Data set 9 - 12

[admin]

Part 2

DOJ Disclosures
https://www.justice.gov/epstein/doj-disclosures

Privacy Notice

In view of the Congressional deadline, all reasonable efforts have been made to review and redact personal information pertaining to victims, other private individuals, and protect sensitive materials from disclosure. That said, because of the volume of information involved, this website may nevertheless contain information that inadvertently includes non-public personally identifiable information or other sensitive content, to include matters of a sexual nature. In the event a member of the public identifies any information that should not have been posted, please notify us immediately at [email protected] so we can take steps to correct the problem as soon as possible.

Redactions of victim names and other identifying information have been applied. In audio files, redactions of victim names and other identifying information have been implemented through the use of a steady, solid tone.

Epstein Files Transparency Act (H.R.4405)

Data Set 9
https://www.justice.gov/epstein/doj-dis ... et-9-files

Data Set 10
https://www.justice.gov/epstein/doj-dis ... t-10-files

Data Set 11
https://www.justice.gov/epstein/doj-dis ... t-11-files

Data Set 12
https://www.justice.gov/epstein/files/DataSet%2012.zip
https://www.justice.gov/epstein/doj-dis ... t-12-files

[Librarian's Review Starts at End of Data Set 12, and goes towards Beginning of Data Set 9.]

[admin]

https://www.justice.gov/epstein/files/D ... 731783.pdf [librarian comment: During Biden's Term]

Phillips, Lauren (USANYS)

From: [DELETE] (USANYS) </O=USA/OU=EXTERNAL (FYDIBOHF25SPDLT)/CN=RECIPIENTS/CN=
60A16ECAAB73479F9C6EA6A5F059BE8E>
Sent: Friday, June 9 2023 3:28 PM
To: [DELETE] USANYS 2
Subject: RE: [EXTERNAL] [DELETE]/ Leon Black

Thanks! Now good?

***

From: [DELETE] [DELETE]
Sent: Tuesday, February 28, 2023 10:37 AM
To: [DELETE]
Cc: [DELETE] (USANYS) [DELETE] [DELETE] [DELETE]
Subject: RE: [EXTERNAL] [DELETE] / Leon Black

Good morning [DELETE]

We are reaching out to see if you have some time this week or next week for a quick phone call re: this investigation. We have a new CW who has come forward and alleged sexual abuse by Leon Black. This CW was trafficked by Maxwell and Epstein, and we are wondering whether her name has come across your desk in the course of your investigation.

Thank you,
[DELETE] & [DELETE]

***

From: [DELETE] (USANYS) 2 [DELETE] usdoj.gov>
Sent: Friday, January 21, 2022 5:28 PM
To: [DELETE] [DELETE]
Subject: Re: [EXTERNAL] [DELETE] / Leon Black

Hi [DELETE]

We don't have any current plans to interview [DELETE] again. We were previously interested in meeting with the second victim represented by her attorney after the Maxwell trial. Based on our last conversation, I believe you had met with her already. If you are still pursuing an investigation encompassing both victims, we are not likely to open an other investigation. If anything changes or my understanding is incorrect, please let me know.

Thank you,
[DELETE]

***

On Jan 21, 2022, at 12:53 PM, [DELETE] [DELETE] wrote:

Hi [DELETE]

Hope all is well. We had spoken a couple months ago about [DELETE]— our office is conducting an investigation into sexual assault allegations by [DELETE] against Mr. Black. When we last spoke you had indicated that your office was pretty busy with the Maxwell trial and did not have much of an update regarding an investigation involving [DELETE]. Just wanted to check back in now that the trial is over to see if there was anything further on that. Happy to give you a call if you prefer to speak over the phone.

Thanks!
[DELETE]

Assistant District Attorney
New York County District Attorney's Office
[DELETE]

***

On Oct 29, 2021, at 10:33 AM, [DELETE] [DELETE] wrote:

Good morning AUSA [DELETE]

ADA [DELETE] & I are from the Manhattan District Attorney's Office and we are investigating allegations of sexual abuse against Leon Black made by [DELETE]. Our understanding is that you spoke with one of our colleagues, ADA [DELETE] months ago in regard to an investigation that the US Attorney's Office is handling involving Mr. Black. ADA [DELETE] indicated that [DELETE] had spoken with an FBI agent. We were interested in speaking with you and/or the FBI agent who is working on the investigation.

