After Lowell arrived, he distributed sealed white envelopes to about a dozen employees. In them were loan statements, citing the amount Milken had loaned them for their houses, the accumulated interest, and a demand for immediate repayment. From then on, Lowell was viewed as Milken’s hatchet man. Others in the office traded malicious stories about Lowell, including accounts of his relationship with his wife.
One afternoon in 1981, Milken was at work at the trading desk when he fainted and keeled over. Trepp, Dahl, Winnick, and others near him were horrified, fearful that their meal ticket had suffered a heart attack. They immediately shouted for Lowell. Lowell emerged from his office, looked at the unconscious and prostrate Milken, then turned around and went back into his office, closing the door without saying a word. The traders were dumbfounded. Milken soon revived, suffering no long-term effects from the mysterious incident.
Whatever the tensions, however, they seemed minor compared to the money being generated by the Milken operation. Milken made it a point to ensure that every employee made more money each year than he or she had the year before. By and large, Milken’s people found something they genuinely liked about Milken.
Curiously, given how driven most of them were to earn large sums, it was clear to them that money alone held little interest for Milken; it was what that money could do. One day, chatting with Winnick, Milken said that one of his dreams was to boost his net worth by a factor of ten, from $3 billion, say, to $30 billion. Then, turning to the sweeping view from Century City across western Los Angeles toward the Pacific Ocean, he asked, “What do you think it’d cost to buy every building from here to the ocean?”
Milken might have realized those goals simply by continuing his lucrative dominance of secondary issues and new junk-bond issues. In Los Angeles, he had assembled a network of junk-bond customers that dwarfed his earlier sources in New York. Among the closest to him was Thomas Spiegel, the head of Columbia Savings and Loan. Spiegel venerated Milken. He worked the same arduous hours, and his office walls soon had numerous photos of Milken and his wife, posing with Spiegel at restaurants, at parties.
Charles Keating, the head of burgeoning Lincoln Savings and Loan, was another key link. Keating and Milken often discussed their families, and reinforced the importance each placed on family connections as the only true bonds in life.
But the closest of all was probably Fred Carr, the head of Executive Life Insurance Co. Carr was smart, one of the first to embrace Milken’s theory of junk-bond opportunities, and an early and enthusiastic backer. To the amazement of others in the office, Milken would examine copies of Carr’s and Drexel’s portfolios every Friday afternoon, then, without consulting Carr, freely trade positions between the two accounts. By contrast, Milken made no secret of the fact that he thought Charlie Knapp, head of Financial Corporation of America, was a “moron.”
Milken wasn’t content with simply assembling the awesome buying power that large savings and loans and insurance companies offered, especially now that federal deregulation had opened up so many new opportunities in the savings and loan business. Junk bonds, in and of themselves, were enormously lucrative. But they could be harnessed to an even more potent force. Milken could see clearly what was beginning to happen on the American financial landscape. He heard about it from clients like Carl Lindner and Saul Steinberg. The big money was in the struggle for corporate control, in mergers and acquisitions and, increasingly, in a variation that seemed even more promising to Milken: the leveraged buyout, in which a public company was taken private. With corporate control went power.
It was clearly just a matter of time before Milken, having quietly nurtured his financing network into a huge money-spewing engine, burst upon the takeover scene. Then, Milken often told Trepp, there would be no deal that he couldn’t do, no company so big that it need not fear his power. “We’re going to tee-up GM, Ford, and IBM,” he told Trepp in tones of almost grim determination. “And make them cringe.”
2.
Robert Wilkis gazed across the crowded room high in Citicorp’s Manhattan headquarters. Never before had he seen such a concentration of young WASPs. Had they all gravitated to banking like salmon following the instinct to swim upstream? The 1977 welcoming cocktail party had underscored his sense of isolation and difference. He had just shaken the hand of Citicorp’s chairman, the legendary Walter Wriston. But Wriston had hardly noticed him; he was too busy looking at the plastic name tag of the next new employee in line. Wilkis sighed and headed back to the bar for another drink.
