Booknotes

JAMES STEWART, AUTHOR, "DEN OF THIEVES": Well, they're characters. If I'd been dreaming them up, I couldn't have done it. I'll go from the small fry to the big enchilada. At the lower end is Dennis Levine, an investment banker who was accused by the SEC of making $12.6 million in insider trading profits. Next up the rung, Martin Siegel, at the time the country's leading investment banker, star mergers specialist. He ended up paying over $11 million in penalties. Then there was his co-conspirator, Ivan Boesky, the country's leading arbitrageur -- probably the best-known name on Wall Street in the mid-'80s. He paid a fine and penalty of $100 million. And finally there was Michael Milken, the junk bond king. His fine and penalty was $600 million.

STEWART: I was working on the epilogue, obviously the last thing I wrote in the book, and I was probably working on that late this summer. The "60 Minutes" producer had been calling a number of the people I had interviewed for the book who called me to say that they were working on something to do with Dennis Levine.

STEWART: Oh, he was thrilled about it. One of the lines I love in the book is that with his life collapsing around him, having been caught up in this scheme, Dennis Levine turns to one of his co-conspirators and says, "You know, none of this matters as long as you're famous." At that point he hopped out of his car and rushed up to the newsstands because he had heard his picture was going to be on the cover of Newsweek. He was thrilled by this. Well, it turned out his picture wasn't on the cover of Newsweek, it was inside the magazine, and he was very disappointed about that. But he had also said to many people that his real dream was to be on "60 Minutes," and, well, he did achieve it.

STEWART: I have met all of these, yes.

STEWART: I'm reluctant to get into who I did or didn't interview for the book because by process of elimination then you can figure out who the major sources were, and I have made some promises not to reveal that. On the other hand, at various times I have spoken to all of the main characters in the story.

STEWART: It depends on what you're looking for. There is no doubt in my mind that the nicest guy of the four is Martin Siegel. In my view, he is the one who has shown true remorse and is wanting to make amends for what he admittedly did wrong, and what he did wrong is very nefarious. He blatantly inside-traded not only with Ivan Boesky but with the head of arbitrage at Goldman, Sachs, Bob Freeman -- he admitted to all of that -- and he surrounded that with some very tawdry dealings. He took suitcases of cash that were handed off both in the lobby of the Plaza Hotel in New York and, in one very bizarre encounter, at a pay phone booth on a street in Manhattan. So he did a lot of bad things.

STEWART: He did go to jail, although he got the lightest jail term of these four. He spent only two months in prison, and he's out now. He is working very hard now to rebuild his life, and he is devoting himself to community service activities in Jacksonville, Fla. He always was a very charming, engaging personality as part of his success on Wall Street, and he still is. However, if you want to spend an evening with an eccentric character that's you'll end up talking about probably the rest of your life, I guess I'd have to pick Boesky. He is a pretty bizarre guy. One of the things that struck me about him was the lavishness of his lifestyle and spending. It's just incredible. He'd go to a restaurant, and when the waiter came by and would say, "These are our specials today," Boesky would say, "Well, I'll have all of them." He'd order every special on the menu -- eight, 10; it didn't make any difference -- and so they'd have to wheel a whole separate table out with all the day's dishes on it. Boesky would circle the table, taste each dish, pick one and send all the rest back. He'd pay for all of them, of course. Money was no object.

STEWART: He did go to jail. He was sentenced to three years. He was released. Counting his jail time and then his halfway house time, he served approximately two years in confinement. He's out now.

STEWART: He is living most of his time in Europe now. He is separated from his wife who continues to live on the lavish Boesky estate in Westchester County, N.Y. He is spending most of his time in France, in Paris and the Cote d'Azur. He has an apartment in Paris and a house on the Riviera. He spends much of his time with this very peculiar character named Hushang Wekili, who has been his sort of mysterious lifelong companion. He has been trying to raise some money -- so far, unsuccessfully -- to get back into some kind of securities business.

STEWART: I guess I'd have to say, for purely social time, Milken. He's so obsessed with his work that he rarely socialized. He was no one who could really divert his attention from making money to having an ordinary conversation with the like of you or me. Again, just one of zillions of anecdotes illustrating this is that the traders and salesmen who worked in his office decided to celebrate his birthday by hiring a stripper to come into the office. The stripper was doing her act when the phone rang for Milken. It was a client wanting to execute a junk bond trade. Milken took the call, and then when he was distracted by the stripper he actually crawled under his trading desk. The stripper, who by now had taken all of her clothes off, crawled under the desk after him and he still managed to stay on the phone and complete the trade, even with this pandemonium going on around him. He was compulsive.