Do you have some time today or next week to speak? If so, please let us know what day and time is good for you and the best number to reach you (we have your number as [DELETE]

Thank you,

[DELETE]
Assistant District Attorney
New York County District Attorney's Office
[DELETE]

***********************

https://www.justice.gov/epstein/files/D ... 731775.pdf

From: [DELETE]
To: Douglas Wigdor
Subject: RE: Leon Black
Date: Tuesday, March 5, 2024 3:50:40 PM
Attachments:
image001.png
image002.png
image003.png
image004.png

Hi Doug —yes, I reviewed everything. I'll be at my desk until 4:15 and then tied up in meetings until later tonight. [DELETE]

***

From: Douglas Wigdor <[email protected]>
Sent: Tuesday, March 5, 2024 2:59 PM
To: [DELETE] [DELETE]
Subject: [EXTERNALI RE: Leon Black

Hi [DELETE]

Have you had a chance to look at what Jeanne sent. Had a few follow ups and a question if you could let me know a good time and number to reach you. Thanks !

***

From: [DELETE] [DELETE]
Sent: Monday, March 4, 2024 12:14 PM
To: Jeanne M. Christensen [DELETE]
Cc: [DELETE] [DELETE] [DELETE]
Subject: Re: Leon Black

Thanks very much, Jeanne.

***

From: Jeanne M. Christensen [DELETE]
Sent: Monday, March 4, 2024 11:07:37 AM
To: [DELETE] [DELETE]
Cc: [DELETE] [DELETE] [DELETE]
Subject: [EXTERNAL] Leon Black

Doug told me about the conversation this morning and per your request, attached is the letter sent to Judge Rakoff on Friday.
Please keep in mind that exhibit C contains highly confidential information.
If you have any questions after reviewing, do not hesitate to reach out,

Jeanne
Jeanne M. Christensen
Partner

[DELETE]
85 Fifth Avenue
New York, NY 10003

[admin]

Part 1 of 3

https://www.justice.gov/epstein/files/D ... 731774.pdf

From: [DELETE] [DELETE]
Sent: Tuesday, March 5, 2024 11:45 AM
To: [DELETE]
Subject: Black

If you want to look at anything ahead of time:

Senate Finance Committee investigation:

https://www.finance.senate gov/chairmans-news/wyden-unveils-ongoing-investigation-into-private-entiity-billionaire-leon-blacks-tax-planning-and-financial-ties-with-jeffrey-epstein [librarian comment: During Biden's Term]

https://www.finance.senate.gov/imo/medi ... b_lttr.pdf [librarian comment: During Biden's Term]

Dechert internal investigation report:
https://www.sec.gov/Archives/edgar/data ... dex991.htm [librarian comment: During Biden's Term]

https://www.finance.senate gov/chairmans-news/wyden-unveils-ongoing-investigation-into-private-entiity-billionaire-leon-blacks-tax-planning-and-financial-ties-with-jeffrey-epstein

July 25, 2023

Wyden Unveils Ongoing Investigation Into Private Equity Billionaire Leon Black’s Tax Planning and Financial Ties with Jeffrey Epstein. Apollo Global Management Co-Founder Has Refused to Answer Key Questions Regarding Epstein Payments, Financial Transactions Keeping Billions Out of Taxable Estate

Washington, D.C. – Senate Finance Committee Chairman Ron Wyden (D-Ore.) today unveiled an ongoing investigation into the tax and estate planning of Apollo Global Management Co-founder Leon Black and his financial dealings with Jeffrey Epstein, who advised Black on those matters. The investigation has uncovered serious tax issues and other concerns with trusts and structures Black executed to avoid over $1 billion in future gift and estate taxes.

Part of a broader review of the means by which the ultra-wealthy avoid or evade federal taxes, the committee’s investigation began in June 2022 and was prompted by inconsistencies in a report by the law firm Dechert LLP that Apollo’s board of directors commissioned to examine Black’s ties to Epstein. The Dechert report found Black paid Epstein, who was neither a licensed tax attorney nor a certified public accountant, a total of $158 million in several installments between 2012 and 2017. The payments were inexplicably large; well in excess of what Black paid any other financial advisors and far higher than the median compensation of Fortune 500 CEOs at the time.

