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Michael Milken convicted
Michael Milken outside Federal courthouse in Manhattan, ca. 1989 (Keith Meyers/The New York Times)
The Boston Globe is hot off the press with a story on Mitt Romney's allegiance with convicted felon and former junk bond impresario Michael Milken. Milken, who was indicted for racketeering and securities fraud plead guilty to six of the charges and was sentenced to ten years in prison. (He served about two.) At the time when Mitt Romney went into business with Milken, it was public knowledge that the high flying billionaire was under serious federal investigation:
But there was a potential downside of doing business with Drexel. Just as the deal was about to be sealed in September 1988, the Securities and Exchange Commission filed a complaint against Milken and Drexel, alleging insider trading and stock manipulation. Some clients feared being tainted by scandal, but Romney stayed loyal: The deal was too important.

“We did not say, ‘Oh my goodness, Drexel has been accused of something, not been found guilty,’” Romney told the Globe years later. “Should we basically stop the transaction and blow the whole thing up?”

Yep. That's a quote. Mitt Romney saying he didn't think a racketeering and securities fraud cloud should stop him from making a big profit. Is this the kind of person who should be in charge of our nations finances? Is this the kind of person who should have custody of national secrets?


But the deal nearly blew up anyway. The fraud case was being heard by US District Judge Milton Pollack. In what seemed a remarkable coincidence, the judge’s wife, Moselle Pollack, was chairwoman of Palais Royal, one of the department stores in Bain’s deal, and she stood to gain millions.

Drexel’s lawyers seized on the potential conflict of interest and tried to get the case thrown out, or to at least have Pollack taken off the case. Indeed, there were suggestions that Drexel was in effect using Romney. A Wall Street Journal story from 1988 quoted the SEC as saying Drexel had first approached Bain about the deal, “creating the very situation of which they complain.”

But Rick Moseley, a former Drexel official who worked on the deal, said Drexel did not create the conflict and didn’t realize the judge’s wife had a stake in the deal.

“It was totally inadvertent,” Moseley said. “I can tell you that because I was in the epicenter of it when the deal came in.”

Romney and his partners were alarmed by the media furor over the alleged conflict of interest. Romney called Drexel’s chief executive, Fred Joseph, and was assured the controversy wouldn’t endanger the deal.

Still, as reported in “The Real Romney,” a biography by two Globe reporters, some SEC officials were upset that Romney went ahead with Drexel, because it enabled the claim of a conflict to go forward.

“By doing the deal, [Romney] enabled Drexel to use the claim of conflict of interest on the part of the judge, which I think at a minimum reflects a lack of concern about the impact of his financing activities on the administration of justice,” said James T. Coffman, a former SEC official who worked on the case.

To summarize, the deal between Romney and Milken would have thrown the judge supervising the case into a conflict of interest, since the company that Romney was interested in pillaging, Palais Royal, was chaired by the judge's wife. Instead of putting the brakes so as to avoid obstructing the administration of justice, Romney charged full speed ahead.

So what happened? Well, Milken went to prison for a couple of years. Palais Royal was merged and remerged until it was a debt laden monstrosity that filed for bankruptcy in 2000 and laid off 5000 people. Of course, by that time Mitt Romney had already flown the coop, taking with him a tidy profit of $165 million:

The “glorious” part, for Romney at least, was that he used junk-bond financing to turn a $10 million investment into a $175 million profit for himself, his partners, and his investors. It marked a turning point for Romney, according to Marc Wolpow, a former Drexel employee who was involved in the deal and later was hired by Romney to work at Bain Capital.

“Mitt, I think, spent his life balanced between fear and greed,” Wolpow said. “He knew that he had to make a lot of money to launch his political career. It’s very hard to make a lot of money without taking some kind of reputational risk along the way. It’s just hard to do. It doesn’t mean you have to do anything illegal or immoral, but you often have to take reputational risk to make money.”

If I've told you once, I've told you a million times: Bain Capital is a veritable gold mine. You don't need to discuss anything else about Mitt Romney. He says it is his experience at Bain Capital that qualifies him to be president. What Mitt Romney did as a "businessman" is nothing less than a legal form of racketeering. Kagro X knows what I'm talkin' about.
Mitt Romney's experience at Bain is exactly what disqualifies him for the office of president.
- bbb

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