Trial by Press:
James B. Stewart vs. Michael Milken
Jude Wanniski
October 9, 1991


As you all have surely noted, The Wall Street Journal last Wednesday ran a chapter of James B. Stewart's book on Michael Milken and Ivan Boesky, Den of Thieves, under the headline, "Scenes from a Scandal." The excerpt presents the thesis that Milken and Boesky, together driven by drooling greed, were conscious partners in criminal schemes to enrich themselves at the expense of the investing public. The piece took up two full pages, including all of page B1, around a line drawing of Milken designed to prepare the Journal 's three million readers for a profile of Evil Incarnate.

The publication of this material in this fashion is an astonishing event in the long and illustrious history of the Journal, its low point by far. Because the Journal' s editors are not conscious of what they have done, they would not agree with me that it is among the most wretched episodes I can recall in the annals of serious American journalism. Having spent 13 years of my own journalistic career at Dow Jones & Co. publications, six of them at the Journal on the Editorial Board and as Associate Editor, I'm especially saddened at the corruption of journalistic standards that has mindlessly spilled into its news pages, wrapped in lofty self-righteousness. The old editors of the Journal would never have permitted this situation to develop. The conflicts of interest are profound.

James B. Stewart, whose book the Journal is trumpeting, is the Journal's "Page One" Editor. He is a lawyer by training, as is Norman Pearlstine, the Journal's executive editor, his boss. Stewart's first book, The Prosecutors, published five years ago as his alliance with federal prosecutors began to flower, is itself a celebration of federal prosecutors -- which speaks to the cast of Stewart's mind. Until very recently, the tradition of American journalism had been in celebration of the defense attorney, the Clarence Darrows of the profession who defended the criminally accused against the tendencies of the police state.

Journalism first walked down this new path with Watergate, when The Washington Post, out of its visceral hatred of Richard Nixon, permitted itself to be manipulated by his special political prosecutors. Leon Jaworski's battalion of lawyers was the so-called "Deep Throat" that fed the Post reporters juicy leads which built the case against Nixon in a crescendo of innuendo and conjecture. The President's conviction thus took place not in a court of law or a Senate impeachment proceeding, but in the news pages of one of the nation's most influential daily newspapers. The political prosecution of the Reagan Administration was similarly fed by tidbits to the press from special prosecutor Lawrence Walsh, who continues to have the blind support of The New York Times, although he has yet to succeed in a court of law.

Until Ivan Boesky came along, the Journal had been cut out of this action. The prosecutors had denied its news reporters the spoonfeeding of raw conjecture dressed up as fact, largely because the paper's high-minded editorial page opposed this trial-by-press method. Prosecutors did not consider the Journal to be a reliable ally in a witchhunt. Indeed, for two decades there has been an intense, often bitter rivalry between the Journal's editorial pages and its news pages. In this witchhunt on Wall Street, the Journal's editorial page editor, Robert L. Hartley, has been unable to do anything about the corrupting influence that has infected the news pages. Pearlstine and Stewart have had this Big Story carefully fed to them by Rudolph Giuliani, the U.S. prosecutor. They know it must be true and do not care what Bartley and his editorial page writers privately think of them, knowing they are unable to say anything publicly about them. Bartley's associate, L. Gordon Crovitz, a lawyer trained in the Darrow tradition, writes the "Rule of Law" column that has inveighed against the corruption of the criminal justice system. Bartley and Crovitz are in a most unusual position as defenders of the rule of law, prevented by institutional constraints from saying anything publicly about the Journal's news department's role in corrupting that process.

