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Second Acts in Finance: The 5 Most Astonishing Comeback Stories


Tales of the previously powerful being brought down to earth with a thud only to rise again, are irresistible. Here, a "fierce five" of corporate American comebacks.

In 1989 the gravy train came to an abrupt end when, with investor appetite for junk bonds collapsing and the savings and loan crisis starting to swirl, an aggressive prosecutor on the rise named Rudolph Giuliani, then United States Attorney for the Southern District of New York, filed a 98-count, 110-page indictment. The government's allegations included insider trading and racketeering charges related to myriad hostile takeovers and corporate restructurings. Milken plead guilty to six counts of securities fraud in 1990 (Drexel Burnham not coincidentally went belly up that same year), was hit with well over $600 million in fines, and received a lifetime ban from the securities industry. He entered prison in March 1991, sentenced to 10 years yet eventually serving "only" 22 months. (I say "only" as by all accounts it wasn't the celebrity tennis camp of popular imagination. One report had the Feds trying to break a man who even his enemies admitted was a genius, evil or otherwise, with soul-destroying assignments which included filling salt shakers.)

The erstwhile tycoon was eventually released to a Los Angeles halfway house on January 3, 1993, which is where the story really gets interesting. Days after being sprung from jail, Milken was diagnosed with prostate cancer and given at most 18 months to live. The former felon's redemption song soon began in earnest, with a second act which would eventually prove even more successful than his first claim to fame. That same year he established the Prostate Cancer Foundation, ultimately transforming awareness of the disease to such an extent that Fortune magazine would one day hail him, without accusations of hyperbole, as "The Man Who Changed Medicine." A longstanding charitable streak -- the Milken Family Foundation was founded as far back as 1982 -- came more to the fore, as did assorted "do-gooder" investments in educational outfits including LeapFrog Enterprises (NYSE:LF) and Knowledge Universe. Above all, the Milken Institute has morphed into a sort of Stateside Davos, where moguls come not merely to pontificate but exchange ideas of genuine consequence. And, irony of ironies, when the man who was now New York mayor and a serious presidential aspirant succumbed to prostate cancer himself in April of 2000, Rudy Giuliani and the person he put behind bars struck up the unlikeliest of alliances. Indeed Hizzoner even went so far as to say the erstwhile object of his ire should receive a presidential pardon, as indelibly described in an article that won its author a Pulitzer Prize in 2001. (Little wonder that the committee opted not to bestow an award for fiction last year, for who needs fantasy when fact is infinitely more implausible?)

Thus ends, at least for now, the remarkable transformation of Michael Robert Milken, whom time has turned from toupee-wearing convicted felon to bald elder statesman of philanthropy. His many powerful allies always asserted that the financier was guilty of no more than making enormous sums of money, and was witch-hunted by overzealous lawyers for "crimes" unworthy of the name. Not all share that view of course, but vindication is the best revenge for the 66-year-old whose estimated net worth now stands in the neighborhood of $2 billion. Junk bonds have swiftly followed up a stellar 2012 with what the Journal just characterized as a "record-breaking start to 2013." And compared with the outright criminality of much that came later -- from Enron to Worldcom to dot-com, Lehman Brothers to the brothers Madoff -- Mike Milken increasingly looks like a Boy Scout by comparison. He may have broken the rules, but unlike many entries in our financial rogue's gallery, never personally lost anyone a dime.
Henry Blodget

''I expect my obituary will read, 'Henry Blodget comma who predicted Amazon would hit $400 comma.'"

So the onetime star stock analyst told the New York Times in March 2001, but life has a strange way of upending easy assumptions. Bill Clinton -- president during the 1990s Internet boom that gave birth to Blodget and his ilk -- surely similarly fretted that the first line of his obit would say, "Only the second president to be impeached comma." It still may, but 14 years to the week after his trial started in the Senate, Monica is but a distant memory for the original "comeback kid," who freshly finds himself on a list of the planet's most admired people. Henry Blodget did indeed initially make his name, and earned a money-spinning move to Merrill Lynch, with a prophecy that Amazon (NASDAQ:AMZN) would reach $400 per share in late 1998, during the heady days of the Internet bubble. Yet there is so much more to the story. A subsequent investigation by then-New York Attorney General Eliot Spitzer unearthed damning email evidence of the researcher issuing official "Buy" recommendations on the same stocks he privately disparaged, all with the intent of securing lucrative investment banking business for the firm. One infamous instance included the notation "POS," not in its present text message meaning of "Parent Over Shoulder," but instead used to internally characterize a publicly-lauded stock as a "Piece Of Sh%t."
No positions in stocks mentioned.
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