Then he spotted someone who looked even more out of place than he felt. The guy was standing by himself. Unlike the others, most of whom looked like former Ivy League athletes, he was overweight with longish hair and a dark moustache. Wilkis moved closer and saw the name printed on his name-plate: Dennis Levine.
“What’s a nice Jewish boy like you doing in a place like this?” Wilkis asked. The two men started comparing notes but discovered they had little in common besides a Jewish upbringing. Wilkis was tall and thin, and, for all his insecurities, he had compiled an enviable résumé. Before joining Citibank’s prestigious world banking group, where he concentrated on high-profile international lending, he had worked at the World Bank. He’d also spent a summer at the U.S. Treasury doing research on major economic issues. Wilkis was worldly and sophisticated, having lived abroad and traveled extensively. He was a Harvard grad, married to a Cuban-born woman, and he spoke five languages fluently: French, German, Italian, Arabic, and Hebrew.
Levine, by contrast, worked in an area of the bank called “corporate counseling.” Not even Levine seemed to understand the group’s function, but he had plenty of free time and tried to insinuate himself into other corporate work. Levine had been born and raised in a Jewish middle class area in Queens. He had traveled little and his academic record at Baruch College, a part of the City University of New York, had been undistinguished.
Levine and Wilkis found a lot to talk about. Their offices were just down the hall from each other’s in Citicorp’s headquarters at 399 Park Avenue. Wilkis suspected he would be seeing more of Levine. There was something about him—a warmth, perhaps, an almost palpable longing to be liked—that made an immediate impression.
Wilkis’s premonition was quickly borne out. The following week, early in the day, Levine dropped into Wilkis’s office and asked what he was working on. Before Wilkis could answer, Levine said, “Let’s go have coffee.”
“I can’t,” Wilkis replied. “I’ve got to get this stuff out to a client.”
“Oh, fuck your clients,” Levine said, then grinned wickedly and walked out.
Wilkis was taken aback. He was responsible almost to a fault, a function, he often thought, of the orthodox Hebrew schooling he endured growing up in Baltimore.
The next day Levine was back, upping the ante. “Let’s skip work after lunch,” he proposed. Wilkis was appalled. Levine added, “You know you’re bored.”
Wilkis was indeed bored, and ambivalent about his life and career. He was 28 years old (three years Levine’s senior), and before attending Stanford Business School, had never envisioned a job on Wall Street. Politically, he’d always been left-wing, and he still thought of himself as very liberal. After graduating from college, he’d taught handicapped children in the Boston public school system.
He had sought access to a higher-paying career by applying to business school, but once enrolled, he hated it. He was angry at himself for being there, for selling out. He nearly flunked accounting and he was contemptuous of many of his classmates, dismissing them as “morons” who “actually wanted to become accountants.” He feared that he, too, would have to become a drone to survive. The experience, though he ultimately did well, was a blow to his self-image.
By the time he graduated in 1977, his wife was pregnant. His mother was getting a divorce and had financial problems. He was broke. Classmates were landing lucrative jobs, and when Citicorp offered him one, he grabbed at the opportunity. He h
ad vague ideas about doing something in the international-relations arena.
But Citicorp so far had been dreadful. The big bank was a coat-and-tie version of the army, and he was in boot camp, surrounded by manuals of rules and regulations prescribing nearly his every move. His work environment was impersonal. No one besides Dennis Levine showed any interest in socializing with him. But Levine’s interest proved intense.
Levine was by turns ingratiating—“You really went to Harvard and yet you’ll talk to me?” he’d ask with mock sincerity, conspiratorial—“You know, we’re just nice Jewish boys in a hostile, WASP environment,” belligerent—“Screw the system! Screw the boss!” he’d exclaim, and philosophical. He called Wilkis a “left-wing pinkie commie.” “You know your problem, Wilkis?” he’d ask. “You worry too much about the ‘gray’ areas in life. That’s where we’re different. I have clear-cut goals. You don’t.”
