Over at UCLA Law School, they’re experiencing some earth-shaking controversy of their own. An ultra-wealthy alumnus made it rain, with a $10 million gift to the school — but now some professors want to rain on his parade, and their objections have hit the national news media. (Apologies for the mixed precipitation metaphors.)
As we mentioned last week, UCLA law alumnus Lowell Milken made a $10 million gift to his alma mater — the largest single donation in the law school’s history. The money will be used to establish the Lowell Milken Institute for Business and Law.
Milken, Milken — that last name sounds familiar….
Yes, that’s right — Lowell Milken is the brother of that Milken, infamous white-collar criminal Michael Milken, former junk bond king and poster boy for 1980s Wall Street excess. The brothers’ connection is causing controversy, as reported by Julie Cresswell and Peter Lattman in the New York Times:
Behind the scenes, Mr. Milken’s big donation has set off an internal debate at the school. While many faculty members welcomed the money, one of the University of California, Los Angeles’s top business law professors has said the gift poses deep ethical problems and reputational risks, given Mr. Milken’s run-in with securities regulators two decades ago.
“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,” Lynn A. Stout wrote in a letter last month to the president of the University of California and U.C.L.A.’s chancellor.
With all due respect, Professor Stout, you are the Paul Hastings Distinguished Professor of Corporate and Securities Law. Paul Hastings is one of the country’s finest firms, but even it has had its share of less-than-distinguished moments.
Back to the Milken controversy. For those of you not old enough to remember the eighties (well, at least the non-Madonna parts):
The Milken name is still a lightning rod on Wall Street and in legal circles. Michael Milken and his younger brother, Lowell, were central figures in creating the booming junk-bond market of the 1980s and the subsequent collapse of the investment bank where they worked, Drexel Burnham Lambert.
In a controversial deal with the government, Michael pleaded guilty to securities law violations after the government agreed to drop criminal charges against Lowell. Michael served a 22-month prison term and paid $600 million in fines and restitution.
As part of a settlement in a related civil matter, the Securities and Exchange Commission permanently barred the two brothers from the securities industry. Lowell Milken did not admit to any wrongdoing.
That last part is worth noting. Even though Michael Milken went to prison, Lowell Milken — the person actually making the $10 million gift — was never convicted of anything. As Bonnie Somers, a spokeswoman for the Milken Family Foundation, told the Times, “Basic fairness requires that individuals be evaluated solely on the basis of their own conduct, and Lowell Milken’s life of accomplishment and service speaks for itself…. [To its credit, UCLA] understands that in the United States of America, its citizens are presumed innocent until proven otherwise.”
Shouldn’t that settle matters? Not as far as Professor Stout is concerned — and she’s not alone. A retired UCLA law professor, Kenneth W. Graham Jr., described himself as “outraged” over the gift. It could be argued — and presumably this is the basis for the objections — that even if Lowell wasn’t convicted, perhaps thanks to his brother’s willingness to take the fall, some of the Milken millions should be seen as ill-gotten gains. As a Fordham law professor, Thane Rosenbaum, told the Times, UCLA is essentially “taking its money from people engaged in questionable behavior…. It’s unbecoming to a great university.”
In this economy, though, should law schools be looking gift horses in the mouth? The objectors appear to be in the minority, at least at UCLA Law:
[O]ther U.C.L.A. law professors disagree with the objections and are thrilled with Mr. Milken’s largess. Since their legal woes, the Milken brothers have become prominent philanthropists, donating hundreds of millions of dollars to a variety of causes, most notably in the areas of medical research and education.
“Save for one dissident professor, the entire business law faculty is grateful for this gift,” Kenneth N. Klee, a bankruptcy law scholar, said.
The current debate surrounding Lowell Milken’s gift highlights the quandary that public universities across the country face as the fiscal woes of states have forced them to look increasingly to private corporations and wealthy alumni for financial support.
Indeed. The University of California system has suffered greatly during the Great Recession and its aftermath. As you may recall, the UC Regents recently hiked student fees for the coming academic year. To its credit, UCLA Law essentially neutralized that increase, by issuing immediate scholarships to the entire student body, in the exact amount of the hike.
But that money ultimately has to come from somewhere, right? What’s wrong with milkin’ a Milken?
That seems to be the pragmatic view of Professor Stephen Bainbridge, who made the following comments to the Times:
“We’re staring down the barrel of another round of cuts in California and relying on alumni giving is essential for us to be able to provide a quality education. If it wasn’t for these sorts of gifts we’d have even tighter budgetary constraints.”
“I believe that Lynn genuinely thinks that this hurts the school by giving Milken the U.C.L.A. imprimatur of being a good guy and an ethical person. I think it’s unfortunate that we’re dragging up stuff that happened a quarter of a century ago — and for which any debt to society has long been paid — to taint something that is going to help our students tremendously.”
Over at his blog, Professor Bainbridge offers additional analysis of the Milken gift, focusing on the underlying events from the 1980s. He emphasizes that Lowell Milken was never convicted of anything and that “the government used threats to go after Lowell as one of the ways on which they coerced Michael into taking a plea deal.” Read the full post over here.
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Milken’s Gift Stirs Dispute at U.C.L.A. Law School [Dealbook / New York Times]
NY Times on the Milken gift to UCLAW [Professor Bainbridge]