Michael Milken pleaded guilty to a number of what are generally called “white-collar” crimes as opposed to “blue-collar” crimes or those Godfather-type underground activities known as “organized crime”. But on examination, much of Milken’s white-collar work bears a startling resemblance to the methods of organized crime in schematic if not case by case. Milken was no capo, but he certainly applied the general mind set of the gangster to finance. And in doing so, he created a vastly more powerful operation than anything that John Gotti could ever have imagined. After all, what were the greenmail raids of Milken associates Goldsmith, Ichan, Stienberg, Pickens, Boesky, and others except the old protection racket writ very, very large? What were the threats to subvert the finances of target companies except a shakedown, with plenty of immoral complicity by target company management? What was the cleverly planned pillage of the federally insured S except the familiar criminal tactic of buying a business for pennies (in this case, the trivial equity required to buy a pool of federally insured assets) and then simply stealing its assets instead of operating it as a long-term entity? What was First Executive Corp. except the looting of a financial company to enrich the men who had captured it? What was the demand by Milken for huge slices of equity in the deals he made, the movement of those pieces to him personally, and the fact that those demands were often made at the very last minute except the most fundamental strong-arm tactics? But at an even more basic level, the Milken operation had at its core a basic unethical principal: The quickest and easiest way to make a lot of money is to borrow it and not pay it back.
Milken simply raised that principal to a form and scale that were unheard of. There is a passage in the movie Goodfellas in which a restaurant is bought by a Mafia chieftain whose restaurateur-partner hopes for great things. Instead, the Mafia guy (played by Paul Sorvino) buys liquor on the charge account of the restaurant, has it “stolen” and resells it, leaving his partner to go into bankruptcy because he can’t pay his liquor bills. If the Paul Sorvino character then claimed he was doing a good thing by looting his partner’s restaurant because he was enlarging the demand for stolen liquor and creating new jobs for all of the loaders and lifters who carried it off, that would be Drexel/Milkenism fairly precisely. Indeed, if one imagines that the looted restaurant is a whole series of S and the defrauded partner is the taxpayer, the parallel seems to be almost precise. Even if the Milken players did not violate or at the very least were not prosecuted for violating any laws, their tactics bear a striking similarity to those of organized crime. If, at the end of the day, the Drexel player (or any other businessman) has enriched himself while draining the assets of a company to which he has a fiduciary obligation, that is at the very least highly organized misconduct.
Drexel and Milken and many other confederates cannot, of course, be compared for evil-doing with the likes of Al Capone or Legs Diamond or “Lepkele” Buchalter, but in the basic approach to the conduct of business, they certainly borrowed far more from the captains of crime than from the captains of industry and finance like Andrew Carnegie, Henry Clay Frick, and J. P. Morgan. That is, while the steel barons of the nineteenth and early twentieth centuries enriched themselves wildly out of any scale of fairness to their stockholders or employees, at the end of the line they left the largest and best and most profitable steel manufacturing facilities in the world. Milken and his entourage could hardly make such a claim.
At the end of their line, they had enriched only themselves, leaving vast sectors of American business and industry reeling. The true similarity between Milkenism and organized crime can be found in the mind set of Michael Milken and his colleagues and the use of the underworld tactics of the con and the shakedown, the swindle and the heist, in the world of finance on a national and international scale. During the Kefauver Hearings into organized crime in the late 1950s, a common topic of conversation was roughly this: Considering how cagey and tough all of these hoods taking the Fifth before Kefauver were, how much more money would that type have been able to make if instead of street-corner gambling and loan-sharking they worked in “legitimate” business? Now we know.