Saturday, June 10, 2023

Why did Leon Black pay Jeffrey Epstein $ 158 million?

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Jeffrey Epstein was a sexual predator who died in prison awaiting trial for serial offenses against underage girls. But when Leon Black first met him in the 1990s, he saw another side of the elusive businessman, according to a report this week, seeing him “as someone very intelligent and well informed. . . estate planning and taxation ”.

Mr. Black is one of the most successful financiers of his generation, co-founder of Apollo Global Management, a group that ranks among the most powerful on Wall Street. Still, the billionaire attributes a significant portion of his family wealth to Epstein, estimating that up to $ 2 billion in profits can be attributed to the financial sense of the late pedophile. By comparison, Forbes magazine estimated that Mr. Black was worth $ 7.7 billion in Epstein’s time. Suicide 2019.

Apollo’s lawyers highlighted this professional relationship on Monday as a reason why its founder had paid Epstein $ 158 million over five years ending in 2017 in which the disgraced businessman served as Mr Black’s costly adviser on matters ranging from audits of tax authorities, the management of his yacht and private plane, and a dispute over the ownership of a sculpture by Pablo Picasso.

For two decades, Mr. Black confided in Epstein on personal matters, relied on him as the “architect” and “strict chef de mission” for the private firm that managed his investments. The men socialized or held meetings on Epstein’s Caribbean Island and at his other properties in New York City, Paris, Florida, and New Mexico.

the public calculation Mr. Black’s ties to a convicted sex offender are a humiliating coda for a relationship that began to deteriorate years before Epstein’s shocking death in federal custody. “There was a virtual tsunami in the press about it,” Mr. Black said in 2019. “It seems like this is the gift that keeps on giving. . . It’s salacious, it involves elements of politics, of Me too, of rich and powerful people. And I guess this will continue for a while.

Last October, after further revelations about Mr. Black’s payments to Epstein prompted a number of leading pension funds to freeze additional investments Along with Apollo, Mr. Black asked his company to commission an investigation from Dechert, the international law firm.

“Let me be clear, there has never been an allegation from anyone that I have engaged in any wrongdoing because I did not,” Mr. Black said. at the time. “Any suggestion of blackmail or any other connection to Epstein’s reprehensible conduct is categorically false. “

The couple last spoke in 2018, after Epstein sent emails containing what Dechert called “unsubstantiated claims” about the work he had done and demanding more money. Mr. Black refused to pay anything more.

As their relationship deteriorated, Epstein wasn’t above invoking his friendship with Black in an attempt to extract more money. According to the Apollo attorneys report, he did so “with reference to personal matters that Black had shared with Epstein in confidence.” Their report added, “There is no evidence that these questions have anything to do with any of Epstein’s criminal activities or any of Black’s payments to Epstein.”

Second chances

The Apollo founder had known Epstein for about a decade when Epstein was convicted in 2008 of soliciting sex with a minor, in a plea bargain that resulted in a 13-month prison sentence .

“Black considered Epstein to be an established bachelor with eclectic tastes, who often employed attractive women,” according to the Dechert report, but he “could not recall ever seeing Epstein with an underage woman at all times.”

Rather than sever the relationship after conviction, the founder of Apollo began formally employing Epstein as an advisor in 2012. Mr. Black characterized himself as someone who “believes in.” . . give people a second chance, ”according to the Dechert report.

This is consistent, the lawyers added, with the relationship Mr Black had with his former mentor Michael Milken, who served time in jail for securities violations by bankrupt investment bank Drexel Burnham Lambert. , and Martha Stewart, who was convicted in 2004 of making false statements and obstructing justice in connection with a stock transaction.

Further, Mr. Black “believed that the seriousness of Epstein’s offenses was limited to a single solicitation of a 17-year-old prostitute whom Black believed Epstein had mistakenly understood to be older,” he said. declared the Dechert report.

Leon Black has had relationships with other convicted felons, including Martha Stewart © Getty Images

. . . and his early career mentor at Drexel Burnham Lambert, Michael Milken © AP

A matter of trust

Epstein’s first and “most valuable” assignment, people familiar with his work told Dechert, was to correct the flaws in a trust structure designed to allow Mr. Black to transfer certain assets to his heirs without paying. inheritance or gift tax.

The structure dated back to 2006 and was created by lawyers recommended by Epstein. But the way they implemented it meant that without further action the trust “would carry a future risk of a large tax assessment.” Epstein had a “unique” solution to the problem, which “[he] claimed was the owner ”, which another of Mr. Black’s lawyers called a“ grand slam ” [that] meets all of Black’s financial and estate planning goals ”. Witnesses for Dechert estimate the plan’s tax savings to be between $ 500 million and $ 1 billion.

“Some of Epstein’s ideas were particularly creative and useful,” people familiar with his work told Dechert lawyers. In particular, it could “motivate Black to focus on certain family office matters in a way that others may not”.

But some of his ideas “weren’t remarkable or viable,” the report said, and he used to take credit for the work of others. “Some witnesses described a toxic and destructive work environment under Epstein,” Dechert’s lawyers wrote, while others “agreed that the pressure from Epstein. [improve] their performance “.

Mr Black said on Monday that the Dechert report confirmed “the key facts I previously disclosed regarding my relationship with Jeffrey Epstein, including the fact that I was absolutely unaware of the heinous misconduct by Mr Epstein which was revealed at the end of 2018 ”. He added that he would step down as CEO of Apollo by July 31, as part of a reform package that will empower Apollo’s public shareholders while allowing him to remain chairman.

In a letter sent to Apollo investors in 2019, Mr. Black insisted he had “never promoted” Epstein to his top colleagues at the company. This statement was “not false,” according to the Dechert report, although Mr. Black “commented positively on the substantial value of Epstein’s services.”

Despite this recommendation from the billionaire founder of Apollo, the lawyers added, “it is clear that no employee of Apollo other than Black has ever seriously considered hiring Epstein.”


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