Leon Black viewed Jeffrey Epstein as a “confirmed bachelor with eclectic tastes, who often employed attractive women”.

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, believed in second chances, particularly for his well-connected friend.

Thus continued a relationship between the men that was laid out in a report released on Monday by law firm Dechert, commissioned by Apollo’s board after news stories about their financial ties. The investigation found that Black paid Epstein $158m 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 the US’s richest men.

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 was involved in any way of Epstein’s criminal activities, and the billionaire maintains he had no knowledge of Epstein’s abuse of underage girls. Still, the findings showed how the disgraced adviser’s knowledge of the tax system and skill managing the affairs of the ultra-rich helped Black save at least $1bn, and potentially more than $2bn.

At the same time Apollo revealed details of the report, the company said Black would step down as CEO. He will remain chair.

Tax savings

The Dechert report details a friendship going 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 globe.

Dechert also laid out the ways Epstein was useful to Black, who’s worth almost $10bn, according to the Bloomberg Billionaires Index.

The business arrangement started in 2012, according to the law firm, which reviewed over 60,000 documents.

A few years earlier, Black 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 US estate and gift taxes. But Black’s had a flaw and there was a risk of a tax assessment of $500m, which could rise to $1bn or more if it were not resolved.

Epstein offered what the report described as a “unique solution”. It was the first project Epstein worked on for Black and possibly the most valuable.

In 2015, Epstein helped with another transaction designed to save Black’s 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 $600m.

Yachts, plane

Epstein, a Brooklyn native, was an enigma to many inside and outside of finance. He attended Cooper Union and New York University’s Courant Institute of Mathematical Sciences but left both without a degree. He briefly had a job at Bear Stearns 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 “vast sums of money from me and my family”. But Epstein had helped Wexner with his finances and purchases such as real estate.

He did many of those same things for Black.

Epstein helped respond to audits, and advised on how to manage Black’s art, yacht and aeroplane, according to the Dechert report.

“Epstein would get into the weeds on obscure issues about which otherwise highly competent Family Office employees were not knowledgeable,” the report said.

One of Epstein’s contributions, according to the report, was convincing Black to focus on these issues, as well as meeting his family and explaining how the estate was organised. He would prepare detailed “fire drill” plans, testing how Black’s estate would be taxed under different scenarios.

‘Caustic Force’

Black’s full-time staff didn’t always appreciate Epstein’s contributions. He was “generally a disruptive and caustic force within the family office,” the report said, one who “had a habit of overdramatising even minor perceived errors.”

Epstein would take credit for others’ ideas, while compiling long lists of his own suggestions. Many of his creative estate-planning schemes didn’t hold up under scrutiny. According to witnesses, including Black, “part of the challenge of working with Epstein was separating the good ideas from the bad ones.”

But the payments racked up. Black paid Epstein $50m in 2013, $70m in 2014 and $30m the following year. He made a $10m donation to Gratitude America in October 2015, which was a charitable organisation affiliated with Epstein.

But beginning in 2016, “Black and Epstein’s professional and personal relationship deteriorated,” according to the report. One 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 e-mails that invoked his friendship with the billionaire and referenced personal matters shared in confidence. Black held firm and at an April 2018 meeting it was determined that while Epstein had played a key role in the deal, the idea came from one of his external lawyers.

Black also thought that the amounts he was paying Epstein over the years would be fully deductible on his tax returns — because this is what Epstein told him — and this wasn’t the case.

Black’s 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.


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