There are sleazy, envious, openly corrupt newspapermen whom I've known over the years. Stewart is not one of them. Eminently likeable, decent and brilliant in his way, he first came to my attention in 1986 as the Journal's mergers and acquisitions reporter, which became his stepping stone to a Pulitzer Prize and the "Page One" editorship. Stewart drove the Journal's competitors crazy because he always seemed to get to the big M&A stories before they did. In our 1987 MediaGuide , he was awarded the maximum rating of (****). How did he do it? We now know his "Deep Throat," his most important source of inside news on Wall Street, was Ivan Boesky, who was even then manipulating the Journal and the rest of the financial press for his own profit. Before he was caught, remember, Boesky was portrayed by the financial press corps as a fiendishly clever expert in arbitrage. The financial press also presented him as a cultured intellect, a man of the world, a philanthropist, someone it would be nice to know. Michael Milken, who never, ever socialized with Boesky, an important, illustrious client of Drexel Burnham Lambert, probably believed with the rest of us what he read in the newspapers about Boesky. The Journal's news pages, which lead the rest of the financial press on such matters, of course contributed to this highly polished image of Ivan Boesky.

Boesky dealt with Milken as a client, as Drexel Burnham Lambert in these glory years did most of the M&A deals on Wall Street because of Milken's financial prowess. The Stewart presentation makes it appear as if they were in constant contact, scheming and plotting. Those who worked with Milken have indicated Boesky was considered something of a nuisance, calling Milken a dozen times for each return call he got from Milken. Boesky's source of inside information from Drexel was not Milken, however. It was Dennis Levine, an ambitious young man who was no financial genius but who had ready access to enough of Drexel's inside doings to make him a gold mine of information to Boesky. Stewart himself reports that when Levine hinted to Boesky he might like to come to work for him, Boesky reminded him he was too important to him at Drexel. In due course the feds would collect Levine, but as a small fry he was much too inconsequential to earn Ivan Boesky the sweetheart deal He got from the feds, a sojourn at a federal country club. Boesky told the feds Milken was his source, and Stewart,  of course stunned that his pal Boesky turned out to be a crook, easily believed Milken was the evil genius who led Boesky astray. Unable to accept his own failure to detect Boesky's criminality, Stewart appears to have believed deep in his heart from the very beginning that he knew for sure Milken was a deeply evil man, whom he must stop, whom he must punish. In his book, Stewart clearly views Boesky, a man he knew well, as a victim of Milken, a man he never met. By contrast, Dennis Levine, who knew both men, has written of his view that Milken was taken in by Boesky.

In our 1988 MediaGuide, published long before I met Michael Milken, we gave Stewart a "10 Best" Award for the story for which he won his Pulitzer, 'The Wall Street Career of Martin Siegel Was a Dream Gone Wrong," 2/17/87, about how Drexel's head of mergers and acquisitions became corrupted in his involvement with Boesky. But we still reduced Stewart's overall rating to (**l/2), precisely because we felt his early reports on the Wall Street scandals were overstepping the bounds of traditional journalistic standards. Here is how his entry read:

Stewart, James B. The Wall Street Journal. (**l/2)
New York. A four-star reporter in the '87 MediaGuide , the Journal's ace on mergers and acquisitions could easily have repeated this year, but he pushed a little too hard for our tastes, seeming as if he wanted to hasten indictments in the dealmaker scandals. A lawyer who was executive editor of American Lawyer magazine before joining the WSJ in 1983, Stewart has been the reporter to beat on Wall Street's frantic M&A beat, with a keen eye, great sources, and a sidekick legman, Daniel Hertzberg, whose byline often appears below Stewart's. "The Wall Street Career of Martin Siegel Was a Dream Gone Wrong," 2-17, was among the best we've ever seen from Stewart, a colossal effort that squeezed a book of information and drama into a fascinating news account. He's authoritative with "Death of a Theory? Supreme Court May Revamp Insider Trading law," 9-30, arguing the Court is likely to do so in a review of the R. Foster Winans conviction. But on his coverage of Drexel Burnham and Michael Milken, we became increasingly distressed with his scoops, as the following entries from our readers indicate: "Boesky and Drexel Aides Joined in Illicit Scheme, Records Suggest," 2-4, "a clear and insightful piece on Boesky and Drexel 'parking stock' with each other, but these are extremely serious allegations not to have a source that they can name." And U.S. Accumulates Evidence Supporting Case Against Milken, Sources Say," 4-28, "excellent piece with a clear description of the possible wrongdoings, a good analysis of what the case will hinge on, but there is no source quoted by name." Then, "Boesky Ex-Aide Could Provide Data on Milken," 9-24, "is Stewart becoming an arm of the Justice Department? He seems to be fanning embers here: 'Yesterday's announcement seems likely to dispel impressions on Wall Street that the government's investigation of floundering.'" Finally, "After the Fall," 11-19, "very serious accusations are made here about the subject's personal life and style. Perhaps more quotes would have been helpful from people who know him." Author of a new book, The Prosecutors, Stewart seemed to be going to trial by press, a breach of Journalistic standards that he shares with his editors.

