Summary List Placement
From 1:1 breakfast business meetings to family trips to the Caribbean, Jeffrey Epstein maintained a close personal relationship with billionaire Apollo Global Management CEO Leon Black for more than 20 years.
The two also had a business relationship from 2012 to 2017, in which Black paid the disgraced financier $158 million and loaned him millions more, according to an investigation into their relationship commissioned by Apollo’s board and executed by law firm Dechert.
Apollo, one of the world’s biggest private equity funds with $440 billion in assets, said on Monday that as a result of the investigation Black will step down as Apollo’s CEO in July. He will remain chairman.
Epstein pleaded guilty in 2008 to soliciting prostitution from a teenage girl, and he was arrested in 2019 on suspicion of trafficking dozens of underage girls as young as 14 in the early 2000s. He died in federal prison in 2019.
His alleged behavior didn’t initially affect his high-profile social and professional circles, which included retail magnate Leslie Wexner; Johnson & Johnson heiress Elizabeth Johnson; hedge-fund billionaire Glenn Dubin; Bill Clinton; Donald Trump; and Prince Andrew.
In Black’s case, the pair had known each other at least since the mid-1990s, the investigation found, and entered into their business arrangement four years after Epstein spent 13 months in jail and became a registered sex offender.
Epstein’s advice helped Black expand his wealth and vise versa. Black’s payments helped bankroll Epstein’s lifestyle, who had an expansive real estate portfolio with homes in New York, New Mexico, the US Virgin Islands, and Paris, France.
The investigation concluded that neither Black nor any Apollo employees had any involvement in Epstein’s criminal activities.
Witnesses interviewed in the investigation said that while Epstein brought “creative ideas” to the table during his work with Black, they weren’t always helpful and that he was “generally a disruptive and caustic force” within Black’s family office, Elypsium Management.
Dechert reviewed over 60,000 documents and had 20 interviews with witnesses. Here are seven takeaways from the 22-page report.
Black and Epstein had known each other socially since the mid-1990s and maintained a close personal friendship for more than 20 years.
Black and Epstein were introduced by a mutual friend in the mid-1990s, and the pair became close friends prior to their working together beginning in 2012. The investigation said that Black found Epstein to be “very intelligent and knowledgable” about estate planning and taxation and in 1997 made him one of the first directors for his family’s philanthropic organization. Epstein resigned from the Black Family Foundation in 2007.
Epstein introduced Black to researchers at Harvard and MIT, encouraged him to donate to scientific research, and recommended an attorney to handle his trust and estate planning before Epstein took over the role around 2012 or 2013.
The two regularly attended social events together, and Black introduced Epstein to his family. Black would regularly visit Epstein’s Upper East Side townhouse, and the two preferred 1:1 breakfast meetings to discuss business, while afternoon visits would be more social and with others. Black and his wife visited Epstein once in France and Santa Fe and “one or two occasions” in Florida, and he went twice with his wife and children to Epstein’s island in the Caribbeans.
The two entered a business arrangement in 2012, and some of Epstein’s insights brought millions of dollars of value to Black and his family office.
Black and Epstein entered a business arrangement in late 2012, and Epstein’s ideas about estate and tax planning brought “significant value” to Black and his family office and saved “substantial amounts of money,” according to witnesses investigated in the report.
It is estimated that Epstein saved Black up to a possible $2 billion in tax payments.
The first large project Epstein worked on for Black was problem-solving a Grantor Retained Annuity Trust, or GRAT. These vehicles are designed to reduce taxes on large financial gifts to family members. Black’s structure, however, had a flaw which meant it could actually be liable for about $500 million in taxes, a number that could have risen to close to a billion dollars.
Epstein provided the “best and most creative solution” to the problem, which he said was proprietary and was not disclosed, and witnesses interviewed in the investigation said it was Epstein’s most important contribution to Black.
For his work, Epstein said he normally charged $40 million per year but that he and Black agreed to a payment of $23.5 million, to be made in two installments, to do the initial work.