STEWART: Of the four, he is the only one currently in jail now. He was sentenced to a 10-year term, the most severe of the group, and he is in the federal prison in Pleasanton, California, outside of San Francisco, right now.

STEWART: Yes, indeed.

STEWART: Yes.

STEWART: Those few paragraphs probably took more time to piece together, from a reporting standpoint, than just about anything else in the book. I can say that the account ultimately came from eyewitnesses. I first heard about this bizarre ending to the Milken saga from someone who was not present but had heard accounts of it that began to circulate from the very small number of people who were present when it happened. I guess beyond that I don't want to say specifically who in the entourage gave me these details. I did attempt to interview -- and in some cases succeeded -- everyone who was present in that corridor during those moments. I think you can tell from the level of detail that I was able to get a pretty comprehensive account. I have to say that if someone read the book and called me and said, "You know, I just can't believe it. I just don't believe that. That's just too bizarre." I just want to say that no one has contradicted this. No one has denied that this happened. It did happen exactly like that.

STEWART: The meaning to me is it has an almost literary sense to it. This was the downfall of a man who had been richer and more powerful than just about anyone in the business world in this decade. The final realization that he had been destroyed was an exceptionally anguishing event. I think the level of the emotion, the extreme reaction to this news, showed the powers of denial that had gone on up until this point, which is very evident as you read the story, and then that sudden awareness of how far he had fallen. It was just an overwhelming, overpowering, kind of reaction to that turn of fate, which I believe until that moment Milken believed never could happen.

STEWART: Yes, that's right.

STEWART: He chooses to wear a baseball cap, yes.

STEWART: He was very concerned about his appearance and very sensitive about the fact that he was bald at a very early age. He had an earlier hairpiece, which you see in the initial picture in the book, which was not very artfully done. It seemed as though there was a period in his life when these things didn't bother him very much, but then later as he became much more wealthy and successful and hobnobbed with some of the richest people in America, he did become more concerned with his appearance and the trappings of wealth and power. As part of that transformation, he did get this much more expensive and much better-done hairpiece. But I'm not a psychiatrist or a psychologist. I think there probably is some significance to that, but precisely what it is, I couldn't say.

STEWART: I was born in the Midwest, a small city right on the banks of the Mississippi River -- Quincy, Illinois -- Hannibal, Missouri, which was Mark Twain's home, is right across the river. That was always a big rivalry between Quincy and Hannibal, and I really grew up with Mark Twain lore and Mark Twain stories and visiting the Mark Twain cave. I guess my first interest in storytelling got started with Mark Twain.

STEWART: Yes, Quincy High School. There is one public high school for the town, and that's where I was.

STEWART: There was a wonderful, wonderful English teacher named Marjorie Bolt who had a tremendous influence on me. I guess maybe everyone has had this experience -- one high school teacher that just made the world come to life. She could do that. I just loved her English classes. She always said, "Read, read, read." She was constantly shoving books into our hands, and she was so enthusiastic about it. I still remember that very vividly.

STEWART: Samuel Clemens. Well, he was a ...

STEWART: Oh, he took the substance of the world around him and wove it into these gripping narratives. I know he's deemed as a kind of symbol of Americana. I don't know if he really thought of himself in those terms, but he was a realist and a humorist and he took the materials of life around him and created these great stories. I, myself, don't write fiction. The reason is I don't think I have that kind of imagination. I couldn't dream up, certainly, some of the bizarre events that happen in this story. But I think someone like Mark Twain was not that -- I mean, he had a wonderful imagination, and some of his works are more fictional and imaginative than others. But I still think at its core he was doing much the same thing. He looked at the world around him, and that's what inspired these stories.

STEWART: I went to DePauw University in Greencastle, Indiana -- an even smaller town in the Midwest.

