their tables with new Georgian silver and Mario's embryonic roses; their flower bills often running $10,000 a month. "I can't tell people how to act. My guys are all consenting adults. I can't believe people in New York would regard some of these people as social leaders," he said recently of two of the men he had made.

Fred Joseph arrived at Drexel in 1974.

"When I came in, I told everyone here, 'You have to be aggressive.' Our guys felt like losers! They said they weren't getting any orders." At that time Wall Street was mostly closed to outsiders, and Drexel was not part of the whiteshoe establishment. The son of a Boston taxi driver, Joseph went to Harvard as a scholarship student; he is an "outsider" turned Wall Street smoothy. Joseph, whom Manhattan, inc. once anointed as the "Junk Bond Baron," was the perfect front man for the secretive Milken. When, after weeks of negotiations, I finally met with Joseph, he was disarmingly casual and likable, sitting on one leg and hobbling his loafer up and down, as if we had been friends for years. In his office were a small rolltop desk and a towering construction of Lucite blocks which contained the "tombstones" of many Drexel deals. An ad on one wall in Drexel said, "6 weeks, 82 deals, $6.6 billion." There was also a hand-lettered poster that read, COME OUT FIGHTING, WE'RE IN YOUR CORNER, but that sign was propped up on the floor.

Joseph is known for his charming Boston accent, for hunting with bow and arrows on the weekend, and for his ability to project utter candor. He has been in an impossible situation; he is trying to save his firm and the jobs of 10,000 employees without betraying Milken, who was largely responsible for Drexel's great success. "When I saw that Fred Joseph brushes his hair the way Jack Kennedy used to, I knew Milken was a dead man," a New York political observer told me.

Soon after Joseph came to Drexel, he was urged, "Go meet your high-yield trader. He's really smart." Joseph made his way down to the trading floor and encountered Mike Milken for the first time: "He was working forty lines at once," he told me. "I could see he had an incredible brain! He was making new markets for certain bonds, so I said, 'Let's do some deals together.' "

One day Milken told Joseph that Lehman Brothers had financed some companies entirely with high-yield bonds. "It was like a light. Mike thought he could see some real potential there! Suddenly, all these companies that had never been able to raise any money were out there. We said to each other, 'Maybe we could sell their bonds!' Almost immediately we got the bonds going for Texas International. I remember someone in corporate finance asking me, 'Do you really think Milken has the ability to sell them?' "

That year, 1977, Drexel did seven high-yield-bond deals. By 1979 it had quadrupled its high-yield business and the firm's revenues. Milken had demanded his own trading account. His profits were 100 percent.

Bernard Milken was in Los Angeles, dying of cancer. One of Milken's children was diagnosed as epileptic. Tired of his 5:30 A.M. New Jersey commute, Milken requested that his entire high-yield department be moved to California, where, he seemed convinced, the climate and the sense of being embraced by his past would restore calm to his family life. "Our fear was that Mike would get out to Los Angeles and just take it easy," Anthony Lamport told me.

Milken returned to California just before the Reagans, with their deregulation policies and free-market ideas, ascended to Washington, creating the necessary political climate for the Milken era to commence. The LBO, or "leveraged buyout," long a standard form of Wall Street investment, had until then been a mechanism to buy private companies or invest in divisions of publicly held corporations by borrowing against the assets of the company. From 1978 to 1983, LBO activity in America totaled about $11 billion; from 1984 to 1988, it was $181.9 billion. In California, Milken's bonds were no longer scorned with the name "Chinese paper." "After the first series of megadeals, you never heard the expression 'Junk is for Jews' again," a Drexel trader told me.

In those heady days, C.E.O.'s would wait for hours in the conference rooms to make presentations to Milken, attempting to persuade him to "finance their hopes and dreams," as Milken often said. "You would sit there and wait," one financier told me. "And wait and wait. It wasn't that Michael wanted to be rude, he was just preoccupied. There were five or six conference rooms, all with guys waiting, and then the corporate-finance guys would wheel Mike in—he was like this supersonic robot! You would get fifteen minutes, and he would have already read everything about your company. ... He would point out things you hadn't dreamed of!" His competitors used to speculate about how Mike felt going from room to room and what he said: Junk bonds for you! No junk bonds for you! You, Icahn, can make a run at USX! You, Kravis, can have Safeway!