According to the investigation, Epstein also estimated he saved Black another $600 million in a 2015 arrangement, known as a step-up basis transaction, that involved some loans between Black and family trusts in order to achieve tax benefits for Black’s children.
Epstein advised on various other estate and tax planning matters, but witnesses and Black said that the challenge working with him was “separating the good ideas from the bad ones,” and that many did not hold up under scrutiny, despite their creativity.
Epstein also managed some of Black’s more personal matters, like his art collection, yacht, and airplane.
Outside of his tax work for the family office, Epstein also managed Black’s artwork, including forming a new art partnership, contesting the ownership of a Picasso sculpture, managing loans, and more, despite not being an expert in management or art law. He also managed Black’s yacht, including moving it, helping Black charter the vessel, and creating the entity that owned it, but he did not get into the tax-structure details of its ownership, according to the report.
Epstein was also “very knowledgable about buying and selling airplanes,” according to witnesses, and he took a more active role in managing Black’s aircraft and its certifications. A family office employee told investigators that an airplane broker was unhappy when they learned Epstein would be helping Black with an aircraft purchase because his knowledge would make it harder to negotiate.
Black also loaned Epstein $30.5 million, which was never fully repaid.
In early 2017, Black gave two loans to Epstein, for $22.5 million and $8 million, for an art transaction. The loans, which were paid by an entity owned by Black to an entity owned by Epstein, were supposed to be short-term, and Black asked repeatedly for repayment in full throughout 2018, but Epstein only ever repaid $10 million before his death.
Epstein was known as a tough person to work with and a negative force within the family office.
Witnesses said Epstein was a “strict taskmaster” who was difficult to work with and that he often argued with family office employees and overdramatized small errors. Epstein would also regularly take credit for good ideas even when he didn’t play a large role in coming up with them.
While the pressure Epstein put on employees did drive them to achieve greater performances, they said he cultivated a “toxic and disruptive work environment.”
Black also took issue with Epstein’s work performance and increasingly thought of him as “greedy” and a “self-promoter” but found it challenging to set up boundaries or wean the family office off of his advice because Epstein, despite his problems, was identifying genuine issues to solve and continuing to provide value.
Black told investigators that Epstein annoyingly referred to problems as “cavities” he was finding in Black’s “mouth” — a reference to the family office — but they were still real problems to be solved.
Black and Epstein regularly donated to charities at each others’ requests.
The two encouraged each other to make donations to various charitable causes: Epstein on two occasions and at Black’s request made large donations to the Melanoma Research Alliance, which was established by Black and his wife, and Epstein, in turn, asked Black to donate to the Massachusetts Institute of Technology; Harvard University; the Arizona State University Origins Project; and the Peace Initiative Foundation. Black in 2015 donated $10 million to Gratitude America, an organization with which Epstein was affiliated.
Black and Epstein stopped working together in 2017 after the pair had a falling out over money.
Black and Epstein entered in several contracts and renegotiations for work in 2013, and in total Epstein was paid $50 million that year. Beginning in 2014, they entered an ad hoc arrangement without written agreements, and Epstein was paid $70 million in 2014 and $30 million in 2015, $20 million of which was for the step-up basis transaction and the rest for his tax and estate advice and management of artwork, yacht, airplane, and other tasks.
Epstein earned $0 in 2016, and Black gave him a final payment of $8 million in 2017, likely for tax advisory and compliance services, according to the investigation. The report also said that Epstein led Black to believe incorrectly that his payments would be tax-deductable.
Overall, despite paying Epstein specific totals for specific engagements like solving the GRAT and step-up basis transactions, Black said he didn’t view the arrangement as paying Epstein a set fee to complete certain tasks, but rather compensation for the overall value of the work and advice Epstein provided.
The relationship between Black and Epstein deteriorated beginning in 2016, and they stopped working together in 2018 after they disagreed on the fee paid to Epstein for the step-up basis transaction. Epstein took full credit for finding the solution and said he wanted a $60 million fee, 10% of the perceived benefit, $600 million in savings, of his solution. Black, on the other had, had already paid him the $20 million for his work, and investigation witnesses said it was unclear whether Epstein actually came up with the idea by himself.