Leon Black regarded Jeffrey Epstein as a “confirmed bachelor with eclectic tastes, who often employed attractive women.”
The private equity title was willing to overlook that Epstein had served 13 months in Florida jail after soliciting a minor prostitute. This was partly because Epstein claimed that the girl had lied about her age, while Black, co-founder of Apollo Global Management Inc., believed in second chances, especially for its well-connected friend.
Thus continued the relationship between the men that was established in a report released Monday by the law firm Dechert, commissioned by the Apollo council 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 felony charges in 2008, for advisory services to help expand the wealth of one of the richest men in America.
The report made it clear that Apollo never retained Epstein for any service and 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 knowledge of the tax system and the ability to handle the affairs of the ultra-wealthy dishonest adviser helped blacks save at least $ 1 billion and potentially more than $ 2 billion.
At the same time Apollo revealed details of the report, the company said Black would cease as CEO. He will remain president.
Tax savings
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 mansion in Manhattan, entrusted him with personal matters, and visited his homes around the world.
Dechert also outlined the ways in which Epstein was useful to Black, who is worth nearly $ 10 billion, according to the Bloomberg Billionaire Index.
The trade deal began in 2012, according to the law firm, which reviewed more than 60,000 documents.
Black a few years earlier, Black had created a Granted Retained Annuity Trust, or GRAT. These vehicles, popular among extremely wealthy Americans, are structured so that the appreciation of assets placed in a GRAT can go to the heirs without paying property taxes and U.S. donations. But Black’s had a flaw and there was a risk of a $ 500 million valuation, which could increase to $ 1 billion or more if left unresolved.
Epstein offered what the report described as a “single solution.” It was the first project in which Epstein worked for Black and possibly the most valuable.
In 2015, Epstein helped with another transaction designed to save taxes on Black’s children, known as the base transaction. The complicated deal, which took nine months to execute, involved loans between blacks and trusts and avoided capital gains taxes for their beneficiaries. Epstein claimed the measure saved $ 600 million.
Yachts, plane
Epstein, a native of Brooklyn, was an enigma to many inside and outside of finance. He attended Cooper Union and the Courant Institute of Mathematical Sciences at New York University, but was left without a degree. He worked briefly at Bear Stearns Corps. And before his first arrest he worked extensively for lingerie tycoon Les Wexner. The founder of L Brands broke ties with Epstein after his first conviction and after he accused him of misappropriating “large sums of money from my family and me.” But Epstein had helped Wexner with his finances and purchases such as real estate.
He did many of these things for Black.
Photographer: Patrick T. Fallon / Bloomberg
Epstein helped respond to audits and advised on how to manage Black’s art, yacht and aircraft, according to the Dechert report.
“Epstein would get into the weeds on obscure issues that highly competent Family Office employees were unaware of,” the report said.
One of Epstein’s contributions, according to the report, convinced Black to focus on these issues, as well as reunite with his family and explain how the estate was organized. He would prepare detailed “fire drill” plans, checking how he would tax Black’s estate according to different scenarios.
“Caustic force”
Black’s full-time staff did not always appreciate Epstein’s contributions. It was “generally a caustic and disruptive force in the family office,” the report said, which “had a habit of over-dramatizing even minor perceived mistakes.”
Epstein would appreciate the ideas of others, while compiling long lists of his own suggestions. Many of your real estate planning creations schemes was not kept under control. According to witnesses, including Black, “part of the challenge of working with Epstein was to separate the good ideas from the bad ones.”
But the payments piled up. 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 an Epstein-affiliated charity.
But as of 2016, “Black and Epstein’s professional and personal relationship deteriorated,” according to the report. The dispute consisted of a payment linked to the intensive transaction, with refusals to pay Epstein tens of millions of dollars that Epstein believed he had won. Epstein pushed the issue back through emails invoking his friendship with the billionaire and referring to personal issues shared with confidence.
Black’s last payment to Epstein was made in April 2017, and in 2018, Epstein paid off part of two outstanding loans to Black but never paid the balance, according to the report. Black and Epstein stopped communicating in 2018, a year before Epstein was arrested on child trafficking charges and later died in prison. His death was declared a suicide.