"I want you to give me $300 million," Milken told one financier just after the October 1987 stock-market crash. "We will buy a huge block of Texaco with it, eight or ten million shares! They're selling at twenty-eight dollars! You'll have a lot of fun. You'll be the white knight in their problems with Pennzoil! There will be a lot of flash! You'll enjoy that. And you'll make a ton of money."

A week earlier, just before the market collapse, the financier had miraculously closed his new $600 million investment fund; his nerves were still frayed from how close he had come to losing every dollar he had been able to squeeze out of the pension funds and the French and the Japanese. Even more ominous, the rumors of Milken's coming indictment by the U.S. attorney were all over the Street. Every day, it seemed, The Wall Street Journal or The Washington Post was running a new leak from the S.E.C.

"Mike, I can't risk $300 million! That's half of my fund. I don't have the balls to do that," the financier told me he told Milken.

"It will be all right," Milken said calmly. "I've really thought about it. I've studied the numbers. It all adds up. What you have here is a situation where the numbers make a lot of sense."

The financier left the office, and later did not invest. "What happened?" I asked. "Mike gave the deal to Carl Icahn," the financier told me. "God, I was a wimp. Carl made a ton of money. Millions and millions of dollars!" The financier, now a head of a huge private company, threw up his hands. "This guy Milken is the biggest genius in the securities business. He's like Midas. He can take dust and turn it into gold."

"When I first met Mike," Ralph Ingersoll II told me, "I wanted him to raise $100 million for a new newspaper company I had started. Mike was carrying on three conversations at once, which he always did, but in front of him was one of my newspapers, The South County Journal. He asked me, as he looked at it, to explain to him how my business worked, which I tried to do succinctly. At the end, he was able to tell me exactly what I wanted to do with my business. He got it immediately. Several years later, he advised me to invest in Spanish newspapers. He said, 'In this country, there are 20 million Hispanics, growing at the rate of four to five times the national average. Take on the needs of the American Hispanic community.' "

One Drexel executive said, "You have to understand what it was like when Mike was the king. It was Camelot. Pure magic. We thought it would go on and on."

"Was there ever a moment when you questioned whether things had gone too far with Mike and what he had pulled off at Drexel Burnham?" I asked a thoughtful former high-level Drexel executive.

"Listen," he told me, "when we hired Dennis Levine, we thought it was a good idea. He was young and hungry. We thought he would be great in the M & A department of guerrillas! We said to him, 'Dennis, if you have a good year, we're going to give you a $750,000 bonus!' That year he did a lot of business. He was working with Mike on Ronnie's deal with Revlon, they had Carl Icahn's deal with TWA, they had Oscar Wyatt and Coastal going after ANR! They had a great year! So at year-end, when it was time to evaluate how everybody had done, Dennis was told, 'You've been fantastic! You're not going to get $750,000 as a bonus, you're going to get $1.5 million!' Remember, this kid was thirty-two years old. Do you know what I heard he said? You won't believe this! I heard he said, 'I am insulted! How dare you insult me like this!' The partner who told me the story said, 'I could have jumped across the conference table and strangled that bastard!' But then we talked about it and we realized we had made hundreds of millions of dollars on Revlon, TWA, and Oscar's deal. Why not? One and a half million dollars was nothing but a small percentage of the business, and what difference did it make anyway?" The Drexel official shook his head sadly. "1 think about that moment a lot."

Several months after that exchange in the conference room, Dennis Levine was arrested for selling insider information to Ivan Boesky, for whom Mike Milken had raised $660 million, despite the advice of his brother, a few of his partners, and several of his friends. Boesky and Levine are now both in jail. Before he departed for Lompoc, Boesky cut a deal with the government: Fie would dump his stocks, pay $100 million in fines, spend three years in prison, and tell everything he knew about Wall Street, including his allegedly sordid history with Michael Milken, the man whom the U.S. attorneys now call "Mr. Big."

"The day Ivan Boesky was arrested was the day the party stopped at Drexel Burnham," a Drexel partner told me.