STEWART: I don't know. I think I visited various schools, but I always wanted to go to a small liberal arts college. That was my idea of what college was all about -- small classes, lots of interaction with professors, lots of talking about the big issues of the day and of the past. You know, a nice setting with leafy trees. I always thought there would be plenty of time to see the world. I wanted to see it, but I somehow felt, start with the foundation that comes from thinking and then go out. Then you'll be armed to absorb what you see around you. So, I visited a number of small colleges. Growing up in a town like Quincy, not that many people went far away to college. No one, to my knowledge, ever went to the East Coast or the West Coast. Occasionally, maybe somewhere as far away as Colorado. Most of my graduating class went into the family farming businesses and didn't go to college at all, so it was kind of adventurous even to go as far away as DePauw. It was exactly what I had been looking for.

STEWART: I was a social sciences major. I was a political science major; then I broadened it into what was called an area major which, while it still had its core in political science, expanded into history and romance languages.

STEWART: After college I went to law school, and then I worked for a law firm in New York City. The big leap in my career came in 1979 when I decided to move from practicing law to writing about lawyers at a new magazine that hadn't even started called American Lawyer magazine. I helped get that off the ground and stayed there for four-and-a-half years. I wrote my first book about lawyers. It was called "The Partners." Shortly after that, I wrote a letter to the Wall Street Journal because I loved their front page stories. To me in journalism, that's where you could be a storyteller and a reporter at the same time. I didn't know anybody there. They called me in for an interview and eventually got hired.

STEWART: Harvard Law School.

STEWART: I graduated from DePauw in 1973 and started Harvard that same year and graduated there in 1976. I was at the large law firm of Cravath, Swaine & Moore for about three years and started the American Lawyer in 1979.

STEWART: 1983.

STEWART: Yes.

STEWART: Oh, well, I wanted to get everyone in, I guess, who I felt were very close to me and who I love very much, and so I put my brother and sister in. My sister is three years younger than I am, and we really grew up together and remain quite close. My brother is much younger. He recently graduated from college, and so we've had a very interesting relationship. It's not like most fraternal ones since I'm so much older. Then Kate is a baby, my goddaughter, who was born to two of my closest friends while I was busy writing this book so it seemed only fitting to include her as well. I kind of have three generations in that dedication.

STEWART: It's a biblical reference, the passage where Jesus has come into the temple and says, "It was written this is a house of prayer, and you have made it a den of thieves." It works for me as the title on a number of levels; primarily, of course, that the main characters in this story are thieves, but literally in the sense that they stole confidential information and made money off of it. And thieves in the broader sense that they have schemes that separated millions and millions of dollars of other people's money that ended up in their pockets and because they were undermining the integrity of the market. I don't think it's an accident that the stock market in New York looks like a temple. It has those classical columns lining the front, and the market presents itself as an institution of integrity, of the rule of law, just as the temple itself was holding itself to a higher standard in biblical times. I found that since the Stock Exchange itself had embraced this kind of temple imagery that it worked very well in terms of the underlying biblical passage also. I don't mean to be too literal about this. I was trying to suggest as well that at its core there is a moral theme in this story. It's not just a book about Wall Street, but it's really a story about human nature and temptation and its consequences.

STEWART: I'm the editor of the front page.

STEWART: Since September of 1988, a little over three years.

STEWART: I don't know myself sometimes, but typically my day was that I would get into the office around 8:30 or 9 in the morning and work until about 2. I'd try to cram a full day's work into that period of time, but then leave my wonderful staff there polishing up the rest of the day. Then I'd race home, grab a bite to eat and usually be writing by 3, say, in the afternoon, then I'd go until about 9 and then I'd have dinner. Six hours a day of intense writing is about all that I can do. I would find my stamina kind of went off the cliff at that point. That filled up my life pretty fully. I don't necessarily recommend that regimen. Sometimes I was just writing so intensely I couldn't go into work, and I took some days off.

STEWART: I began the reporting back when Dennis Levine was arrested in May of 1986. I agreed to do the book. I knew it was going to be a big story and that there was going to be more, but late in 1986 I agreed to do the book. I continued to do reporting on and off up through last year. A lot of new information came to the surface after first Drexel and then Milken pleaded guilty. I actually sat down to write the first paragraph in, I think, June of last summer and started typing and really worked very intensely straight through until I finished the following February, with two big interruptions. One was when Iraq invaded Kuwait on August 2 -- that day will always be etched in my mind -- and then that kind of stabilized and I was able to get back to the book. Then I was sprinting to the finish line, getting it written, when the war broke out in January. It was very difficult, but I just had to take the book and put it on hold and devote myself full time to the paper during those incredible weeks. I'm happy to say it was a short war.

