Former Junk-Bond King Expands Business to the Internet

Michael Milken could be proving that the Internet, like the U.S. western frontier of the 1800’s, is a place a person with a past can get a fresh start.

The former junk-bond king who went to prison for breaking security laws has begun a new business life by helping to finance UNext.com. The Internet startup plans to deliver graduate-level courses online to corporate employees later this year.

Already the company has signed up four major universities including the University of California, Stanford University, Carnegie Mellon University and the London School of Economics and Political Science. They join Columbia University’s business school — which was the first school to sign on — as graduate schools race to the Internet in attempt to reach an untapped market in cyberspace.

Milken’s company, however, is not alone.

Caliber Learning Network, formed by MCI WorldCom and Sylvan Learning Systems in 1998, also offers live university courses via the Internet. The company has cut deals with the Wharton School of the University of Pennsylvania and Johns Hopkins University. Caliber has also been busy signing corporate customers such as Nabisco Inc. Nevertheless, the company lost $29 million (US$) on revenue of $15.4 million last year.

UNext.com also scored its first corporate client when it signed up IBM to distribute a program that will allow employees to take courses online from work, home or while traveling. The courses will be delivered through a program created by a Lotus Development unit called LearningSpace. Lotus’s sales force will hawk the new educational product to its corporate customers throughout the world.

In the future, UNext.com plans to go public and offer its courses directly to individuals as it seeks accreditation to become an online school that’s able to grant MBA degrees. But first it must deal with the past of its financier Milken.

Unrest among faculty

According to the Wall Street Journal, Milken’s presence has stirred some unrest among faculty members of some of the schools doing business with UNext.com. But Andrew Rosenfield, a trustee of the University of Chicago, who also sold his consulting firm to Milken’s Knowledge Universe LLC and owns 20 percent of UNext.com, said Milken has no voting power in UNext.com and has agreed not to increase his stake in the company.

A clean slate

But the real question is whether Milken will be able to regain his reputation and allowed to be judged by his present and future actions — rather than his past mistakes. Some say he got off too lightly and is not to be trusted, while others say giving a person a second chance is what the Internet and the “new economy” is all about.