As Milken's power grew and the C.E.O.'s lined the Drexel driveway, Milken began to veer off course, a pilot flying into the storm without radar. Milken did not protest as his benign mechanism suddenly began to be used by the deal-hungry M & A boys in New York. His ability to assess character diminished. "I used to tell Mike that I thought a lot of his traders were shabby," Fred Joseph told me. "He would always defend them. Michael would forgive anyone anything if they were great salesmen." Milken actually once debated for days if it was "sensible" to attempt a $30 billion takeover.

At one point Milken tried to persuade a canny financier to join Drexel as the head of the explosive Mergers and Acquisitions area. "I can't come to work for you," the man told him. "I've given my word to someone else." "So what?" Milken is reported to have said. "What does your word mean? It means nothing." "The only thing I ever worried about with Mike was the possibility for excess," the financier told me.

There is a famous story from this period about Henry Kravis's $6.2 billion takeover of Beatrice. Milken reportedly told Kravis that he would not be able to sell the Beatrice bonds without equity. It was said that he demanded warrants, an option to buy 24 percent of the company, which

was to be passed along to the bond buyers as an incentive. As it happened, Milken easily placed the Beatrice paper for Kohlberg Kravis Roberts, but, incredibly, he retained the stake for the bond buyers for Drexel and himself. "I'll never agree to warrants again," Kravis is said to have told a Drexel partner. (He would, however, on the RJR Nabisco deal.) Drexel's fee on Beatrice was $86 million. The Drexel partners earned close to $800 million on their Beatrice equity, with several hundred million going to Milken personally, according to Connie Bruck.

The seeds of disaster had been sown, though no one knew it, in the early hostile takeovers of 1985, when Drexel and Milken helped Carl Icahn make a bid for Phillips Petroleum. "Did it ever occur to you how powerful the oil lobby was in Congress?" I asked David Kay, a former senior partner at Drexel. "The numbers made sense," he told me. "The oil companies were being run poorly." Next, Drexel and Milken saddled up Boone Pickens at Mesa to attempt a takeover of UNOCAL. It was then that the national forces began to move against Drexel and Milken. Fred Hartley, a man whose idea of running an oil company efficiently was to travel with a grand piano in the corporate plane, was reportedly close not only to Standard Oil mogul Robert Anderson but also to Pete Domenici, the senator from New Mexico, who began to sponsor anti-takeover bills. In the House, Representative John Dingell of Michigan convened a series of hearings, perhaps to assuage the oil lobby. "Kid, what did you do to get everybody so mad at you ?" New York senator Alphonse D'Amato asked Milken • when he went to Washington then. "I honestly don't know, Senator," Milken replied. Within one year, about thirty-five anti-takeover bills were introduced in Congress. None has so far passed. "Four years have gone by. Congress has done nothing. No one has stood up for America. They've all been delighted to see their country destroyed," Fred Hartley told me. A prevalent theory around Drexel is that the oil lobby also complained bitterly and futilely to the S.E.C., which, handily, was then run by John Shad, Fred Joseph's mentor.

By 1986, Milken's trading room accounted for over 25 percent of Drexel's $4 billion revenues. "I realized [then] that Milken was trying to take over America," the financier Ted Forstmann told me. Forstmann, who has been highly critical of junk bonds, refused to do any business at all with Milken or Drexel. "Milken was trying to fix it through his circle that

if you didn't deal with him you didn't get anything. We were happy to go our own way." At the white-shoe firms, such as Morgan Stanley and Salomon Brothers, the partners began to scramble to compete with the master trader. From Salomon Brothers, Milken took the clients Beatrice Foods, Uniroyal, TWA, Pacific Lumber, and National Can. "You tell that trader of yours on the Coast that I'm going to cut his nuts off. He can't have all of our business," John Gutfreund, the chairman of Salomon, reportedly told Fred Joseph once at a dinner party.

