Why did Leon Black pay $158m to Jeffrey Epstein?

Jeffrey Epstein was a sexual predator who died in jail while awaiting trial on charges of serial offences against underage girls. But when Leon Black first met him in the 1990s, he saw a different side of the elusive businessman, according to a report this week, viewing him “as someone who was very intelligent and knowledgeable regarding . . . 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. Yet the billionaire attributes a sizeable part of his family wealth to Epstein, estimating that as much as $2bn in benefits can be traced back to the late paedophile’s financial acumen. By comparison, Forbes magazine estimated Mr Black was worth $7.7bn at the time of Epstein’s 2019 suicide.

On Monday, lawyers for Apollo pointed to that professional relationship to explain why its founder had paid $158m to Epstein over a five-year period ending in 2017 during which the disgraced businessman served as Mr Black’s high-priced adviser on issues ranging from audits by the tax authorities, management of his yacht and private plane, and a dispute over the ownership of a sculpture by Pablo Picasso.

Over two decades, Mr Black confided in Epstein regarding personal matters, leaned on him as an “architect” of, and “strict taskmaster” for, the private office that managed his investments. The men socialised or held meetings at Epstein’s Caribbean island and his other properties in New York, Paris, Florida and New Mexico.

The public reckoning over Mr Black’s ties to a convicted sex offender marks a humiliating coda to a relationship that began to sour years before Epstein’s shocking death in federal custody. “There has been a virtual tsunami in the press on this subject,” Mr Black said in 2019. “It seems to be the gift that never stops giving . . . It’s salacious, it involves elements of politics, of Me Too, of rich and powerful people. And my guess is it will continue for a while.”

Last October, after new revelations of Mr Black’s payments to Epstein prompted a number of top pension funds to freeze further investments 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 by anyone that I engaged in any wrongdoing because I did not,” Mr Black said then. “Any suggestion of blackmail or any other connection to Epstein’s reprehensible conduct is categorically untrue.”

The pair last spoke in 2018, after Epstein sent emails that made what Dechert called “unsubstantiated assertions” about the work he had performed and demanding more cash. Mr Black refused to pay anything more.

As their relationship deteriorated, Epstein was not above invoking his friendship with Black in an attempt to extract more money. According to the report by Apollo’s lawyers, he did so “by referencing personal matters that Black had shared with Epstein in confidence”. Their report added: “There is no evidence that those matters had any relationship to any of Epstein’s criminal activity or to any of Black’s payments to Epstein.”

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

“Black viewed Epstein as a confirmed bachelor with eclectic tastes, who often employed attractive women,” according to the Dechert report, but he had “no recollection of ever seeing Epstein with an underage woman at any time”.

Rather than severing the relationship after the conviction, the Apollo founder began to formally employ Epstein as an adviser in 2012. Mr Black has characterised himself as someone who “believes in . . . giving people second chances”, according to the Dechert report.

That is in keeping, the lawyers added, with relationships Mr Black has maintained with his former mentor Michael Milken, who served time in prison for securities violations committed at the failed investment bank Drexel Burnham Lambert, and Martha Stewart, who was convicted in 2004 of making false statements and obstruction of justice in relation to a stock trade.

Moreover, Mr Black “believed that the severity of Epstein’s offences was limited to a single instance of soliciting a 17-year-old prostitute that Black believed Epstein had mistakenly understood was older,” the Dechert report said.

Epstein’s first and “most valuable” assignment, people familiar with his work told Dechert, was to rectify defects in a trust structure that had been designed to allow Mr Black to transfer some assets to his heirs without paying estate or gift tax.

The structure dated from 2006, and had been created by lawyers recommended by Epstein. But the way they had implemented it meant that, without further action, the trust “would carry a future risk of a large estate tax assessment”. Epstein had a “unique” solution to the problem, which “[he] asserted was proprietary”, and which another of Mr Black’s lawyers called “a ‘grand slam’ [that] met all of Black’s financial and estate planning goals”. Dechert’s witnesses put the tax savings from the plan at between $500m and $1bn.

“Some of Epstein’s ideas were uniquely creative and useful,” people familiar with his work told the Dechert lawyers. In particular, he could “motivate Black to concentrate on certain family office issues in a way that others could not”.

But some of his ideas “were unremarkable or not viable”, the report said, and he had a habit of taking credit for other people’s work. “Some witnesses described a toxic and destructive work environment under Epstein,” the Dechert lawyers wrote, although others “agreed that the pressure that Epstein exerted . . . did [improve] their performance”.

Mr Black on Monday said the Dechert report confirmed “the key facts I have previously disclosed concerning my relationship with Jeffrey Epstein, including that I was completely unaware of Mr Epstein’s abhorrent misconduct that came to light in late 2018”. He added that he would step down as Apollo’s chief executive by July 31, as part of a package of reforms that will hand more power to Apollo’s public shareholders while allowing him to remain as chairman.

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

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