Wilkis had rarely met anyone so single-minded about his career. Levine said that as a young student at Baruch, he had come across a book called The Financiers, about the workings of the investment banking world. He was dazzled by passages describing these bankers’ lifestyles, their expensive clothes and tailor-made suits, their cars and estates. Levine had never known that world existed.
Levine had grown up in Bayside, a Queens neighborhood of cookie-cutter brick bungalows that could have served as the opening credits for “All in the Family.” He was the youngest of three sons; his mother had never gotten over the heartbreak of having her daughter die at age five. Levine’s father, Philip, had his own business selling aluminum and vinyl siding. Philip Levine didn’t trust banks, didn’t want any records of his financial dealings, which he believed would be used against him by the Internal Revenue Service. He didn’t even have a checking account and kept his life savings in cash under his bed.
Dennis excelled at nothing in high school, though he was reasonably popular with a small group of friends, some of whom he hung out with in Queens after graduating. Then, depressed at the idea of spending his life in the neighborhood, he applied to tuition-free Baruch College, quickly distinguishing himself from his classmates by wearing a jacket and tie to class almost every day. He ingratiated himself with his professors, certain that these “contacts” would be necessary to vault to Wall Street. During his senior year, Levine applied to every investment bank on Wall Street—and was rejected by them all. He blamed it entirely on his lack of a “white-shoe pedigree,” and he was bitter.
Wilkis, on the other hand, considered himself cultured and literate; his primary interest was the great books. He’d never felt any prejudice because he was Jewish, and he didn’t view the world as hostile. Yet he empathized with Levine. Levine’s mother had died suddenly while Levine was in college; so had Wilkis’s father. Over and over, Levine played on the theme that, working together, he and Wilkis could triumph. Probably most of all—despite his wife, Elsa, and a new daughter—Wilkis was lonely.
One day Levine told Wilkis he’d met a young woman named Laurie Skolnick. He startled Wilkis, who was sensitive to feminist issues, by saying he intended to “own her.” Wilkis later attended their wedding. Laurie was blond, pleasant, and Jewish, and believed, she said, in a “traditional” marriage: Levine would earn a living and she would raise a family. She spoke with a pronounced New York City accent. Wilkis didn’t tell Levine, but he was appalled by the wedding reception, which he considered a vulgar display of bad taste. As far as he could tell, most of Levine’s friends were involved in drugs. This was a world light-years removed from that of Wilkis and his Harvard-trained friends.
Oddly, the experience only seemed to heighten his empathy for Levine. Wilkis felt somehow that he was rescuing Levine. On their increasingly frequent outings, Levine came to share his deepest thoughts and aspirations. One evening he told Wilkis, in a somewhat cryptic tone, “I knew after I was bar mitzvahed that there was an inside track and information was the key.” And he would often tell Wilkis his “dream of dreams: the euphoria, the omnipotence of reading on September 12 the Wall Street Journal of September 13.”
Wilkis gave these musings relatively little thought. Levine seemed to be making little progress up the ladder of information. Not surprisingly, given his attitude and frequent absences from the office, Levine wasn’t promoted the following year when he and Wilkis’s class of new employees came up for review. Wilkis was. His new position included access to a junior executive dining room rather than the run-of-the-mill employee cafeteria. Levine was beside himself, constantly begging Wilkis to take him as his guest. And then Levine asked Wilkis to break the bank’s rules: to get him an identification card that would get him into the dining room on his own. Despite some trepidation, Wilkis got him the I.D.
Shortly after being passed over at Citibank, Levine applied for jobs again at 25 New York investment banks. He got one positive response. This time he was actually hired by Smith Barney, Harris Upham & Co. He called Wilkis the first week of his new job with a stock tip.
“Just buy it,” Levine insisted. “Don’t ask any questions.” Wilkis bought a couple of hundred shares, and soon after, the stock rose dramatically. “See, Bob,” Levine said. “I’m going to take care of you.”
