YouSaid · the spoken record

Richard Sandler

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2024-03-04
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2024-03-04
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  1. “Prosecution before we were learning about, and more and more people were making their deals to testify for the government. And we didn't always know what they were saying. So we always felt the risks were getting greater and greater during this period. Now, there were two investigations going on. Yeah, the Securities and Exchange Commission doing an investigation, and you had the Southern District of New York, U.S. Attorney doing a criminal investigation. So the first movement was by the SEC. They filed a complaint against Drexel, against Mike, against his brother, against a few others. I believe it was in 88. They alleged all kinds of different securities violations. Some would have related insider trading, some relating some of the other things we're talking about. And then in 1989, the indictment came down against Mike and his brother. Between the SEC complaint and the indictment, Drexel made a settlement with the government.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “You could refuse to testify under the Fifth Amendment. You could say, I'm not going to testify. But they could make you testify if they give you immunity. It's another major weapon that the government has. So if they say that as long as you tell the truth, nothing you say will we use against you personally, we're going to give you immunity from prosecution for anything you tell us as long as it's true. They started giving people immunity. Some Drexel clients, some Drexel employees, we didn't necessarily know what they were saying, if their lawyers would tell us. And we saw in the investigation was moving in multiple directions. It wasn't just insider trading anymore. There was this whole idea of securities parking. Did you sell security to somebody with an agreement to buy it back so that they really weren't at risk? Did they sell you a security with an understanding that you really didn't own it? All these theories that had not really been subject to”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “It took a long time. We started this in the late 1986. We're getting all these, as I say, leaks to the press going on. You would find over a period of time the different witnesses that they would bring into the grant.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “These corporate raiders were coming after their companies. They complained to their investment bankers. Their investment bankers didn't like the fact that this new industry had begun on Wall Street and they weren't participating in it. Yet they were going after their clients. So Mike was an attractive target because he really wasn't liked by a lot of people in the business roundtable and in the established firms. He was getting a lot of publicity. He was very successful. And so people complained to the SEC. They complained to Congress. And now you had a guy who had admitted to committing securities crimes saying that it somehow Mike Milken was involved with him.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “And investors about this area of the market. They started investing with him through Drexel. They were successful, and it created a marketplace where people were interested in the securities that he was recommending. Then they started doing the new issues and a whole industry had developed, and Drexel dominated the industry. No one understood it as well as they did. Nobody worked as hard or researched it as much as Mike and the team did. And then they started representing people who saw value in established companies that they thought were undervalued. And they were able to get financing from Drexel, which they never could have gotten before, and started making tender offers for companies. Some of these were considered hostile because a company didn't welcome it. And those companies did not like the fact. They called them corporate raiders at the time that”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Security for a company that could not get an investment grade was unheard of when Mike came to the market. He studied this area. He studied companies that had below investment grade ratings. He studied the company he met, the management of the company. He looked at the industry. And based upon that, he started buying securities that were at that time at great discounts because most of them probably had been originally investment grade security. got in trouble their ratings dropped and their prices dropped in the market. But Mike always realized that if he was right about a company, if a company is able to pay its interest and pay its principal and its due, then he get paid no matter what it was selling for in the market. And he was very successful. The investments that he had made at Drexel with the money that Drexel had given him to invest, he had gone out and taught to a lot of major institutions.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Well, clearly Ivan Boski, who made really a good, great deal for himself. When you really think about, he was trading on inside information. He was the largest purchaser of securities. He was buying huge volumes. He was paying for the information he was getting literally in suitcases or bags of cash that he was giving to people. And yet he only pled guilty to one count. He got a relatively license because he was, as the government said, one of the greatest cooperators of all time. And clearly he was saying that certain illegal transactions he did, he must have done with Michael Milken. Michael Milken was probably the most successful publicity shy person financier on Wall Street. He had totally revolutionized the industry. The idea of a new issue of a high yield security or a new issue of debt.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Ivan Boski was probably the most revered and respected risk arbitrageur on Wall Street. He had accounts with every firm. In fact, he did very little trading with Drexel. He was probably the largest equity buyer of securities of stocks at the time for any firm where he had an account.