As it happened, the combination of Jamesj Stewart as the willing point man in the press corps for Giuliani's lynch mob worked like a charm. Now, with Michael Milken sentenced to ten years in a federal penitentiary, with 11 drug dealers as roommates, almost everyone in the nation who does not know Milken personally believes him to be the Master Crook of the 1980s (while those of us who know him believe him to be a victim of our epoch). Boesky, by contrast, now a free man, is viewed as merely a pawn of the Master. In Stewart's book, and in the Journal excerpt, when Boesky's assertions conflict with the possibility that Milken may be the liar, Stewart's presentation implicitly demands we believe in Boesky.

With Stewart named "Page One" editor late in '88, Journal news editors were persuaded by him that this was a Just Cause, the responsibility of their newspaper to see Milken did not somehow escape the wheels of justice. For the following two years the newspaper routinely ran unsourced news stories by other reporters under Stewards guidance and direction, alleging felonious activity by Milken involving insider trading, stock manipulation, and bribery. At one point, the government estimated that the myriad transactions involving Milken on which Boesky had spilled the beans cost the investing public several billion dollars.

For three years, the government wrestled with the beans Boesky had spilled, trying to come up with airtight felony counts. Failing on quality, they instead went for quantity, finally delivering a 98-count indictment to the court. At the same time, the Journal trained its news guns on the very concept of "junk bonds," inviting a temporary decimation of that market and fueling the congressional demands that something be done. A long string of Savings & Loan companies, forced to sell what had been their most profitable assets by the federal bailout law that resulted, went under water and into federal receivership, adding hundreds of billions of dollars to the federal deficit over time. Again, the Journal's editorial page maintained a piquant counterpoint to these grotesque proceedings, but was barred by institutional constraints from pointing out its brethren on "Page One" had been pan of the problem here as well - by nurturing the idea that high-yield bonds, the concept born in the evil mind of Michael Milken, were themselves unworthy financial instruments.

In the end, faced with new threats from the prosecutors that he and his brother Lowell would soon face another carload of felony counts and would be kept in the courts until they were old men, Milken caved in to a plea bargain when the feds said they would allow his brother to walk away a free man. To avoid a trial, with material they knew was far from being air-tight, the prosecutors had to allow Lowell Milken his freedom, for he made it plain he would not plea bargain and would demand a trial on the felony charges that could technically salt him away in a federal slammer for several hundred years. Milken's plea of guilty to six felony counts was most unusual in that none of them involved insider trading, stock manipulation or bribery - the triad of unsourced allegations that Stewart had been running in the Journal's news pages for years. They involved only technical violations of the security laws, none of which, on close examination, would seem to warrant more than the equivalent of a parking ticket for an expired meter. By my reckoning, none of the counts involved the loss by the investing public of a dime, much less billions. In each case, Milken confessed to being involved with clients who had failed to make disclosures they were required to make according to SEC regulations.

In a post-sentencing proceeding to determine how much these felonies cost the investing public, U.S. District Judge Kimba Wood could stretch logic only enough to find $318,000. In this case, Milken had agreed to a request from his superiors at Drexel to help a client, whose own customers had not paid commissions to the client for investments they had made. To recoup the commissions, amounting to $318,000, the future prices were adjusted by fractions of a point within the bid/asked spread. This was logical. It didn't really cost the investing public anything. And it would have been legal if Drexel's client filed the appropriate disclosures to the SEC. I could sympathize with Judge Wood when I heard that she identified the $318,000 as the public's loss. Having already sentenced Milken to 10 years in prison, it would have been awkward if she had thrown this amount out with the others, forced to announce this Master Criminal didn't steal a dime from anyone.