Levine’s opportunities to glean inside information were soon curbed when he was assigned to the Paris office of Smith Barney. Wilkis was envious of the assignment. He actually wanted international work, and would have viewed Paris as a plum. Levine had little or no interest in foreign affairs. In France, he worked on Eurobond syndications, selling Eurobond offerings to European clients, which required him to travel throughout Europe, visiting its financial capitals. He and Laurie lived in a spacious apartment owned by Smith Barney on the Avenue Foch in the fashionable 16th Arrondissement of Paris. But in frequent phone calls to Wilkis, Levine did little but complain, especially about his wife.
“She’s getting in the way of my career,” Levine griped. Laurie, wrenched from her comfortable Queens existence, felt isolated in Paris. She was miserable, and ended up in a hospital. Levine wasn’t much happier himself. He was frustrated at being out of the “deal flow” in Smith Barney’s New York office. Even though, as a junior corporate finance employee, he’d done little there besides spreadsheet analysis, he’d boasted to Wilkis that he knew practically every deal underway in the office. He said he had mastered the ability to read documents on colleagues’ desks upside-down.
Wilkis left Citibank, taking a job at Blyth Eastman Dillon, one of the old, established WASP firms, because it was starting up a new international merchant bank. Wilkis had the idea that the new unit would finance development projects in Third World countries, but the whole thing had gotten enmeshed in an internal power struggle at the firm. Wilkis complained to Levine that he wasn’t traveling, wasn’t accomplishing anything he’d hoped for. Levine countered that Wilkis should forget about international work and get into M&A.
“I don’t understand you,” Levine said angrily. “You want to help the niggers and the spics? Why do you want to do this Third World crap?” Then his tone shifted. “Bob, you’re my friend. I only want you to do well. You’re so naïve. Wall Street is going to eat you up. No one cares about this left-wing shit of yours. They’ll use you. You’ve got to think of yourself, your family. You’ve got to do more to help your mother.” It was another variation on Levine’s us-against-the-world view. “I’m the only one you can trust,” Levine concluded.
But soon after, Wilkis defied Levine’s advice, accepting a job in the international department of Lazard Frères, the small but prestigious investment bank whose best-known banker is Felix Rohatyn. Levine continued to chide Wilkis about his career path, but increasingly he was focusing on his own progress, or lack of it, at Smith Barney.
Whenever Levine was in New York from Paris, he’d drop in on J. Tomilson Hill III, agitating for assignment to M&A. Hill had come to Smith Barney from First Boston, one of the biggest firms in M&A. He was urbane, polished, well-educated. He dressed meticulously, in elegant
well-tailored suits, and slicked his hair straight back from his scalp. While he struck some as cold, even arrogant, he impressed clients as experienced, efficient, and professional. When he arrived, Smith Barney had recently merged with Harris Upham—another combination forced by the end of fixed commission trading. Historically, Smith Barney had been strong in retail brokerage and research. Like Burnham & Co., it had experienced a sharp decline in the profitability of those businesses. Harris Upham was strong in municipal finance and tax-exempt bonds. Neither firm had much of a corporate finance department, let alone an M&A department. Hill had been brought in to create one.
Hill needed people for his new department, and he found Levine to be a healthy change from the Harvard and Stanford grads who, in his view, thought they were God’s gift to the world. Hill thought Levine was a hustler. He’d gone to city schools, and Hill figured if he’d gotten this far, he must be doing something right. Levine held out the promise of what Hill called “hybrid vigor.”
Hill checked with Levine’s superiors in the Paris office. They described him as aggressive, “hungry,” someone who wanted to move fast. They said he had a very outgoing personality, loved new business situations, and seemed to have a facility with clients. He didn’t hesitate to pick up the phone to schmooze with existing clients or cold-call new ones. It was an appealing profile.
Finally, during the summer of 1979, Hill granted Levine’s wish and brought him back to New York to work in M&A. Levine was ecstatic. He and Wilkis celebrated at a Manhattan restaurant. “Who’s paying?” Levine asked Wilkis. “You are? Oh, good. Waiter? We’ll have the Chateau Talbot ’71.” Levine was eager to show off his newfound knowledge of fine French wines. As he and Wilkis toasted his return, Levine leaned over to confide in Wilkis. “I’m playing like the big boys now,” he said with an air of mystery.
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