Leon Black viewed Jeffrey Epstein as a \u201cconfirmed bachelor with eclectic tastes, who often employed attractive women.\u201d<\/p>\n
The private equity titan was willing to overlook that Epstein had served 13 months in a Florida jail after soliciting an underage prostitute. That was partly because Epstein claimed the girl had lied about her age, while Black, co-founder of Apollo Global Management Inc., believed in second chances, particularly for his well-connected friend.<\/p>\n
Thus continued a relationship between the men that was laid out in a report released Monday by law firm Dechert, commissioned by Apollo\u2019s board after news stories about 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 that helped expand the wealth of one of America\u2019s richest men.<\/p>\n
The report made clear that Apollo never retained Epstein for any services and that he never invested in any Apollo-managed funds. Dechert found no evidence that Black, 69, was involved in any way of Epstein\u2019s criminal activities, and the billionaire maintains he had no knowledge of Epstein\u2019s abuse of underage girls. Still, the findings showed how the disgraced adviser\u2019s knowledge of the tax system and skill managing the affairs of the ultra-rich helped Black save at least $1 billion, and potentially more than $2 billion.<\/p>\n
At the same time Apollo revealed details of the report, the company said Black would step down as chief executive officer. He\u2019ll remain chairman.<\/p>\n
The Dechert report details a friendship going back to the 1990s, with Black impressed by Epstein\u2019s 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\u2019s Manhattan mansion, confided personal matters to him and visited his homes around the globe.<\/p>\n
Dechert also laid out the ways Epstein was useful to Black, who\u2019s worth almost $10 billion, according to the Bloomberg Billionaires Index.<\/p>\n
The business arrangement started in 2012, according to the law firm, which reviewed over 60,000 documents.<\/p>\n
Black a few years earlier had set up a Grantor Retained Annuity Trust, or GRAT. These vehicles, which are popular with extremely wealthy Americans, are structured so that appreciation in assets placed in a GRAT can go to heirs without paying U.S. estate and gift taxes. But Black\u2019s had a flaw and there was a risk of a tax assessment of $500 million, which could rise to $1 billion or more if it wasn\u2019t resolved.<\/p>\n
Epstein offered what the report described as a \u201cunique solution.\u201d It was the first project Epstein worked on for Black and possibly the most valuable.<\/p>\n
In 2015, Epstein helped with another transaction designed to save Black\u2019s children on taxes, known as a step-up basis transaction. The complicated arrangement, which took nine months to execute, involved loans between Black and trusts, and avoiding capital gains taxes for his beneficiaries. Epstein claimed the move saved $600 million.<\/p>\n
Epstein, a Brooklyn native, was an enigma to many inside and outside of finance. He attended Cooper Union and New York University\u2019s Courant Institute of Mathematical Sciences but left both without a degree. He briefly had a job at Bear Stearns Cos. and before his first arrest worked extensively for lingerie mogul Les Wexner. The L Brands founder severed ties with Epstein after his first conviction and later accused him of misappropriating \u201cvast sums of money from me and my family.\u201d But Epstein had helped Wexner with his finances and purchases such as real estate.<\/p>\n
He did many of those same things for Black.<\/p>\n
Epstein helped respond to audits, and advised on how to manage Black\u2019s art, yacht and airplane, according to the Dechert report.<\/p>\n
\u201cEpstein would get into the weeds on obscure issues about which otherwise highly competent Family Office employees were not knowledgeable,\u201d the report said.<\/p>\n
One of Epstein\u2019s contributions, according to the report, was convincing Black to focus on these issues, as well as meeting with his family and explaining how the estate was organized. He would prepare detailed \u201cfire drill\u201d plans, testing how Black\u2019s estate would be taxed under different scenarios.<\/p>\n
Black\u2019s full-time staff didn\u2019t always appreciate Epstein\u2019s contributions. He was \u201cgenerally a disruptive and caustic force within the family office,\u201d the report said, one who \u201chad a habit of overdramatizing even minor perceived errors.\u201d<\/p>\n
Epstein would take credit for others\u2019 ideas, while compiling long lists of his own suggestions. Many of his creative estate-planning scheme<\/span>s didn\u2019t hold up under scrutiny. According to witnesses, including Black, \u201cpart of the challenge of working with Epstein was separating the good ideas from the bad ones.\u201d<\/p>\n But the payments racked 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 a charitable organization affiliated with Epstein.<\/p>\n But beginning in 2016, \u201cBlack and Epstein\u2019s professional and personal relationship deteriorated,\u201d according to the report. The dispute was over a payment tied to the step-up transaction, with Black refusing to pay Epstein tens of millions of dollars that Epstein believed he had earned. Epstein pushed back on the issue through emails that invoked his friendship with the billionaire and referenced personal matters shared in confidence.<\/p>\n Black\u2019s last payment to Epstein was made in April 2017, and in 2018, Epstein repaid a portion of two loans that were outstanding to Black but never repaid the balance, according to the report. Black and Epstein stopped communicating in 2018, the year before Epstein was arrested on charges of sex trafficking minors and later died in jail. His death was ruled a suicide.<\/p>\n