STEWART: It's been incredible. I guess I had lived with so much of this information so long that I'd forgotten what a jolt it was going to be to readers. There is a tremendous amount of new stuff in there, and I think it explains things and shows the gravity of the threat to the economy and the magnitude of the crimes in a way that somehow even much of what was written in daily journalism didn't capture. So I'm thrilled by that. An excerpt ran in the Wall Street Journal last week, and I've never gotten a response anything like that that I've ever written before. It has generated some controversy. There are characters in the book who are exceptionally unhappy with the way that they've been portrayed. The Milken camp, I think, for reasons I do not fully understand as I mentioned in the epilogue, are still trying to rewrite history. Even though he has pleaded guilty to six felonies, they are even considering the possibility of trying to come forward and saying, "Well, no, he didn't really do any of that." They, based on what I've been able to tell, have reacted very violently against the book. I have been fending off various legal threats and spending a lot of time going back and rebutting allegations. I'm happy to say that even though scores of lawyers have been poring over every line in this book that it has held up completely under this kind of scrutiny.

STEWART: I estimate that he has at least $2 billion. He will have at least $2 billion when he comes out, and in coming up with that number I'm not even attempting to estimate how much money that $2 billion is earning every day because I'm sure it is in the hands of very shrewd financial advisers who know how to maximize the return. The numbers are staggering, and they reveal, I think for the most part, the first time in this book because it took a great deal of reporting on my part and time to kind of piece this together, but let's just look at one year -- 1986. He earned $550 million that year in salary and bonus from Drexel. The same year, one of his partnerships -- he had over 500 secret partnerships in the Beverly Hills office -- paid out over $400 million in 1986. One deal that he worked on and extracted warrants to buy stocks, the Beatrice deal, I calculate those warrants in 1986 were worth approximately $650 million. Now, we're looking at one year's salary, one deal he got stock equity in and one of his partnerships, and we're well over $1 billion for that year. I mean, those numbers -- I was just flabbergasted.

STEWART: Again, the book reveals it in the confidential financial statement that his lawyer submitted at the time of his sentencing, which I believe has never been revealed before. He indicated a net worth of $125 million. He paid a fine of $100 million so that leaves him with roughly $25 million. However, his wife was wealthy in her own right, and there were various trust funds and other accounts set up to benefit his children. So if you include those assets as part of the Boesky financial picture, then he is much wealthier even than that. On the other hand, $25 million is -- in the world of Milken, that's poverty. In my world, and I suspect yours, that's still enormous wealth. Boesky is living very well. He comes in limousines, he's still eating at Lutece, he's hobnobbing in Europe. None of the four are going to be suffering.

STEWART: It's hard to figure out. Theoretically, he paid all of his assets as part of his settlement, but he's still living comfortably in a Park Avenue apartment, he still took his family for a two-week vacation in Aspen this year. I mean, where is all this money coming from? I mention in the epilogue to the book that the SEC has been investigating Levine again to find out where this money is coming from. The "60 Minutes" show you referred to earlier raised questions about whether Levine is, in fact, engaged in another sort of con operation. I also suggest in the book that he had hidden assets of at least several hundred thousand dollars that he didn't disclose at the time of his sentencing.

STEWART: That, too, is hard to estimate. He, again, purported to pay most of his assets in fines and settlements at the time he resolved the charges. However, he was allowed to keep all of his real estate, and I do report the numbers on that. He sold his apartment in New York for well over $1 million, and he sold his estate in Connecticut for something over $3 million. He bought a very beautiful mansion in Jacksonville, Fla., but real estate prices there are much lower. So just looking at the real estate picture, it suggests that he would have several million dollars left over. Again, that seems like a small amount compared to Boesky's $25 million, but a couple million dollars -- I think I could get by rather well on that.

STEWART: Linda Robinson heads a public relations firm that bears her name and was hired by Milken to conduct the public relations aspects of his defense. I think it's fair to say it's the first time in history that an individual defendant in a criminal case mobilized the media resources that were at the command of Linda Robinson and her allies. One of the most startling things that I found was that Milken was spending more than $3 million a month -- a month! -- on his legal and public relations campaign. Drexel itself, who had to pay the bills under an agreement, was so outraged that they put him on a "budget" of $1.2 million a month, but he didn't just spend his own money. She is very powerful. She was able to mobilize a very effective campaign in the press. I think this book is going to dispel a lot of it, but to this day you still hear lively debates over whether Milken really did anything wrong. I think that reflects the fact that he had this unprecedented campaign going on, orchestrated by Linda Robinson.