There is no question that acceleration of the hostile takeovers at Drexel, under Milken's aegis, was the force that finally did Mike Milken in. As Milken built his business in Beverly Hills, he and his traders could no longer control the altimeter. There were too many raiders, too many deals. Several of Milken's traders were pulling in $10 million and $20 million a year. "We didn't have time to back off and think," one Drexel partner told me. "We were doing deal after deal. We controlled almost all the business on the Street. We leveled everybody, and the guys in Beverly Hills became so arrogant. They just all got too damn rich. . . . What really finished us off was when the S.E.C. got Ivan Boesky into their nets. Then the U.S. attorney and the S.E.C. believed they had struck pay dirt!"

Mike Milken and I were never alone during the evening in Encino. Like Sinatra, Milken appears to surround himself with a combination of princes and courtiers, as if he were incapable of telling them apart. In this case, the prince was Ralph Ingersoll II, who has been an eloquent public spokesman for his close friend. "The man I know is a visionary, a brilliant, decent, and sensitive person," he had told me. "He deserves a fair trial, and you deserve to have access to him." Milken's P.R. man, Ken Lerer, who sometimes calls himself "a former journalist," was also present, complaining about having to get on the red-eye, as was the ubiquitous Richard Sandler, who, along with Lerer, attempted to censor our every word.

Milken has always demonstrated a need to rely on lavishly paid and questionable spokesmen, such as his former lieutenants at Drexel and now Lerer and Sandler, who interpret for their boss: What Michael wants. . . What Michael says. . . What Michael means. . . Milken, always oblivious to anything that isn't numerical, has allowed himself to be "packaged" as a financial Oliver North. This is an extravagantly expensive and pretentious effort, orchestrated by Lerer and his partner, Linda Robinson, the wife of the head of American Express, and it misfires. "What I need you to understand is the difference between myth and reality," Lerer told me. "Michael is the most misunderstood man in America."

"I have a breakfast for Chancellor Green in New York," Milken said to me, "and someone mentions that I am taking 1,700 children to a ball game. Then I have to read how my taking kids to a ball game is a publicity stunt. It is so ridiculous."

There is no doubt that Milken has a passion for philanthropy. He is naive about the impact elaborately staged events involving baseball games, Hispanic grocers, and crippled children may have on the public's perception of him. Through his family foundation, which is now being examined by the I.R.S., he has given away more than $300 million, often anonymously, much of it since his problems began.

He is obsessed as well with the needs of his two sons and daughter, their sticker books, pierced ears, and driver's licenses. He has an affinity for children altogether, and actually seems more comfortable in their company than with adults. He is apt to keep business acquaintances waiting for half an hour while he gets down on the floor to play with their kids and their Barbie dolls or Legos. He dreams of solving the problems of illiteracy and emotional disturbance in children, and of finding a cure for epilepsy.

In May in Los Angeles, I attended a lunch at the Beverly Hilton with a thousand other guests to honor the Milken family for its contributions to the H.E.L.P. Group, which aids emotionally disturbed children. As part of the entertainment, a group of these children were asked to tell the audience about their feelings for Mike. "He is so nice to us," one said. "Are you nervous about being onstage?" Kristy McNichol, the actress, asked the child. "Yes!" he said.

As the Milken family stood on the stage, a large banner was unfurled naming the new H.E.L.P. campus, which the Milkens have funded, for Milken's late father. Then Michael Milken spoke in the parables and Delphic pronouncements he is known for. "This is a moment to turn despair into optimism," he said. "This is the moment to make everything an opportunity." He was the very picture of modesty. He praised Kristy McNichol and all of his supporters and friends gathered in the ballroom. Then he said, "It would have been enough just to have helped the children."

The tragedy of this contrived effort before Milken's coming trial is that it takes away from a dimension of the man's real persona. At the lunch, I observed Milken with one of the children, a piano prodigy who had performed on the program. Milken was unaware I was listening to his conversation. He said to the boy, "I want to come visit you later. I want to hear the new piece." No one was around, and the child, clearly used to Milken's attention, was casual. "O.K., Mike, but I'm kind of busy. I have a lot of homework." Milken backed off immediately, with no sign of impatience. "Sure," he said. "I understand."

Later, Milken and I spoke of the lunch. "I've turned down hundred of requests for similar events," he told me. "This one, I believed, would make the children happy, and that meant a lot to me. I didn't want any reporters there. All of the people who criticize me might like it if I would just vanish, but I'm not going to do that."

