Leon Black saw Jeffrey Epstein as a “staunch bachelor with eclectic tastes, who used to employ attractive women”.
The private equity titan was willing to ignore that Epstein had served 13 months in a Florida prison after soliciting an underage prostitute. This was partly because Epstein claimed that the girl lied about her age, while Black, co-founder Apollo Global Management Inc. believed in second chances, especially for its well-connected friend.
Thus, the relationship between men continued, which was exposed in a report released on Monday by the law firm Dechert, commissioned by the Apollo board after news of their financial ties. The investigation found that Black paid Epstein $ 158 million between 2012 and 2017 – after the sex offender pleaded guilty to criminal charges in 2008 – for consulting services that helped expand the wealth of one of America’s wealthiest men.
The report made it clear that Apollo never retained Epstein for any services and that he never invested in any funds managed by Apollo. Dechert found no evidence that Black, 69, was involved in any form of Epstein’s criminal activities, and the billionaire claims he was unaware of Epstein’s abuse of underage girls. Still, the findings showed how the unfortunate advisor’s knowledge of the tax system and the ability to run the business of the ultra-rich helped blacks save at least $ 1 billion and potentially more than $ 2 billion.
At the same time that Apollo revealed details of the report, the company said that Black leave the position of executive director. He will remain as president.
Fiscal Economics
The Dechert report details a friendship dating back to the 1990s, with Black impressed by Epstein’s ties to prominent figures in business, politics and science, including researchers at Harvard University and the Massachusetts Institute of Technology. Black was a frequent visitor to Epstein’s Manhattan mansion, confided personal matters to him and visited his homes around the world.
Dechert also exposed the ways in which Epstein was useful to Black, who is worth almost $ 10 billion, according to the Bloomberg Billionaires Index.
The commercial agreement began in 2012, according to the law firm, which analyzed more than 60,000 documents.
Black, a few years earlier, had established a Grantor Retained Annuity Trust, or GRAT. These vehicles, which are popular with extremely wealthy Americans, are structured so that the valuation of assets placed on a GRAT can go to the heirs without paying real estate taxes and donations in the United States. But Black’s was flawed and there was a risk of a $ 500 million tax assessment, which could rise to $ 1 billion or more if it were not resolved.
Epstein offered what the report described as a “single solution”. It was the first project Epstein worked on for Black and possibly the most valuable.
In 2015, Epstein helped with another transaction aimed at saving Black’s children in taxes, known as a basic step-up transaction. The complicated arrangement, which took nine months to execute, involved loans between Black and trusts and avoided capital gains taxes for their beneficiaries. Epstein said the change saved $ 600 million.
Yachts, plane
Epstein, a Brooklyn native, was an enigma to many in and out of finance. He attended Cooper Union and the Courant Institute of Mathematical Sciences at New York University, but left both without graduating. He worked briefly at Bear Stearns Cos. And before his first arrest, he worked intensely for lingerie mogul Les Wexner. The founder of L Brands broke ties with Epstein after his first conviction and later accused him of embezzling “vast sums of money from me and my family”. But Epstein helped Wexner with his finances and purchases, like real estate.
He did many of those same things for Black.
Photographer: Patrick T. Fallon / Bloomberg
Epstein helped respond to audits and advised on how to manage Black’s art, yacht and plane, according to the Dechert report.
“Epstein would come in contact with obscure issues that highly competent Family Office employees were unaware of,” said the report.
One of Epstein’s contributions, according to the report, was to convince Black to focus on these issues, in addition to meeting with his family and explaining how the property was organized. He would prepare detailed “fire simulation” plans, testing how Black’s assets would be taxed in different scenarios.
‘Caustic force’
Black’s full-time team did not always appreciate Epstein’s contributions. He was “generally a destructive and caustic force within the family office,” said the report, someone who “was in the habit of dramatizing even the smallest perceived mistakes.”
Epstein would receive credit for others’ ideas, while compiling long lists of his own suggestions. Much of your creative estate planning schemes did not resist scrutiny. According to witnesses, including Black, “part of the challenge of working with Epstein was to separate good ideas from bad ones.”
But payments have increased. Black paid Epstein $ 50 million in 2013, $ 70 million in 2014 and $ 30 million the following year. He also made a $ 10 million donation to Gratitude America in October 2015, which was a charity affiliated with Epstein.
But as of 2016, “Black and Epstein’s professional and personal relationship has deteriorated,” according to the report. The dispute was over a payment linked to the transaction, with Black refusing to pay Epstein tens of millions of dollars that Epstein believed he had won. Epstein countered the matter through emails that invoked his friendship with the billionaire and mentioned confidential personal matters.
Black’s last payment to Epstein was made in April 2017, and in 2018, Epstein repaid a portion of two loans that were owed to Black, but never repaid the balance, according to the report. Black and Epstein stopped communicating in 2018, a year before Epstein was arrested on charges of child sex trafficking and then died in prison. His death was considered suicide.