STEWART: She is married to James Robinson who is the chairman of American Express. She worked in the Reagan campaign. Her father was, I believe, Amos in the famous "Amos 'n' Andy" series, and she grew up in Hollywood. As a child, in fact, she used to bounce on Ronald Reagan's knees. In kind of a mirror of our times, she was, I think, in the '70s an acupuncture specialist. She then became a Reagan political activist, and then she moved to New York and Wall Street and brought Republican sort of attack-style tactics to the world of public relations.

STEWART: Peter McGowan, chairman of Safeway.

STEWART: They're maintaining a campaign on behalf of Milken -- again, for reasons that escape me. But there is an organization which I mention in the book that is being run, is going around, of all things, raising money to try to clear Milken's name and to try to demonstrate in their own terms that he was a symbol of compassion and not greed. Of course, I feel that they are entitled to their views. Again, I do feel it is primarily a reflection of how wealthy Milken made various people.

STEWART: Yes. Linda Robinson and her allies were trying to convert me to the Milken cause on an almost daily basis from the day they were hired to represent Milken. However, I think a point came where they decided that I was a hopeless cause, and then they tried to shut me out of every bit of information that they controlled, which they, I think, hoped would put me at a disadvantage in the media. I remember Linda threatening that the day Milken was exonerated they were going to leak that news to the New York Times, which would then scoop the Wall Street Journal. Well, needless to say, such a day never came. But there was that kind of thing that was going on. They, then, would let other reporters go to meet Milken and then freeze me out, or they would invite other reporters to the famous Predators' Balls going on in Beverly Hills and, of course, I'd be frozen out. I went to one of them anyway, just to see what was going on and, of course, immediately I had people following me everywhere I went and not letting me get in doors and that kind of thing.

STEWART: Some people don't understand this at the Wall Street Journal, but there's a very strict separation between the editorial page people, who focus on opinion, and the news people, who focus on facts. I'm on the news side of this operation. They're in a separate wing of the building, so I rarely ever even see the people who work on the editorial page. As I mention in the book, our editorial page has written a number of editorials that are favorable to Milken in various ways, but they come at this from largely ideological grounds. They were concerned about the role of the government in the investigation, and I think you see in book there are some legitimate concerns in that. They were concerned about the use of the RICO [Racketeer Influenced and Corrupt Organizations Act] statute, which to me is not a particularly significant issue but it's a legitimate one for debate on their pages. They are also very interested in the impact that Milken had on broader economic issues in the country -- again, I think a legitimate subject for opinion and debate. On the other hand, what I'm interested in were the facts and the criminal conspiracy that underlay all of this, and I think that's incontrovertible. As far as the story goes, it is of little interest to me whether Milken's activities in some sense boosted some sectors of the economy. I mean, you can argue that the drug trade, by increasing the velocity of money, contributes to the economy, but that doesn't mean we're going to condone the drug trade.

STEWART: The executive editor Norman Pearlstine, who runs the paper, ultimately made the decision both to do the excerpt and where it should be. But we have, in doing book excerpts, traditionally been running them on the front of the second section, "The Marketplace" page. That's in part because the publishing industry is traditionally covered in that section, but also because the display possibilities are really better there. Anyone who is familiar with the front page of the Wall Street Journal, I think, knows what it looks like. It's a bit gray and has a headline format that is oriented towards the kinds of stories that run there. I think in the past when book excerpts have run there, it's an awkward fit into our front page format.

STEWART: That we do excerpts?

STEWART: It's happening with increasing frequency. I remember the excerpt from "Barbarians at the Gate" was given a very good display on that page, and more recently the book on the housing projects in Chicago, "There Are No Children Here," was displayed there.

STEWART: In that picture they were at a congressional hearing, run by Congressman [John] Dingell, into the operations of these secret partnerships in Beverly Hills. It was the first public appearance by Milken after the investigation, so there was enormous attention there. Edward Bennett Williams was hired by Milken as his primary defense counsel at the beginning of the investigation, and Edward Bennett Williams was the lead lawyer. Arthur Liman and his colleagues at Paul, Weiss at that point were co-counsel, but were very much in a second-chair role. The book explores in considerable detail -- and I believe that had Edward Bennett Williams lived, the outcome of this might have been very different.

