Recipients of Milken Generosity Rally Round

Across the street from a quiet park in West Hills sits a sparkling symbol of one of the two sides of financier Michael Milken’s public persona.

The Bernard Milken Jewish Community Campus, a 75,000-square-foot community center named for the “junk bond” pioneer’s late father, was built with the help of $5 million in charitable contributions from Milken of Encino and his family.

The other side to Milken’s public image comes from allegations made by the Securities and Exchange Commission, which filed a civil complaint in September charging Milken and others with illegal insider trading. In addition, an influential congressman is questioning whether the largest of Milken’s tax-exempt charitable foundations was used for the business benefit of Milken and his clients.

“It would be manifestly unfair for a tax-exempt charity, which is in effect subsidized by the taxpayers, to be used by the people who created it for self-aggrandizement, private profit and illegal ends,” Rep. John D. Dingell (D-Mich.) wrote in a letter this month asking the Internal Revenue Service to investigate the Milken charitable fund.

Millions to Charity

Milken family foundations have doled out more than $17 million to more than 200 charitable organizations in the past 6 years. Operators of the $15-million West Hills community center say the Michael Milken they know is a generous man whose family has a history of involvement in San Fernando Valley charities.

Asked about the government inquiries that have surfaced around Milken, a spokesman for the organization that operates the community center said, “There is no discussion in any way about that.

“A man is presumed innocent until proven guilty,” said Ron Rieder, spokesman for the Jewish Federation Council of Greater Los Angeles.

“It hasn’t even entered our minds,” said Wayne L. Feinstein, executive vice president of the Jewish Federation Council. “Unless those allegations are proven, there is no reason why an American citizen needs to doubt another American citizen. This is a generous, well-meaning man. The only experience we’ve had with him has been as a philanthropist.”

Los Angeles City Councilwoman Joy Picus, who represents the area, said, “You can’t taint a program by the fact that the people who have given money are being scrutinized.” Picus helped guide a refinancing of the community center project in which the city acted as a vehicle to issue $9.5 million in tax-exempt bonds; no city funds were spent or committed.

‘Major Community Asset’

The center, across from Shadow Ranch Park on Vanowen Street east of Fallbrook Avenue, is “a major community asset,” Picus said. Twelve agencies work out of the 2-story, red brick and glass building, providing Jews and non-Jews with social services including legal help, loan assistance, job and family counseling, child care, rooms for meetings and classes and a physical fitness center. The fitness center includes an indoor swimming pool and weight-lifting machines. The building also has a spacious auditorium that is sometimes used for community events.

On the Sunday morning of Nov. 13, for example, nearly 200 people gathered for brunch in the carpeted auditorium to see the American Jewish Congress give its 1988 Tzedek Award for community service to Northridge attorney Bill Levin. In attendance were a number of local officials, including Mayor Tom Bradley, City Atty. James K. Hahn and Los Angeles County Supervisor Ed Edelman.

Many of the social services provided at the center were scattered and were being delivered in a haphazard fashion before they were brought together by the facility, Feinstein said.

Community interest in the center has been so great that the Jewish Federation Council is considering drawing up plans to establish another such campus elsewhere in the county, perhaps on the Westside, he said.

Milken and his brother, Lowell, take more than a passing interest in the center and occasionally visit it, said Kenneth Lerer, a spokesman for the Milken family and its charitable foundations. The center’s child care, kindergarten and senior citizen programs “capture their imagination the most,” Lerer said.

The Milkens’ father, Bernard, was an accountant who was heavily involved in charitable causes in the Valley, Lerer said. The Milken brothers “had substantial involvement” with the Jewish Federation Council in the 1980s and knew of the federation’s longtime goal of building a community center in the Valley, Lerer said.

“This is not a new relationship,” Feinstein said of the Milkens’ giving to the federation. “This is a longstanding traditional commitment of caring Jewish people, not just to their own people but to the community as a whole.”

Nearly $2 million of the Milken contributions to the federation, ostensibly for the community center, came from the Capital Fund Foundation. That $170.5-million fund is the target of Dingell’s inquiries to the IRS.

Another $1 million came from the M.& L. Milken Foundation, which was established by Michael Milken and his wife, Lori. The two foundations, in addition to a third established by Michael Milken and a fourth established by his brother, were begun in 1982.

The Milken family has also given $2.1 million to their place of worship, the Stephen S. Wise Temple in Los Angeles, and a combined $1.6 million to the universities of California and Pennsylvania, where Michael Milken studied finance.

Michael Milken “may have sold junk bonds, but he didn’t give to junk institutions,” said William M. Kramer, a Burbank rabbi, newspaper columnist and professor emeritus in religious and business ethics at Cal State Northridge.

Bond Market Dealings

But it is Michael Milken’s dealing in the bond market that has led to his troubles with the government.

The SEC alleged in its civil complaint that Michael Milken’s firm, Drexel Burnham Lambert, used the Capital Fund in 1985 to help hide capital shortfalls of imprisoned stock trader Ivan F. Boesky. Boesky was investing heavily in an oil company involved in a takeover bid but was short of SEC capital-reserve requirements; Drexel, Boesky’s investment banker, bought $73.8 million of the oil company stock from him and then sold that stock on the same day to five partnerships owned in part by Michael Milken and to the Capital Fund, the SEC alleged. The Capital Fund had bought $4.8 million of the oil company stock, the SEC alleged.

Although Michael Milken, the Drexel firm and others are defendants in the complaint, the SEC did not level any charges against the Capital Fund. Michael Milken and Drexel have denied any wrongdoing.

In another deal under scrutiny, the Capital Fund sold $1.45 million in bonds in 1986 to a company whose directors were also the directors of the foundation, at a time when the value of the bonds was still rising, according to staff members of the investigative subcommittee of the House Energy and Commerce Committee. Dingell is the subcommittee’s chairman.

No Confirmation

An IRS spokeswoman would not confirm or deny that the agency is following up Dingell’s request for an investigation of the Capital Fund. But information given to the agency about tax-exempt organizations generally “is evaluated to see if an examination would be warranted,” said Ellen Murphy, director of public affairs for the IRS in Washington.

At the state level, the attorney general’s office is auditing all four of the Milken family funds to see whether tax laws were violated through possible “self dealing” between the foundations and companies also controlled by Michael Milken and his associates.

Lerer, the Milken family spokesman, vigorously denies any hint of wrongdoing by the foundations. He termed “inappropriate and false” the questions raised by Dingell.

“They do an injustice to the foundation and to the people the foundation works with, and it is the plan of the foundation to continue to devote its energies to the causes it is involved with,” Lerer said.