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “We're in the newspapers almost from day one. So we knew that we weren't involved in cider trading, but we started looking at every transaction that Boseki might have been involved in, any transactions he might have been involved in with Drexel, and try to figure out what somebody might be saying happened. From there, when more subpoenas came in, they may be looking at something else. All we would know, they'd be looking at XYZ transaction. Then we'd pull out all our files on the XYZ transaction and try to figure out what was going on.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Right. We knew it was an insider trading investigation. Earlier that year, a guy named Dennis Levine had pled guilty to insider trading. He actually was working at Drexel in their corporate finance department at the time, but most of the things he pledged guilty to was related back to a time. I think he was a kid or peabody. He apparently had put together a group of people of lawyers, other bankers. They were exchanging information and trading on this information on deals that they knew were coming up. And he pled guilty. You never knew he was under investigation till the day he pled guilty and then come along November that day, Ivan Boski pledged guilty. You didn't read any articles that there was an investigation, but he pled guilty. And again, it was about insider trading. Then you got our subpoenas. Don't forget the other two cases. It wasn't in the newspapers until they made their deal until they played guilty.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Articles are appearing in the paper that we got the subpoenas, that there was insider trading, that they're looking at this, they're looking at that. Obviously someone was leaking information to the media. And for a number of years now, we're in a constant delusion of trying to figure out what's going on. What are they looking at? What are we giving them? What are others giving them? And where is this investigation going?”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “That if the U.S. attorney wants to tomorrow, they could take the subpoena, they could back up a truck, and they could empty out every file in this building. Okay, this is not a civil litigation. I just still remember that to this day that we're going to be now going through this process, trying to figure out what was going on. You have really no rights as a person under investigation. You don't have a right to ask them questions. When they subpoena documents, you don't get a copy of the subpoenas, documents they get from other people. They subpoena people to appear in front of grand juries and take testimony. You don't get a copy of that testimony. You don't get to find anything out. All you have to do is hopefully, if their lawyers are cooperating with your lawyers, you'll get some secondhand knowledge of what's happening. And that's how it started out. And then we had the other issue, which was the media. All of a sudden,”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Well, we got involved in an investigation. We hired lawyers. We had subpoenas. We started complying with those subpoenas, gathering documents, trying to figure out what was going on. We entered into something which I'd never heard of before called a joint defense agreement. Drexel got lawyers. Mike got lawyers. His brother got his lawyers. And others got subpoena got lawyers. I learned from all of them what the process was and realizing just almost immediately the incredible power that the government had in a criminal investigation. I remember saying to one of the lawyers, these subpoenas are so broad. They're asking. And I'd rather object to some of these things. I don't really want to produce all these files and things they want. And this one lawyer who worked with us from Paul Weiss, who was a former prosecutor in the Southern District of New York, said to me, do you realize”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Frankly, I didn't know what to expect. My expectation, I'm pretty naive. I would probably most people. Number one, I used to think that if the government was investigating you, they must have had a good reason. And if they didn't have a good reason, they'd figure that out and you'd move on with your life in my probably Pollyanic view of the world, felt that we were going to get it to the latter situation. There was some confusion here. Boski must have said something to them, but when they found out it wasn't true, we'll just get back on with life. But we got to get lawyers to make sure we do this the right way. In retrospect, quite naive.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “The first thing we did is we realized that this was something that we didn't know anything about. And we needed to get advice from people that didn't know something about it. And it was late in the afternoon, that Friday, November 14, that we gathered. And one of the names that Mike had mentioned that he had met before was Edward Bennett Williams, who at the time was probably the best-known defense lawyer in the country. He was one of the founders of a major law firm that still exists today, Williams and Conley in Washington, D.C. We reached out and we got him on the phone to try to talk to him about what should we do, what are we thinking about. I had a good conversation with him. We called other lawyers we knew to get recommendations since this was all centered in Washington, D.C. and New York City to get names of lawyers on the East Coast and planned that next”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “One afternoon on a Friday, November of 1986, when the market closed, somebody came down to my office and says, did you see what just came across the tape? Ivan Boski is pleading guilty to a crime and he's paying a huge penalty, which really is huge news. I had worked on a transaction where we had invested in a financing that Drexel did for Boski the prior March. And I got a phone call that there were federal marshals downstairs and others serving subpoenas that related to that transaction and referred to a statute I'd never heard of called Rico. They came from the US attorney