Before sentencing Milken, Judge Wood invited the prosecutors in special court hearings to go beyond these harmless "crimes" to which Milken had confessed - and present the best cases they had against Milken on the accusations that had gotten all the public attention via the leaks to the Journal The purpose was to help Judge Wood decide how to sentence Milken, to determine if the crimes to which he had confessed were or were not part of a broader pattern of criminality on Wall Street. The special procedure was named after a man named Fatico and became known in the press as the "Fatico Hearings." For four October weeks last year, the federal prosecutors took their best shots -- one trying to prove Milken manipulated stock, one trying to prove he engaged in insider trading, and one trying to prove he committed bribery. In each attempt, the government failed miserably. Judge Wood sentenced Milken to ten years in prison, followed by three years of full-time community service, even while acknowledging the prosecution had failed in these hearings.

In the attempt to prove stock manipulation, based on information supplied to them by Boesky, the government lawyers discovered they were looking in the wrong place. Milken's lawyers demonstrated that while it appeared someone at Drexel was involved, Milken not only was not trying to drive up the price of Wickes Co. stock as the government had alleged, but his department had been serious sellers of the stock during the time period in question. Judge Wood, of course, rejected the government's assertion upon seeing the records. In the bribery case, involving warrants of Storer Communications, the Judge also found the government failed to prove their charge, accepting the logic of Milken's lawyers and the trading records they presented.

In the attempt to prove insider trading, the government had as a key witness an employe of Milken's junk bond department, James Dahl, who swore before a grand jury that Milken advised him to buy up Caesar's World bonds from their own customers. To the government, this was a smoking gun. In 1983, two of Drexel's customers who owned Caesar's World bonds had called Drexel and asked to sell the bonds. On that same day, by coincidence, Milken was meeting with Caesar's World to make a presentation on how to handle their finances, i.e., a sales pitch. Milken's lawyers introduced evidence indicating there was no inside information made available to Milken at the meeting. It was also disclosed that Milken, asked by Drexel to buy the bonds for its pension fund, decided to buy only half the bonds, further indicating he had no information on the rise in price that occurred later.

The clincher, though, came when Milken's lawyers produced a customer who had written a contemporaneous memo which describes a telephone call he'd received from Dahl. Dahl's call was to recommend that he buy a new issue, presumably of Golden Nugget bond warrants, and that he replied he did not have the cash, but that if Dahl would look over his portfolio and find something to sell, he would agree to the shift. Dahl then recommended he sell Caesar's World. Shown the 1983 memo on the stand last year, Dahl said it had refreshed his memory about the Golden Nugget deal, and that he was calling around to sell warrants, not buy bonds! It was in this context that Milken had suggested that if Dahl wanted to get him into Golden Nugget, why not take him out of another gaming industry security. Watching from the front page of the Journal, James B. Stew art must have been stunned by Dahl's memory lapse, but he takes no note of this in the material from his book in last Wednesday's Journal. In his entire book, in fact, James B. Stewart makes no mention of the Fatico hearings, which exonerated Milken of all three of the central charges Stewart had been pressing in his own personal trial by press. On the day the Fatico hearings ended, I called Milken and told him the last small shadow of doubt I had about him had been expunged by the hearings. "You've now been vindicated by history," I recall telling him. "It only remains to be seen what your contemporaries do to you."

It would have been helpful to the Journal's readers if Stewart had told us a bit about James Dahl's refreshed memory in the Fatico hearings. "Scenes From a Scandal" opens with a dynamite scene. Coupled with the line sketch of Milken as Evil Incarnate, which appears next to it, this opening scene leaves no doubt that Milken and Boesky were fellow crooks.

