UCLA Accepts $10 million gift from Michael Milken
This blog first appeared as an opinion editorial in the Pacific Coast Business Times (http://pacbiztimes.com/2011/09/09/ucla-sells-its-soul-for-milken%E2%80%99s-gift/) on September 9, 2011.
UCLA announced last month a $10 million gift from Lowell Milken to establish a business law institute in his name. The university described him as a “pioneer in education reform” and a “leading philanthropist.” Many faculty have welcomed the gist at a time when state funds have been drastically reduced to fund hiring education in California. Supporters of the gift add he served his time for his 1990 guilty plea for securities laws violations. Still others criticize the University for accepting the gift from a convicted felon. The ethical question is whether it is appropriate to accept major funding from someone who committed a major crime and paid his debt to society.
Let me beginning with a brief history lesson. 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. 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.
Milken’s critics point to him as the symbol of Wall Street greed during the 1980s, and nicknamed him the Junk Bond King. Supporters point to his philanthropic activities since that time. He co-founded the Milken Family Foundation and philanthropies funding research into melanoma, cancer and other life-threatening diseases. In a November 2004 cover article, Fortune magazine called him "The Man Who Changed Medicine" for his positive influence on medical research.
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.” Stout, a specialist in corporate governance and moral behavior, decried the short memory of the public with respect to Milken’s business history.
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. Still, ethical positions should de-emphasize what is in an individual’s self-interest and focus on the good for stakeholders of the university. 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. Doesn’t anyone see the irony in having a business law institute named after a person who violated a securities law? What message does this send to students at UCLA? Is it that a person can commit a serious crime and then gain stature from naming an institute designed to study the harms to society from those who commit such crimes?
Milken’s self-serving behavior also generated controversy at UCLA in 1984 after the University severed its ties with an education company controlled by him 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 who did not want the university’s name associated with Mr. Milken.
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 Milken’s gift. The message is convicted felons can profit 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.