in Southern District of New York. This was something I had no prior relationship with, no prior knowledge about. It changed our lives dramatically”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “They were fascinating. I actually realized that thinking as a client working on transactions, trying to structure deals, working with lawyers is a different, really mindset than actually representing a client as a lawyer. So it took me probably at least a year before I felt that I'd made the transition is basically how I thought about things from day to day. But it was fascinating. I went to a lot of road shows, a lot of major companies that became major companies that were doing financing for Drexel was becoming out there. It meant a lot of interesting people. They had a bond conference, a research conference every year where they brought in all the buyers, all the companies. And then also some people from government and health and different areas, not that different from what the Milken Institute global conference has become, to look at the world meant a lot of really interesting.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “Himself always was media shy. I don't think he ever cooperated or gave an interview in any of these articles, but clearly a lot of transactions were getting done. I, as a lawyer from the time they moved out to 83, started doing more transactions of investments at Mike and other people in the department were making. So it was natural when they asked me, do you want to leave the practice alone? We're putting together a small consulting group to help structure and oversee our investments. I was ready to do it.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Mike had moved from New York to Los Angeles in 1978 and moved his whole department with him. So I knew at the time that he was successful in what he was doing since he was allowed to move a department. He and his wife were both from Los Angeles. I think they always wanted to move back to LA. And his father had cancer. I had two children at the time, two of his three children, and he wanted his father to get to know his grandchildren, so he did come out at that time. I think Drexel was starting to take off, I think 78, late 70s, was around the time that they started the new issues of high yield securities for companies that couldn't get investment grade ratings. So Mike was known as being pretty successful as he moved back to Los Angeles in 78. By 83, there was a lot of articles written. I think there was a cover story in Ford's magazine.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “She was always an outgoing guy, a leader. People were drawn to Mike. So he had a competitive nature, but he was always easy to get along with and very popular in school. He was head cheerleader in high school. I think he was the prom king at his prom, but he didn't have any airs about him. So you never saw that part of him. He did really well in college. The story people like to tell is when he was in his last quarter at Berkeley, needed whatever it was, 10 units to graduate. And he had worked at Tousshros, the accounting firm in Los Angeles during the summer. And he stayed in LA and continued to work for the accounting firm during that quarter. He came up a week before finals, bought the books, read the books, looked at notes of other people he knew and passed all his classes. So he was always a person that was easy to admire and he worked hard.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “back a long time to before when you were born probably dead. I met Mike's brother Lol. Lol and I are the same age. He's my closest friend in the world. We became close friends when we were in the first grade. Six years old at the time. Mike was the older brother, a couple years older. In those days, a couple years was a generation. But I certainly grew up much their home as all grew up at my home. As kids, we went to camp and actually my parents' backyard. They had a large yard and there was no camps in the San Fernando Valley really at that time. And a lot of parents got together and decided they would fund a camp. My older brother and myself and Mike were all in the camp. So we were campers together probably from the time I was nine years old. So we've interacted pretty much from that time on. We all went to college together at Berkeley. By that time, that generation of two years.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Or traded. In fact, he was not. His plea of guilty did not touch insider trading. And another, the Attorney General who aggressively pursued Mike to bring him down and presumably catapult his own political ambitions was none other than Rudy Giuliani, himself indicted, arrested, and disbarred some 30 years later. Last week, Mike discussed how he emphasizes research and facts in his work. This is system two thinking that requires us to think on our own without being infected by the beliefs of others. So what really happened to cause us to have such negative views about a man who has done so much for the world? My guest on today's show tells a very different story based on facts from being in the room where it all happened. Richard Sandler has been Mike Milken's personal attorney.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “A long time ago, 33 years to be exact, Mike Milken pled guilty to six counts of violations of laws, went to jail for two years, and received a lifetime ban from the securities industry. He was at the time the most successful and powerful man on Wall Street and remains one of the smartest and most successful backers of talent in finance, cancer research, and education. Most of us have formed beliefs about Mike based on accounts in the media or books written like Den of Thieves. We might think Mike was guilty of insider trading, for example. The way we form beliefs is problematic and rooted in survival from a time long past. We hear something and almost always immediately believe it's true. Danny Kahneman calls that system one thinking. Here's one example. We think Mike was guilty of insight.”

    2024-03-04 · Capital Allocators · Richard Sandler – The Prosecution of Michael Milken (EP.372) · IDENTIFIED FROM THE TRANSCRIPT · source