It is a Friday morning in January 1985. The telephone rings in Boesky's office. Milken is calling. Witnesses in the room observe Boesky listening on his end, but saying almost nothing. When he hangs up, he shouts orders to BUY Diamond Shamrock and SELL Occidental Petroleum. He clearly is trading on inside information of a deal between Occidental Petroleum and Diamond Shamrock, known to Drexel Burnham because of Milken's role in the financing of the deal, but not to the investing public.

In Stewart's account, on the other end of the telephone we see Milken doing the talking, telling his secret partner, Ivan Boesky, to buy Diamond Shamrock. An employe of Drexel is sitting next to Milken as Milken tells his secret partner to buy Diamond Shamrock'on information not available to the investing public. It is a blatant felonious act of insider trading. The employe at Milken's elbow is James Dahl.

The "Page One" Editor of Dow Jones & Company's The Wall Street Journal, the most important business newspaper in the world, goes on to tell us there is a secret arrangement between Michael Milken and Ivan Boesky to split, 50-50, all the ill-gotten gains they are making from their secret trading, which is witnessed on both ends of their long-distance telephone scheming by various employes who happen to be sitting around.

Yes, long-distance telephone scheming. Milken is in Los Angeles and Boesky is in New York. This is why the federal prosecutors chose not to drag this dynamite story - a much better story than the one that flopped anyway, due to Dahl's refreshed memory - into the special pre-sentencing hearings. Again, records presented by Milken's attorneys proved conclusively that the three-hour time difference between New York and L.A. means the Diamond Shamrock info was officially public knowledge when Boesky was supposedly ordering purchase of the company's shares. According to sign-in sheets presented in evidence, Milken could not have known about the deal until sometime after 9:07 a.m. Pacific time, Friday January 4, 1985. By then, in New York, trading on Shamrock and Oxy stock had been suspended - at the time Boesky was supposedly trading - which Stewart does not relate in his account. Nor does Stewart report that Boesky had accumulated a large position in Diamond Shamrock in the months prior to this deal with Oxy. He does report that on the following Monday, the deal fell through, as Diamond Shamrock's board unexpectedly rejected the deal. Stewart writes: 'Told of the development, Mr. Milken grabbed the phone, called Mr. Boesky, practically screamed: 'The deal didn't go through. We've got to get out of the position.'"

In fact, it was this Monday call James Dahl recalled overhearing. There was no Friday call between Boesky and Milken. At the Fatico hearings, which Stewart overlooks in his book, Dahl told the court he simply overheard Milken on the telephone advising Boesky how best to unload his position in Diamond Shamrock. Dahl never said he knew who placed the call, let alone that Milken grabbed the phone and started screaming. Dahl never told the government he heard a conversation with Milken and Boesky on that Friday, the dynamite phone call with which Stewart opens his article. If in reading the Journal account you wondered how the Master Criminal, Michael Milken, permitted himself to be overheard blabbing feloniously by an underling, Mr. Dahl, this explains why. The "Scenes From a Scandal" reported by the Journal simply did not take place. The government knows they could not have taken place as described, which is why they did not drag this dead cat into the Fatico hearings, choosing Caesar's World instead. Michael Milken, at the pinnacle of his wealth and power in January 1985, had no 50-50 deal with Ivan Boesky to split peanuts.

How can James B. Stewart have gotten it so wrong? Here it is, more than a year after the feds found the Diamond Shamrock story a red herring, and it is the lead evidence of Michael Milken's evil empire in The Wall Street Journal. Did the U.S. Attorney's office simply forget to inform him its original surmise simply did not pan out? Did Stewards research assistant, Journal reporter Laurie Cohen, get mixed up on the times and dates? Did the Journal ask anyone in Milken's corner to explain the sinister phone call? If they had, they surely would have learned what you are learning here. There is an item on the same page stating Milken's lawyers were asked for an explanation, and they simply stated that if Boesky had Dennis Levine as his source of inside information at Drexel, why would he need Milken?

