UCLA and Milken’s Gift
By Steven Mintz
Today's blog first appeared as an opinion editorial in the Pacific Coast Business Times that covers businesses in Ventura, Santa Barbara and San Luis Obispo counties.
When UCLA announced a $10 million gift from Lowell Milken to establish a business law institute in his name, last month, the university described him as a “pioneer in education reform” and a “leading philanthropist.”
Many faculty have welcomed the gift at a time when state funds have been drastically reduced to fund hiring education in California. Still others criticize the University for accepting the gift from a donor who escaped possible conviction on securities fraud charges because his brother Michael, once known as the junk bond king, reached a plea bargain agreement with prosecutors.
Let’s begin with a brief history lesson. Michael Milken was a pioneer in the development of the market for high-yield bonds that became known as junk bonds during the 1970s and 1980s. He was indicted on 98 counts of racketeering and securities fraud in 1989 as the result of an insider trading investigation. He pled guilty to six securities and reporting violations but was never convicted of racketeering or insider trading. Michael Milken was sentenced to ten years in prison and permanently barred from the securities industry by the Securities and Exchange Commission. The presiding judge reduced his sentence for cooperating with testimony against his former colleagues and good behavior; he was released after less than two years. His brother Lowell, who worked alongside Michael, was never charged.
The Milken critics point to the brothers as symbols of Wall Street greed during the 1980s. Supporters point to their philanthropic activities since that time. They founded the Milken Family Foundation and philanthropies funding research into melanoma, cancer and other life-threatening diseases.
One of UCLA’s top business law professors, Lynn Stout, criticizes the gift because it threatens the reputation of the institution. She is quoted in a New York Times article as having written the following to the president and chancellor of UCLA: “The creation of a Lowell Milken Institute for Business Law and Policy will damage my personal and professional reputation, as I have devoted my career to arguing for investor protection and honest and ethical behavior in business.”
My one criticism of Stout’s position, based on the quote, is the personalization of her position. It will damage her personal and professional reputation. I imagine she extends the argument to harming that of UCLA as well. Proponents of the gift point more for the need for funds to support faculty activities at a time of severe budget cuts but the bulk of the funds are targeted for a business law institute in his name.
The Milken family generated controversy at UCLA in 1984 after the University severed its ties with an education company controlled by Michael Milken that planned to sell videotapes of a lecture series he gave at the school. The company agreed to remove any identification of UCLA from the tapes after the school said it received many complaints from state officials.
Precedents exist for a major university to refuse gifts from corporate wrongdoers like Milken. In the 1980s, Princeton returned money from Ivan Boesky to build a Jewish Center after the government charged the Wall Street financier with insider trading crimes. Seton Hall removed the name of L. Dennis Kozlowski from an academic building in 2005, after the conviction of the former Tyco chief executive for looting his company.
My opinion is UCLA has sold its soul in accepting a gift in Lowell Milken’s name. The thinly-veiled message is that convicted felons can benefit from such crimes simply by donating money large enough to make the recipient overlook the offenses. In accepting the largest single gift in the University’s history, the UCLA School of Law stated it will enable “the law school to meet and exceed its ambitious $100 million fundraising goal well ahead of its original five-year schedule.” I suppose UCLA then believes the ends justify the means.
Steven Mintz is a professor of accounting at Cal Poly San Luis Obispo and blogs at EthicsSage.com.
Blog posted by Steven Mintz, aka Ethics Sage, on September 19, 2011