Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

In 1991, Michael Milken became the Pete Rose of the investment world: Once one of the game's biggest stars, the former junk-bond king was banned from the securities industry for life after pleading guilty to six felony counts ranging from conspiracy to securities and mail fraud.

Under the agreement, Milken was barred "from association with any broker, dealer, investment adviser, investment company or municipal securities dealer," as the New York Times reported at the time. The junk-bond chief from Drexel Burnham Lambert was forbidden, as the article noted, from participating in the securities industry "as anything other than a customer."

Well, you know what they say about customers -- they're always right, aren't they?

Fast-forward 25 years, and imagine Milken is a customer of your new hedge fund -- not just any customer, but a seed investor who gave you hundreds of millions of dollars and whose association with your fund is causing a buzz that could bring in a lot more money. By all accounts, he's still got his head in the game -- even Carl Icahn consults with him from time to time.

Oh, and he's on the phone, asking what you're buying.

I don't know about you, but I'd sure be tempted to respond: "Whatever you want me to buy, Mr. Milken."

This is the odd situation detailed on Wednesday in a Wall Street Journal article about how Milken's family office, Silver Rock Financial LLC, has transformed into a hedge fund and is courting outside investors. Milken won’t own or run the Silver Rock hedge fund, his spokesman said, but he will continue to discuss how his money is invested with its executives.

Bloomberg is describing it slightly differently: Carl Meyer, the former chief investment officer for the Milken family office, is starting his own money-management firm called Silver Rock Financial LP and has raised more than $500 million in less than a month for a new credit fund. Meyer no longer has any connection to the family office, according to a Milken spokesman. 

Either way, it's hard not to marvel at how the connection to a felon serving a lifetime ban from the securities industry is serving as what the Journal calls a "seal of approval" for this fund. 

While the new fund will reportedly focus on high-yield bonds and distressed debt, the family office's top equity holding reported in its filing for the first quarter also has a Milken-like flavor to it: 1.25 million shares of GP Investments Acquisition, a special-purpose acquisition company that recently bought World Kitchen, the maker of Pyrex and CorningWare.

Milken It
While Silver Rock Financial LLC has focused on junk bonds and distressed debt, its top stock holdings included special purpose acquisition companies like GP, Gores Holdings, Atlantic Alliance Partnership and Hennessy
Source: 13-F filing for first quarter.
Note: Shows percentage of equity portfolio reported in filing.

In the years since he was released from prison, Milken has gained some well-deserved accolades for philanthropy that have included, among other things, funding research for cancer and epilepsy and providing scholarships.

Still, this isn't the first time it looked as if he might be trying to sneak back onto Wall Street through a back alley.  

In 1998, he agreed to pay $47 million to settle accusations that he had violated the lifetime ban by offering advice on corporate deals. He didn’t have to admit or deny wrongdoing, which is one of the courtesies the SEC sometimes provides to those who agree to write a check with a lot of zeroes.

Just three years ago, the SEC was reportedly investigating whether Milken acted as an adviser to Guggenheim Partners and in effect was actually managing other clients’ money. That investigation seemed to have gone nowhere, though it's been pretty convincingly speculated that a $20 million penalty Guggenheim agreed to pay last year for various infractions (without Milken's name being invoked) was a result of that investigation.

It's easy to imagine the launch of the Silver Rock hedge fund will raise some eyebrows at the SEC. And it makes you wonder which game Milken can't quite bring himself to retire from -- the investing game, or the cat-and-mouse game with authorities. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Michael P. Regan in New York at

To contact the editor responsible for this story:
Daniel Niemi at