This must have struck the Journal readers as a pretty flabby response from Milken's lawyers, given Stewart's blow-by-blow report But now that we know the blow-by-blow report was baloney, it's a good question, isn't it? Why did Boesky need a secret 50-50 deal with Billionaire Milken, to split a million here and a million there, when he had Levine, who really needed the money? The question must have occurred to James B. Stewart, for on page 217 of his book, he tells us that Boesky and Levine got into a beef over how much Boesky owed Levine for the inside tips he supplied, $5 million or $2.4 million. There was also the problem of how Boesky would pay Levine without leaving a felonious paper trail. As they argued, Stewart tells us, one possibility Levine suggested was that he leave Drexel and work in Boesky's shop:

If Levine were hired, the "bonus" would be a disguised method for making the payment But the talks fizzled; Levine was far more valuable as a source within Drexel. So the talks continued periodically, but with no resolution.

What about the secret 50-50 deal between Boesky and Milken? How was Boesky going to pay Milken his half of the millions they were making on the sly - while having their secret conversations overheard by mere underlings at their elbows? Stewart tells us in his book, on page 322, that to this end the government "gained the cooperation" of Charles Thurnher, who was the chief accountant of Drexel's junk bond department. If anyone should know, Thurnher should, and Thurnher had kept a list of the trades the department did involving the Boesky organization. Yet by Stewart's own account, Thurnher's cooperation didn't help the government much:

Like Boesky, Milken had kept his employes largely in the dark. Milken had never told Thurnher why he was having him do various things, so he was of little use in figuring out Milken's motives and state of mind. Thurnher testified at one point that Milken hadn't even asked him to keep the list; on another occasion, he said Milken had described the list as "all a bunch of bullshit."

If Milken thought the list was "all a bunch of bullshit," we might surmise he didn't believe there was anything illegal about the trading, activity or the record keeping surrounding it. But what if this was a dodge on Milken's part? Suppose part of the secret deal was to have the records kept on Boesky's end? Well, of course we know there must have been a crooked accountant working for Boesky, since Boesky was at least doing crooked deals with Dennis Levine. An accountant named Mooradian did indeed confess to juggling the books for Boesky, but said nothing of an interface with Milken. The government also targeted Michael Davidoff, Boesky's head trader. But as Stewart reports on page 319 of his book: "Davidoff was of little use on the Drexel-Milken front, since he knew nothing about the secret arrangements beyond some of the trading he oversaw."

What's going on here? For three years, The Wall Street Journal waited to hear Ivan Boesky, or at least a Boesky associate, spill the beans on Michael Milken. This is what it's all about. Yet when Judge Wood at last tells the feds to take their best shot, in the pre-sentencing hearings, ihe only witness they call who has anything to do with the Boesky organization is Michael Davidoff, who James B. Stewart acknowledges doesn't know anything.

There are other glaring errors in Stewart's Journal adaptation from his book that are worth mentioning. At one point, he writes that in 1984 Milken wanted to drive up the price of MCA stock so his friend Steve Wynn could unload his unwanted shares at a profit. "Mr. Milken simply directed Mr. Boesky to buy MCA shares until he had driven up the price sufficiently that Mr. Wynn could sell his shares at a profit." What actually happened, which Mr. Stewart should know, considering it is all on the public record, is that Milken asked Boesky to buy a block of MCA stock from Drexel at the market price, which Boesky did. Milken then asked him to buy a second block from Drexel's account, also at market, and when Boesky demurred, Milken told him he wouldn't get hurt. When Boesky sold at a loss, Milken made good the loss via other transactions. The fact that Milken assured Boesky he wouldn't lose was an illegal event, unless Boesky disclosed the assurance to the SEC. This was one of the disclosure cases to which Milken in fact pleaded guilty. Judge Wood threw out the government's argument that the investing public somehow lost money on these transaction. At no time has anyone charged, as Stewart relates as fact in the Journal, that Milken "directed Mr. Boesky to buy MCA shares until he had driven up the price." To do so, Boesky would have had to enter bids in the market, instead of buying shares off Drexel's shelf at market price.

