Fred Joseph, who as CEO of investment bank Drexel Burnham Lambert helped create the modern junk-bond market in the 1980s before the firm's collapse, has died. He was 72.
Joseph died Friday at New York Presbyterian Weill Cornell Medical Center after a long fight with multiple myeloma. His death was announced by John F. Sorte, CEO of Morgan Joseph & Co. Inc., an investment bank Joseph helped found.
Joseph, a graduate of Harvard College and Harvard Business School, arrived on Wall Street in 1963, joining the corporate finance department of E.F. Hutton. He later moved to Shearson Hammill, rising to chief operating officer before leaving to join Drexel's corporate finance department in 1974 when Shearson was bought out by Hayden Stone.
He was named CEO of Drexel in 1985. With fellow executive Michael Milken, the company expanded the market for low-rated bonds, which most investors at the time considered too much of a risk but which quickly began to dominate the financial world.
The proceeds from junk-bond sales helped finance a wave of cutthroat corporate buyouts and made Drexel one of the most revered firms on Wall Street. But the company ultimately succumbed to a four-year criminal investigation into charges that Milken and others had used inside information to trade shares of companies considered takeover targets.
Milken ultimately pleaded guilty in 1989 to securities violations, served 22 months in prison and was fined $600 million. The scandal drove Drexel to file for Chapter 11 bankruptcy protection the following year.
Joseph ultimately accepted blame for failing to supervise Milken, saying at the time that as CEO, he must bear responsibility for whatever "transpired on my watch." Joseph was banned from any managerial position with a securities firm for some time and agreed to pay a $3 million fine to federal thrift regulators.
He went on to serve as chairman of consulting firm Clovebrook Capital from 1994 to 1998, and then as an adviser and managing director at ING Barings LLC for three years.
With a group of partners, he later acquired Morgan Lewis Githens & Ahn, which was renamed Morgan Joseph & Co. Inc., an investment bank focused on serving mid-sized companies.
"He was a man of honor and great courage, and has always been an inspiration to all who knew him," Sorte said in a statement. "All of us will miss his sage advice, his iridescent smile and the warm professional manner that endeared Fred to everyone, from first year associates to long-time clients."
Joseph was a member of the board of directors of Watsco Inc. and American Biltrite Inc., and a trustee of WNET/Channel Thirteen. He also was a director of the Multiple Myeloma Research Foundation.