It is sunrise in Beverly Hills, an odd hot wind like an early Santa Ana is blowing, and it is ferociously hot for April, already 80 degrees and headed for 105. In two days Michael Milken will be arraigned in Manhattan federal court.

The heat and the wind add to the strange atmosphere at the Beverly Hilton, where despite the duel between Mike Milken and the U.S. attorneys the eleventh annual Drexel Burnham Lambert HighYield Bond Conference is beginning, just as if Mike were still king, and his disciples have gathered as they have every previous spring for the "predators' ball."

"You won't find the ghost of Michael Milken here," Steve Anreder, the spokesperson for Drexel, has told me snappishly on the telephone. But he is wrong. Milken's ghost and friends hover everywhere, even though Milken does not. Instead, he is marooned a few miles away in his office adjacent to the Drexel building on Wilshire, which, ironically, he owns. Milken has been prohibited by the agreement Drexel made with the U.S. attorney not only from receiving his $200 million 1988 bonus but also from talking to his former partners about business. Fred Joseph, to save his firm, has even persuaded John Shad, formerly of the S.E.C., to move in as chairman. So Milken cannot appear anywhere near the Hilton, although he is presumed innocent and a year away from a trial.

With or without Milken, the high-yield machinery has lifted off; he long ago unleashed the force. "There is $3 trillion worth of capital in this room!" Milken said to this gathering during the dizzy, happy days of 1985.

Already, Milken's buyers and sellers are working the phones in the lobby, calling New York, hyping one another up, screaming "Not that much equity!" shouting "You mean we're slipping, we're slipping!" staring at their program sheets for the week.

Boone Pickens is scheduled to appear, as are Carl Icahn, Carl Lindner, Frank Lorenzo, and Henry Kravis, who is here to peddle $4 billion worth of RJR Nabisco bonds. Many others of the original bomb squad, such as Saul Steinberg and Ron Perelman, are at home, as if to detach themselves from the circus now that they have made the progression from raiders to industrialists.

Early this morning, the new head of high-yield trading, John Kissick, a tall and commanding figure with chiseled features and a long affectionate history with Mike, addressed the opening breakfast, his head eerily projected onto video screens. Kissick spoke of the Milken credo, as if it were as accepted a part of financial history as J. P. Morgan's creation of U.S. Steel. He talked of "the democratization of capital" and of how Milken's genius for raising money for deserving companies would continue to affect all corporate finance everywhere long after his trial. "Michael, our thoughts are with you," Kissick said as two thousand Drexel clients applauded, but the boys stayed in their seats, did not jump up with histrionic demonstrations—not with so much business to be done. The Drexel executives and the deal-makers need to believe there is still a prairie of hope, a world without end, as it was when Mike was king.

Two months after this conference, in June, Milken, like Giuliani out campaigning for mayor, would be focused on future possibilities. He would announce that he was officially resigning from the company he had turned from a bunch of "hasbeens" into "the elixir," as one partner phrased it. He was even forming a new company, International Capital Access Group, which would specialize in helping minority entrepreneurs. "I try to help people, and even this reporters twist and think I'm doing for public relations," he would tell me.

In Los Angeles, at the conference, many of Milken's advisers are somber. "It's like a funeral. No one really knows what to say," one venture capitalist tells me. As always, Milken is interpreted through third parties: "Mike will not appear." "Mike isn't sure how he feels about a demonstration." "Mike may show up at the Bistro Gardens dinner tonight."

"Take a good look at the world Michael created," a Drexel partner tells me. All around me, the men fan out and swirl into the conference rooms, ignoring the P.A. system, which over the next few days blasts announcements through the Hilton: "Magma Copper, offering $100 million of subordinated notes, will present in the Versailles room at 10:15 A.M."

A few miles away, in the hush of his office, Mike Milken has loaded his Drexel canvas bags for his trip to New York, where he is to be fingerprinted and have his mug shots taken. This time, as he filled his bags, they bulged not only with proxies and registrations but with dozens of depositions, legal memos, and strategy suggestions for his first visit to another world altogether, that of convicts and grand juries, metal security doors and bulletproof glass, inside the offices of the U.S. attorney in New York.