Then there is the famous scene of Milken, upon learning of Boesky's guilty-plea arrangement, summoning James Dahl to his office: "Mr. Milken walked silently into the men's room, turned on the tap water full blast and said, 'There haven't been any subpoenas issued. Whatever you need to do, do it' " This is the same James Dahl who testified to a grand jury that Milken ordered him to buy bonds in 1983, but who remembered in 1990 that he was actually selling warrants. This is the same James Dahl who Stewart asks us to believe was permitted at Milken's elbow on a Friday in 1985 while Milken blabbed felonious orders to Boesky, but who actually told the court he overheard a conversation on the following Monday that was ordinary business. Nowhere do we learn in the court proceedings or in Stewart's book that James Dahl knew anything about anything. But Milken got him into the men's room and turned up the water full blast, presumably so what he said couldn't be overheard, urging Dahl to do what he needed to do. With what? It could well be Milken was suggesting he either hit the stalls or the urinals.

In the same anecdote, if that is what we can call it, Stewart writes that "Cary Maultasch, Mr. Milken's representative in Drexel's New York office, was summoned as well, and booked a flight for Los Angeles. When he arrived, he was taken to Mr. Milken. 'You don't know anything about the $5.3 million payment,' Mr. Milken said flatly. But Mr. Maultasch did know. The payment was the money Mr. Boesky had owed Mr. Milken when they finally decided to settle the books on their illegal trading arrangement."

It all sounds vary sinister, but Mr. Maultasch testified at the Fatico hearings that he wasn't summoned by Mr. Milken to Los Angeles. He testified he flew to L.A. on his own, seeking a meeting with Milken. When he arrived at Drexel, he wasn't taken to Milken. He was told to wait until Milken, who had not asked to see him, had some time. A day later Milken talked to him. They discussed the $5.3 million payment Boesky had made, a payment made not to Milken, but to Drexel, in response to an invoice Drexel had submitted to the Boesky organization. As Milken's lawyers explained, Boesky did not trade with Drexel and they got no fees from him in that fashion for the work they did for him on his M&A work. The $5.3 million was the price they negotiated with Boesky for work they had done for him over a long period of time, for which he had paid nothing. The story as described here has been available from government sources for a year to The Wall Street Journal, the world's most important business newspaper. Yet it continually chooses to print the original raw accusations leaked to Mr. Stewart by Rudolph Giuliani three years ago.

A reporter for the New York Observer called me last week to talk about Stewart. He was doing a profile of Stewart for this week's edition and was calling me to "get a dissenting view." That is, he was preparing a heroic profile of the author of Den of Thieves , the title of Stewart's book, but was aware that I had written a general critique of Stewart's stewardship of the Journal's front page for FW magazine last year, "The Inquisition Ax Falls," 12/11-24/90. The reporter said he had interviewed many journalists who knew Stewart and his work, and all of them said he was a scrupulously careful reporter, above reproach. How do I explain that, he asked.

I asked if he was familiar with the 1942 Henry Fonda movie, "The Ox Bow Incident," and he said he was. In this western classic of criminal injustice, a posse of ranchers and ranch hands is assembled to catch a group of cattle thieves. They catch the thieves, played by Dana Andrews, Anthony Quinn and a few others. The thieves insist they are innocent, but are in possession of a few head of cattle with a local brand. The ranchers decide to hold a trial on the spot. All but Henry Fonda cast "guilty" votes and the thieves are lynched. As the ranchers make their way home, they are met by one of their fellows, whose ranch carries the brand on the stolen cattle. He advises them that he had in fact sold a few head to a group of men who were passing through, heading west to start their own ranch. I was 6 years old when my mother took me to see the movie, easily the most influential picture in my life.

The ranchers in the film, I reminded the reporter, did not consider themselves a "lynch mob," as we normally understand the term. They did not seem irrational, inflamed, bigoted, swept by emotion and angry self-righteousness. They felt enough about justice in this new country to go through the emotions of a trial by jury, on the stump, and even, as I recall, to permit prayers at the executions. They were pillars of the community, churchgoing men of God, scrupulously honest and hardworking. The problem, as with James B. Stewart, is that they had made up their minds. They simply knew guilt when they saw it. This has been James B. Stewart's fatal flaw.

