Word: milken
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Dates: during 1980-1989
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...battle to control RJR Nabisco has pitted some of Wall Street's most powerful investment houses against one another, but the financial muscle behind the bidding is really the legacy of one man: Michael Milken. It is not just that Milken's firm, Drexel Burnham Lambert, is bankrolling the Kohlberg Kravis Roberts bid to the tune of $5 billion. Milken's role is much grander and far more controversial. The boyish moneyman with the tousled toupee and the obsessive work habits has almost single-handedly sparked the frenzy of takeovers and buyouts that has given the Roaring Eighties their name...
...Milken who created and has dominated the market for junk bonds, the high-octane financial fuel that powers many of today's most daring Wall Street deals. The volume of these bonds has zoomed from less than $1 billion in 1981 to more than $175 billion today. In the process, Milken, 42, has amassed a fortune of at least $500 million and a reputation as the most influential financier since J.P. Morgan...
...that Drexel Burnham Lambert manage the buyout's junk-bond financing. KKR contends that only Drexel has the savvy to sell the record $5 billion in high-yield bonds that is needed. But RJR Nabisco's managers are concerned that the buyout could be jeopardized if Drexel and Michael Milken, its junk-bond wizard, are indicted for securities fraud, which is expected to occur soon...
...complaint casts the Beverly Hills-based Milken as the mastermind of a secret, bicoastal arrangement with Ivan Boesky, the Manhattan financier now serving a three-year prison term for insider trading. From 1984 until late 1986, according to the Government, Boesky secretly bought and sold huge blocks of stock at Drexel's behest to push forward the firm's takeover deals and to reap millions of dollars in illicit profits. Five others were charged as participants in Drexel's schemes: Milken's younger brother Lowell, an attorney who works in the company's junk-bond department; Cary Maultasch and Pamela...
Drexel has reportedly set aside a $650 million war chest to fight the SEC's charges. A big part of the firm's strategy will be to attack the Government's case for being too dependent on Boesky. Says Martin Flumenbaum, who will defend Milken: "It will turn completely on Boesky's credibility, and Boesky has a clear motive to lie and fabricate." For its part, the SEC claims that it has substantiated its case with transaction records and testimony from Drexel employees, most notably Charles Thurnher, a senior vice president in the junk-bond department. Says Gary Lynch...