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Milken's junk-bond department, which he moved from Manhattan to Beverly Hills not long after he formed it a decade ago, quickly became the engine of the Wall Street firm's furious growth. One reason is that junk bonds earn hefty fees: Drexel charges 3% to 4% of an offering's total value, compared with a fee of less than 1% for a higher-grade issue. Milken's web of buyers and sellers for the bonds has given him a virtual lock on the market, though the entry of such competitors as Morgan Stanley and First Boston has whittled Drexel's market share from a monopoly in the late 1970s to about 50% today. For his huge contribution to Drexel's bottom line, Milken has pocketed bonuses of as much as $200 million in a year and accumulated the largest individual stake in Drexel: a 6% share consisting of stocks and warrants worth $90 million.
Though Milken's title is only senior executive vice president, he has set Drexel's tone and direction during the past decade, according to many who deal with the firm. But his yen for control and lack of regard for convention, which served him so well in staking out his new financial realm, may have been what led him to allegedly illegal tactics. Says journalist Connie Bruck, author of the 1988 book on Drexel titled The Predator's Ball: "For years he's been a law unto himself. He has disdain for the way the world works. He figures he's waging a holy war."
Milken now spends nearly a third of his time working on his legal defense but otherwise maintains his characteristic workaholic schedule. After arriving at his office at 9560 Wilshire Boulevard by 4:30 a.m. each day in a chauffeur- driven Mercedes, Milken holds forth in a trading room the size of a basketball court. He has no private office, preferring to sit at one of three huge, X- shaped desks, where 30 bond traders and other workers shout into telephones and scramble to execute the orders that he barks out or scrawls on yellow legal pads. On the computer terminal next to his, a co-worker has posted a sign reading MENTAL ILLNESS IS ESSENTIAL TO SUCCESS.
The barrage of negative publicity during the past two years, starting when the Boesky case broke in 1986, has been tough on Milken's family. "The Michael Milken portrayed in the press is not the man I know and live with," said his wife Lori. Milken and Lori, who was his high school sweetheart, live quietly with their three children (Greg, 15, Lance, 12, Bari, 7) in Encino. Their five-bedroom house, which might sell for $3 million, was once occupied by Clark Gable and Carole Lombard. It is a suburban idyll trimmed by red and white Impatiens, finished inside with dark oak paneling and filled with photographs of the children.
Once extremely private, Milken has sought to improve his public image by appearing at charitable functions and bidding reporters to "call me Mike." Last year Milken and his wife donated $198.1 million to the family's three charitable foundations, more than a sixfold increase from the previous year. Less than $15 million of these funds was actually disbursed, going to some 200 organizations. The remainder was invested by the foundations. That is perfectly legal, but the California attorney general's office began this month to investigate the Milken foundations' activities for possible irregularities.