Michael Milken no more belongs in a federal prison than you or I. He's there primarily because The Wall Street Journal permitted its big gun, James B. Stewart, to be used by federal prosecutors, who wished to win in the court of public opinion what they saw would be very difficult to win in court, they simply knew Milken was a crook. Neither Giuliani nor Stewart ever met Milken. But they knew the type! Stewart knew Ivan Boesky, knew he was a schemer and a plotter, like J.R. Ewing and Gordon Gekko, and found to his dismay that Boesky was also a criminal. To accumulate great wealth in America, one presumably has to scheme and plot, lie and cheat, connive and steal. If you know one Boesky, you know them all.

James B. Stewart never met Michael Milken, but he knows the type. In his Journal article last week, he tells us: "As early as 1982, Mr. Milken was making $45 million a year, but his aides were struck by how obsessed he was with enhancing his wealth and power. Chatting with Mr. Winnick one day, Mr. Milken looked at the view across Century City and West Los Angeles to the coast and asked, 'What do you think it'd cost to buy every building from here to the ocean?'"

This is real greed, isn't it? James B. Stewart does not inform his readers that Milken never owned more than one house, not even a vacation shack in the woods. His one suburban home, in Encino, California, is a modest one, not any more impressive than the one I bought in Convent Station, N.J. in 1979 for $185,000. What was he telling Mr. Winnick, then, about buying up all of West Los Angeles? Many of Milken's friends remember this as a comment he made in those years when someone would complain that the Arabs would soon own all of Los Angeles, a device I've heard him use in a more recent context when the topic was the Japanese buying up all of America. It becomes a silly complaint once you spend a moment putting a price tag on any serious stretch of real estate.

A Ha!, but didn't Milken in 1985 repeatedly complain to Drexel's Chief Executive Fred Joseph that he was cheated out of a finder's fee. James B. Stewart uses this anecdote to put the finishing touches on his evidence of Milken's drooling greed: "Mr. Milken never stopped griping that he had been cheated. The amount in dispute: $15,000." Now for a billionaire, that is real, real greed. Those of us who know Milken recognize this as being mock serious, similar to a standing joke among wealthy men who are regular golf partners, who complain of once being cheated on a $5 Nassau. Stewart also tells the Journal readers that by 1986 Milken had begun wearing "French-cuffed shirts" and demanding to be served on "china" instead of his usual paper plates. Here too, Stewart is scrambling to paint Milken as Boesky. I would bet the only time Milken has ever worn a French-cuffed shirt is to a black-tie dinner, and almost every black-tie dinner he has attended has been a charity dinner he has supported. He might ask for his food on a dinner plate instead of paper, but he would never think of asking for "china." He is oblivious to the trappings of social prestige. For many years prior to his imprisonment, he spent at least one afternoon a week teaching a math class to disadvantaged children at one of the "Help Schools" he and his foundations supported in Southern California.

Those of us who know Michael Milken know it is impossible for him to scheme, plot, lie, cheat, connive or steal. It is not the way he is. He is a visionary, a dreamer blessed by God with awesome talent, energy and insight He made an incredible fortune the way we expect people to achieve vast wealth in the United States of America, the land of opportunity. He thought vast thoughts of ways to make life better for his fellow Americans and then worked tirelessly to realize those dreams. His wealth grew incidentally, and he gave much of it away in a vast network of charities of his own design.

Mike Milken is not a Jay Gould type or a Diamond Jim Fiske type or an Ivan Boesky type, poised to make a killing in the market through connections. Milken's life and work has been in the tradition of an Andrew Mellon, a John D. Rockefeller, an Andrew Carnegie, an A.P. Giannini, those great men of our nation's business history who each saw a different way of combining capital and labor to produce great leaps in human productivity - thereby enriching the lives of all mankind. And for all that, Michael Milken, who has become my friend during this ordeal, is in prison. He will stay there a long time, unless the people who put him there -- most particularly the editors of The Wall Street Journal -- realize what a profound mistake they have made.

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