STEWART: Edward Bennett Williams was always a little more skeptical of some of the claims being made by Milken and his supporters. Milken was portraying himself as a "national treasure," as a genius, as this man who had single-handedly unleashed these great creative forces in the American economy. Milken had always been surrounded by people who told him what he wanted to hear, and that extended to many of his lawyers. But Edward Bennett Williams was not that kind of lawyer. I'm confident from talking to people very close to the operation that as the evidence mounted, as clearly the tide was turning against Milken, Edward Bennett Williams would have had the sense to recognize that and get Milken in earlier to cut a deal. One of the revelations of the book is that, in fact, Milken was offered a deal on only two felonies and tried to accept it, but in his arrogance or indecision or whatever, he missed the deadline. When he missed the deadline, the prosecutor said, "We're sorry, that deal is off."

STEWART: I believe he was a lifelong Democrat, but he represented a wide range of clients with different political views. I think that wasn't of any great concern to him when it came to defending a high-profile case.

STEWART: Arthur Liman was hired at the same time as Edward Bennett Williams, but in a secondary capacity. Once Edward Bennett Williams became increasingly ill, Liman stepped forward and then took charge. I believe Williams died in August of 1989, and after that Liman came to the fore.

STEWART: He finally pleaded guilty in March of 1990, and he was sentenced in November of 1990.

STEWART: There was a lull in the case. Again, I believe that those were in the summer of 1989. I could be off a year on that, but he was able to get away and conduct those and then get back to the case. There was some lengthy and somewhat tedious discovery processes going on in the case at that time. But Liman always remained firmly in control on the defense.

STEWART: This is Judge Kimba Wood, who is the sentencing judge and is continuing to preside over efforts to reduce Milken's sentence. She was new. I think the mystery about Kimba Wood was that there wasn't a record there to turn to to get much of a sense of how she would rule in sentencing. She was a Reagan appointee, but how are you going to read that in a criminal context? I mean, some Reagan supporters have been very supportive of Milken as some kind of free-marketeer -- I think wrongheadedly, but nonetheless an honestly held conviction. Other Reagan supporters are very strong on the sentencing aspect in criminal cases -- that you need a harsh sentence to deter this kind of conduct. So which side was she going to come down on? There was tremendous speculation about this prior to the verdict. I think adding to this is that she has a very gracious and gentle demeanor. She was very soft-spoken during the sentencing hearing. She sounded very solicitous to Milken's feelings and concerns. But then, again, she dropped this sentence which was the most severe in the insider trading scandal. Now I think when people read the book and they see the magnitude of what Milken did wrong, this sentence does not seem unduly out of line. But given the Milken PR -- that he was this genius, this national treasure, and he just stepped over the line a few times here and there -- it did seem like a harsh sentence.

STEWART: Yes, I believe so.

STEWART: He ran for mayor of New York and I believe he may run again.

STEWART: Rudolph Giuliani, the former U.S. attorney in Manhattan.

STEWART: He oversaw most of the criminal investigation from his position at the top of the office. I feel he deserved credit for the fact that these four major, major culprits were eliminated from the securities industry. On the other hand, I think you see in the passages of the book he was zealous to the point where I believe his obsession with the ends obscured some of the means. The government did not behave at the high standards that I think most of us have a right to expect.

STEWART: Two things particularly stand out to me. There was a fight between Giuliani and Gary Lynch, head of enforcement at the SEC, over the filing of the Milken case. When the SEC, for its own reasons -- and I think good ones -- wanted to go forward with the case, Giuliani was so angry that he said if they did that he would throw his lot in with Milken and Drexel and moved to dismiss the action. I'm sure it was said in a moment of anger and thoughtlessness, but that simply is inappropriate. The SEC did give in to Giuliani's threat, and they waited. There was also the story which I find quite fascinating and dramatic where a government agent posed as a blackmailer and made anonymous phone calls to Siegel, terrorizing him into running to the government and pleading guilty. I simply don't think those tactics are necessary. I think they're questionable from a policy standpoint, but more to the point it's just simply that the government should not be resorting to a form of crime itself in order to bring criminals in.