The committee’s current findings include:

• A transaction Epstein devised to help Black avoid more than $1 billion in federal taxes raises questions about whether Black improperly kept billions of dollars in wealth out of his taxable estate, and whether he may subsequently owe significant gift and estate taxes. Black improperly received excess income from Apollo partnership interests held in a trust -- assets he indicated to the IRS he no longer owned. Epstein proposed a “solution” that required Black to provide “consideration” to the trust, but Black has refused to disclose the extent he was overpaid income from the trust, whether he retained voting rights on assets held in the trust, or the dollar amount of the consideration Epstein proposed.

• According to the Dechert report, Epstein played a “significant” and “instrumental” role in another transaction involving family trusts, which reportedly saved Black $600 million in future gift and estate taxes. Black paid Epstein $20 million for his role in this transaction. However, Black’s attorneys confirmed to the committee that “the idea was in the public domain and originated with Black’s other legal advisors” and that Epstein merely tried to claim credit for their work. Furthermore, Black’s attorneys have not provided any information clarifying how Epstein contributed any value to the transaction. The Dechert report had previously stated that some of Epstein’s overall work “did not hold up under scrutiny” and that Black’s other financial advisors, who were paid considerably less than Epstein, consistently vetted his work.

• At every stage of the committee’s investigation, Black has refused to answer questions or provide any documents that could demonstrate how Epstein’s compensation for tax and estate planning services was determined or justified. In addition to the aforementioned transactions, these questions also inquired about advice Epstein provided in relation to Black’s private art collection, which outside counsel confirmed in a briefing has a value of more than $1 billion. It appears that for at least some of the years in which Black paid Epstein enormous sums, he did so without any written services agreement or contract.

• The lack of transparency surrounding Black’s payments to Epstein, the extraordinary amount of those payments, the apparent lack of a formal services agreement and the fact that Black apparently did not claim Epstein’s compensation for a variety of duties related to Black’s family office as a tax-deductible expense raises questions about whether the payments would be properly characterized as payment for services rendered or rather as a taxable gift from Black to Epstein.

• According to Black’s representatives, the IRS has not audited any of the transactions or trusts detailed in the committee’s investigation.

“Unfortunately, the inadequate responses you have provided the Committee only raise more questions than answers, and fail to address a number of tax issues my staff has uncovered over the course of this investigation. This includes understanding the amount by which you were overpaid income from assets placed in a trust while devising a scheme to ensure that those assets, worth billions of dollars, would remain outside your taxable estate,” Wyden wrote in a new letter to Black. “Additionally, you have refused to answer questions or provide documents related to payments you made to Epstein or substantiate how such payments were calculated or were compensation for services. Your failure to substantiate Epstein’s compensation scheme has heightened the Committee’s concerns about whether such payments were properly characterized as income or gifts for tax purposes.”

With the investigation ongoing, Senator Wyden sent the following questions in a new letter to Black:

1. The response provided on January 16, 2023 indicated that the trustees of the remainder trust prepared an accounting to ascertain the amount of income distributable to Mr. Black under the trust agreement and the amounts that were in fact distributed to him. Please provide the total amount that was distributed to Mr. Black from the remainder trust, as well as the amount that was intended to be distributed to him under the terms of the trust agreement. Please also provide the period in which these distributions occurred and describe how the amount over-distributed was calculated.

2. The response provided on January 16, 2023 indicated that the mutual release of claims resulted in both sides receiving consideration. Please describe the value and nature of the consideration involved in the mutual release.

