Could Jeffrey Epstein Have Played Leon Black So Easily?

Leon Black and others close to him apparently had ready advice for anyone weighing financial guidance from the late Jeffrey Epstein: “Part of the challenge of working with Epstein was separating the good ideas from the bad ones.”

That might not have been the only challenge, of course. Epstein, who hanged himself in his Manhattan jail cell in 2019 after being charged with sex trafficking, had a sordid personal history that included prison time for soliciting prostitution from a minor. Along the way he settled, fended off or never faced justice for myriad other charges involving horrific sexual abuse and rape, with powerless girls, teenagers and young women as the common denominator. His personal reading list was stocked with such titles as “SM 101: A Realistic Introduction,” “SlaveCraft: Roadmaps for Erotic Servitude,” and “Training with Miss Abernathy: A Workbook for Erotic Slaves and Their Owners.” He also made a living as a financial adviser. 

Black, who stepped down this week as chief executive of the private equity juggernaut he co-founded, Apollo Global Management Inc., was one of Epstein’s clients. He gave up his title after an internal power struggle erupted following the firm’s inquiry into his relationship with Epstein. Apollo’s board of directors commissioned an outside law firm to examine the matter and they found that Black hadn’t participated in any of Epstein’s crimes but had paid him $158 million for financial machinations that saved at least $1 billion – and maybe more than $2 billion — in personal tax payments.

Paying $158 million to save at least $1 billion seems like a pretty good deal, right? It wasn’t enough for Black. He also thought Epstein’s $158 million fee could be deducted in its entirety on his tax returns. Neat trick: Pay someone a boatload to save you a fortune in taxes and then stick Uncle Sam with the bill. But Black believed he could squeeze out that extra $158 million because Epstein told him so. As it turned out, he couldn’t. Somebody wasn’t able to separate Epstein’s good ideas from his bad ones.

And the Wall Street tycoon’s inability to follow his own advice about Epstein is a curious thing.

Black, 69, is worth about $10 billion and is as savvy and hard-bitten as they come. He shouldn’t be easy to hoodwink. After all, he’s had quite a journey. His father, a Polish immigrant, was a successful investment banker and conglomerateur who leapt to his death from a Manhattan skyscraper during a federal bribery investigation while Black was attending the Harvard Business School. “My father was God to me. And then he committed suicide. Suicides, you know, aren’t usually committed by gods,” Black told Bloomberg Businessweek last year. “It took me years of therapy to get over that and to figure out where he ended and I began.”

Black’s early career took him to Drexel Burnham Lambert Inc., where he was junk bond king Michael Milken’s lieutenant and part of a clan of young toughs who upended finance and helped launch a massive wave of corporate takeovers – until the firm collapsed amid fraud charges against Milken. Black and other Drexel alums launched Apollo in 1990, the same year their old firm went bankrupt. Black also became friends with Epstein sometime during the 1990s and grew steadily impressed, like many titans, by Epstein’s sterling connections in the arts, academia and business.

Black has said he knew nothing about his friend’s abuse of minors and young women, but was aware the predator had gone to prison. He believed his friend’s excuse that the 14-year-old he solicited had lied about her age and believed he deserved a second chance. So they continued to visit with one another in homes scattered around the world and they continued to talk about money.

As in all things Epstein, Black appears to have been the model of tolerance when it came to red flags in their financial dealings. According to a nifty story from Bloomberg News, Epstein felt empowered enough to terrorize the highly competent team Black had already put in charge of his personal finances. He laid claim to winning ideas that weren’t his, promoted financial maneuvers that were easily picked apart and was “generally a disruptive and caustic force.”

On the other hand, Epstein seemed to have a talent for tax avoidance. When some estate planning miscues threatened to stick Black and his children with billions of dollars in tax payments, Epstein got busy. One sleight of hand lasted nine months and involved a series of loans between Black and some trusts. Epstein said that magic act alone saved Black $600 million, according to Bloomberg News. On it went, from 2012 to 2017, to the tune of $158 million in fees, then some arguments about fees, fractured trust and the end of a close relationship.

Many of Apollo’s clients began distancing themselves from the firm as more details emerged since 2019 about Black and Epstein’s relationship. Perhaps it was only a matter of time before Apollo found it necessary to oust Black, who is staying on as chairman in what may prove to be something more than a ceremonial role.

If Apollo’s board hoped its investigation of the Black-Epstein nexus might provide closure, it’s wrong. The report raises as many questions as it answers, begs for more transparency, and leaves anybody who can’t afford to pay $158 million to save billions – which is almost everybody – tuned in to the obvious: Leon Black is not the kind of guy to get so easily played. So tell us more. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.

©2021 Bloomberg L.P.

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