STEWART: It's securities fraud. It starts with insider trading and then you'll see, particularly in Milken's case, it's a whole superstructure of crimes that build on that.

STEWART: The Drexel-Milken camp did contribute to politicians, to various PACs. Wall Street was a heavy contributor to Sen. [Alfonse] D'Amato, who, of course, replaced Giuliani eventually with a U.S. attorney that's apparently more to his liking. The exact numbers I can't remember off the top of my head, although it's all disclosed in the book. Yes, there were heavily political contributions.

STEWART: Fred Joseph. He was the chief executive of Drexel during the Milken reign. One of the peculiarities of Drexel was its sort of fictitious system of firm regulation. Milken was not an officer of the firm. He had no title. He was not on the board of directors, and yet Milken ran Drexel.

STEWART: Yes. He lived on the West Coast -- far, far away from the scrutinizing eyes of someone like Fred Joseph. I must say I feel a certain sympathy for Joseph. He may have failed to show the kind of leadership in crisis that was needed to save that firm, but he was dealing with a force in Milken that the financial world had never seen before. I mean, the numbers pouring in were just so staggering.

STEWART: I think the question here, that I tried to examine to some extent in the book, is what happens when you have someone so wealthy and so powerful who is a defendant in a criminal case? Does the system really work? Does it treat this defendant the same way it would if you or I without these kinds of resources were charged with a crime? I think the broad answer is -- and I think we should be heartened by this -- that it did work; that this was a tremendous challenge to the American system of justice, and while you might quibble about the fairness of the ultimate sentence, the fact is that I do believe the process worked. Now, would it have worked that way for you and I? No, clearly. There were enormous forces brought to bear here, such enormous forces that at one point Gary Lynch, the head of the SEC, felt like resigning, he was so overwhelmed. Did some people who should have been prosecuted get away with light punishment or not at all? Yes. In other words, is the system perfect? No. But I, myself, was actually heartened to see that with all of these forces arrayed against truth and justice. I do believe the truth has prevailed.

STEWART: Mine is the first book about all the criminal wrongdoing, but it is not the first book about Milken and Drexel. Connie Bruck, who happens to be a friend of mine and someone I know reasonably well, did a book on Drexel and Milken called "The Predator's Ball," looking into their methods. They put on a full court press to try to stop this book and went to great lengths to try to block it. At one point Arthur Liman was insisting that Drexel sue to try to stop this even before it was published, although I'm sure he realized that that was a losing case under the First Amendment. But, again, the book got out and the book got written and wasn't blocked.

STEWART: That was Milken. When the other methods failed, it was an out-and-out attempt to bribe Connie into giving up the book.

STEWART: It's confusing to many people, and it takes an astute observer. You see an Arthur Liman coming forward as the champion of truth and democracy, as the interrogator of someone in the Congress, and then that aura carries over when you see him coming forward and saying that Mike Milken is a national treasure. Now, the fact of the matter is that these are very different roles. It's Arthur Liman acting as a public servant on behalf of the Congress, and then he's turning around as the paid advocate for someone we now know admitted to having done a crime when he is wearing his Milken hat. Now, I don't know what the answer to that is. I just think it requires an alert and astute public not to be taken in by this. A better source than I can explore this sort of revolving door idea, but many of the highest-paid and best lawyers in the country have worked in government service, have taken on this sort of aura, this statesmanlike -- or increasingly, stateswomanlike -- aura which they then turn around and sell to the highest bidder. I think that has raised many questions that continue to be explored.

STEWART: Oh, the heros, I think, without question are the very low-paid, incredibly hard-working, dedicated public servants -- not at the top necessarily -- who did the real work in the U.S. attorney's office and the Securities and Exchange Commission. I think it's worth bearing in mind that with enormous forces arrayed against them, there was no great political support for their work where ordinarily you would turn for some kind of backing -- the sense that the American public was on your side. The only thing they really had was the truth, and they were determined to get it out. I have tremendous respect for their continuing to do that under very difficult circumstances.