3. The response provided on January 16, 2023 indicated that the 2006 GRATs were funded with a 30.35% interest in Apollo Management III LP; a 30.35% interest in Apollo Management IV, LP; a 30.35% interest in Apollo Management V, LP; a 30.35% interest in Apollo Management VI, LP; a 26.8% interest in Apollo Investment Management, LP; a 26.9% interest in Apollo Value Management, LP; a 44% interest in Apollo SVF Management, LP; a 44% interest in Apollo Asia Management, LP; a 44% interest in Apollo Europe Management, LP; a 44% interest in Apollo Alternative Assets, LP; and 142 points of each of Apollo Advisors VI, LP and Apollo Advisors VI (EH). Please answer the follow questions related to the interests that funded the 2006 GRATs:

a. Are any of these assets still held by the remainder trust? If so, please provide an up to date accounting of the capital and/or profit ownership percentage and estimated dollar value of the interest held by the remainder trust in Apollo Management III LP, Apollo Management IV, LP Apollo Management V, LP; Apollo Management VI, LP; Apollo Investment Management, LP; Apollo Value Management, LP; Apollo SVF Management, LP; Apollo Asia Management, LP; Apollo Europe Management, LP; Apollo Alternative Assets, LP; Apollo Advisors VI, LP and Apollo Advisors VI (EH).

b. Please provide the most recent appraisal of the remainder trust’s interest in Apollo Management III LP, Apollo Management IV, LP Apollo Management V, LP; Apollo Management VI, LP; Apollo Investment Management, LP; Apollo Value Management, LP; Apollo SVF Management, LP; Apollo Asia Management, LP; Apollo Europe Management, LP; Apollo Alternative Assets, LP; Apollo Advisors VI, LP and Apollo Advisors VI (EH).

4. Have you, or any entities you are affiliated with, including Elysium Management LLC, taken out any loans against the value of the assets held in the remainder trust (whether held directly or indirectly through ownership of partnerships)? If so, please provide the dollar value of those loans, as well as any loan terms (including interest rates, security, and amounts repaid), and please describe any powers you, the trustees or any other parties have held or exercised with respect to loans from the remainder trust. Do you have a share of recourse debt or guarantee any debt of the entities described in question 3?

5. How many shares of Apollo Global Management, Inc. stock are held by the remainder trust? Please describe the number, value, and class of these shares.

6. Please describe whether you have retained (or previously retained) any voting powers with respect to the assets in the remainder trust. If so, please describe the percentage of voting power you have retained for each of the funds described in question 3, and any other voting powers you have retained with respect to the assets in the remainder trust. Please also describe what percentage of voting power you have retained related to assets held in the remainder trust with respect to Apollo Global Management, Inc., calculated under the principles of IRC 2036(b)(2) as of today or the most recent accounting. Please also confirm whether you are, or previously were, a general partner of, or member of the management company for, any of the funds described in question 3.

7. The Dechert report claims that “in 2013, payments (to Epstein) were memorialized in signed and unsigned agreements.” Please provide copies of any compensation agreements you signed with Epstein. Please also describe any “unsigned agreements” between you and Epstein where Epstein was compensated for work related to trust and estate planning, tax issues, issues relating to artwork, your airplane, your yacht, and other similar matters.

8. The Dechert report claims that you and Epstein negotiated a “written service agreement” that was signed on February 13, 2013. Please provide a copy of this agreement, as well as any documents related to payments made to Epstein as a result of this agreement. These documents should include any statements of work or descriptions of the services rendered by Epstein related to payments made under the agreement.

9. The Dechert report claims that Epstein was paid $56.5 million in five installment payments over 2013 and 2014 as part of an agreement that was never signed. The agreement was apparently renegotiated and the total amount paid was apparently $50 million. Please provide all documents related to payments you made to Epstein resulting from this unsigned agreement, including any statements of work or descriptions of the services rendered by Epstein as part of the agreement.

10. The Dechert report claims that starting in 2014, you began to pay Epstein for his ongoing services on an ad hoc basis, without negotiating written service agreements. As part of this, Epstein was paid $70 million in 2014 and $30 million in 2015. Please provide all documents related to payments made to Epstein in 2014 and 2015, including any statements of work or descriptions of services rendered by Epstein related to his work on the step-up-basis transaction and estate, tax planning, tax audits and filings, or any other advice provided to you and your family office.

11. The Dechert report claims that “it is clear the compensation paid by Black to Epstein far exceeded any amounts Black paid to his other professional advisors.” Please explain how Dechert LLP made this assessment. Please also provide documents showing how Epstein’s compensation compared to other professional advisors, including attorneys providing tax, trust and estate planning services and certified public accountants who assisted you with tax matters.