STEWART: No, not particularly. This is a drama that was largely played out outside of the public arena, with the exception of the law enforcement units. On the other hand, I think what has been remiss is the kind of attention -- legislators should have woken up to what was going on on Wall Street in the '80s. Admittedly, we were all perhaps a little bit slow to realize the magnitude of the kinds of deals that were happening and the opportunity for crime on a scale that had never been seen on Wall Street before. I say in the epilogue that there are laws that need to be toughened on this. Now the Salomon scandal is raging. As long as Wall Street traders measure risk and reward and decide that the rewards outweigh the risk, they're going to do things. They're going to break the law, and so the risk of getting caught has to be made clear. I do think we need a definition of insider trading, and I think the financial penalties in these crimes need to be increased.

STEWART: I was part of it, I have to admit. I guess I'd like to say that I was particularly proud of the Wall Street Journal slugging away on this and trying to write the facts. I can tell you that there were numerous, numerous attempts by powerful people on Wall Street to get me and my colleague at the time, Dan Hertzberg, not only off this story but fired from our jobs, but the chairman of Dow Jones, Warren Phillips, and my boss, Norm Pearlstine, staunchly supported us during all of this. There was a great deal of good coverage that came out of the press. Now, were there also some members of the press who were all too easily manipulated by the public relations forces? I believe there were. There were some who, for ideological reasons, wanted to believe the Milken line, whatever the facts really were. And then there were others who succumbed all too easily to these promises of access to a great figure like Milken that were emanating from the Robinson, Lake camp.

STEWART: The original manuscript did have more pages, and I credit my editor Alice Mayhew with very wisely cutting down some of this stuff. I did go into, in the original book, more detail in the attempts of the Milken camp to obfuscate the facts. For example, in this hearing that was held late in the process, about 100 pages of the manuscript got cut out of that. But I suppose I could have gone on forever working on this book. There are still some mysteries hanging out there. The whole thing began to unravel with this mysterious, anonymous letter that rolled into Merrill, Lynch from Caracas, Venezuela, which in itself is a fascinating story. To this day, no one knows who wrote that letter. If I had endless time and space, I would have just kept tracking after that until I found the author of that mysterious letter.

STEWART: At the moment I don't. I've been working on this for five years, and it was an intensely draining experience -- not only because of the work schedule I described earlier, but just because of the adversarial nature of so much of the reporting. It was a very hard story to report with the array of forces lined up against me fueled by the Milken money. I'm just thrilled to have it done. I'm just so happy that it did get out, again, looking at all of the money that was spent to stop it. Some private detective has been going around trying to find damaging things out about me -- a variation on this whole Connie Bruck story. None of it has worked and the book is out there, and I feel great about that. Having done a story that was this engaging and consuming, my impulse is I don't want to start on anything else that wouldn't somehow be as fascinating as this. So, I guess I'll sit back and watch for a while and see what comes along.

STEWART: I think it's always a little difficult for a writer to take their creation and then try to reduce it into summary statements. I like your show because I think it probably encourages people to get to the book itself and spend some time with it, but the process of reducing what is a very complicated story I think risks oversimplifying it, so I feel maybe a little uncomfortable about it. I like the facts to speak for themselves. I don't like to be the one to draw too many conclusions because I think people will be more moved and will react more powerfully if they draw the conclusions; if the facts are there and it points to some obvious things that they can decided for themselves. I like to think they don't need me to sit here and tell them how to think about it.

STEWART: It's the level of Milken's criminality. Again, I've known what's going to be in this book for some time, so I wasn't prepared for the strength of the reaction to it. It think it's a measure of how successful the very expensive Milken PR campaign was that so many Americans to this day think he either really didn't do anything wrong or did something very minor and very technical. I think you see in the book a very clearly set forth and logical case that just shows him day after day insider trading and then building crimes on top of that -- a massive criminal scheme. That seems to have attracted the most attention.

STEWART: Two things. One, the story of the government blackmailing Marty Siegel which, to me, is like out of a spy novel or something -- the drama of it, but also the broader policy questions I mentioned. And then I'm surprised people haven't focused as much on Siegel, perhaps because, as I point out in the beginning, of the four main characters, I think he has shown the most remorse and has been transformed. Yet, to me what's often interesting in a narrative are the characters who change the most. I mean, Milken is a criminal in the beginning of the book and, although he has pleaded guilty, he still is in denial at the end of the book; whereas Siegel goes through, to me, a very fascinating process of reflection and remorse.

STEWART: I think he'll have a successful career. All four of these people had tremendous abilities and could have been enormously successful without turning to crime. But I think Siegel won't do it again, and I think he'll be successful.

STEWART: Thank you. It was a pleasure.