12. The Dechert report claims that “after 2013 payments were made by Mr. Black to Mr. Epstein on an ad hoc basis based on Black’s perceived value of Epstein’s work.” Please provide a detailed description of how compensation amounts were decided for Epstein, including any documentation of trust and estate planning and tax consulting services rendered by Epstein for you or your family office.

13. In a briefing with the Committee on August 1, 2022, your outside counsel indicated that Epstein would often demand compensation from Black that far exceeded what you were initially willing to pay for his services. Despite the absence of a written services agreement or other contract, it appears that you made large payments to Mr. Epstein in 2014, 2015, and 2017. Please provide a detailed written description of the amounts Epstein initially requested he be paid during those years, the process by which you and Epstein negotiated and agreed to a payment amount, and why you agreed to pay such substantial sums to Epstein despite the absence of a written service agreement. Please also provide copies of any relevant documents related to decisions regarding how much Epstein was paid for his services.

14. The Dechert report claims that from 2013 through 2017, you were under the misconception that your payments to Epstein would be tax-deductible, based on advice from Epstein.

a. Please describe whether you claimed income tax deductions for payments to Epstein for any taxable year during this period, as well as when and why you determined that such payments were nondeductible.

b. Please describe whether you amended your tax returns after learning that the payments to Epstein were not tax-deductible.

c. Please include all substantiation documents with respect to any income tax deductions you previously claimed.

d. Please describe whether any payments you made to Epstein were characterized as gifts for tax purposes, and please provide any documents, including tax returns, related to any reportable gifts made to Epstein.

15. In a briefing with the Committee on August 1, 2022, your outside counsel indicated that Epstein provided substantial advice related to your private art collection, which is worth over $1 billion. This advice reportedly included helping you form a new art partnership as well as assistance in connection with the sale of certain pieces of artwork. Please provide detailed answers in writing for the following items:

a. What was the purpose of the new art partnership you formed with Epstein’s assistance? How did Epstein assist in the formation of that partnership?

b. Please provide more details regarding any art loans that involved Epstein, including Epstein’s role related to those loans.

c. Please provide a list of any like-kind exchange transactions Epstein helped execute for any pieces you owned valued at over $1 million, including a detailed description of the tax benefits obtained through the execution of these transactions.

d. Please provide a list of art sales valued at over $1 million Epstein assisted you with.

Thank you for your attention to this important matter.

Sincerely,

Ron Wyden

Chairman, Senate Finance Committee

[admin]

Part 2 of 3

https://www.justice.gov/epstein/files/D ... 731774.pdf (Cont'd)

https://www.finance.senate.gov/imo/medi ... b_lttr.pdf [librarian comment: During Biden's Term]

United States Senate
Committee on Finance
Washington, DC 20510-6200

July 24, 2023

Leon D. Black
c/o Brownstein Hyatt Farber Schreck LLP
410 Seventeeth Street
Suite 2200
Denver, Colorado 80202-4432

Dear Mr. Black,

As Chairman of the Senate Finance Committee (“the Committee”), I write regarding the Committee’s investigation into your financial dealings with Jeffrey Epstein. This effort is part of an ongoing set of investigations by the Committee into the means by which ultra-high net worth persons avoid or evade paying federal taxes, including gift and estate taxes. These investigations include the avoidance of billions of dollars in income, gift and estate taxes through the use of tax shelters such as Private Placement Life Insurance; the possible circumvention of laws related to gift taxes and deductions involving the complementary use of private aircraft/superyachts by public officials; and the use of Swiss banks by wealthy taxpayers to expatriate from the United States and evade gift taxes while concealing offshore accounts from the Internal Revenue Service (IRS).

As you are aware, the Committee is investigating the $158 million in payments you made to Epstein for services related to a variety of tax and estate planning matters. In particular, the Committee seeks information on Epstein’s participation in structuring trusts and other complex transactions designed to avoid federal gift and estate taxes on as much as $2 billion in wealth transferred to your children. The Committee also seeks information regarding Epstein’s extraordinary compensation scheme, which involved amounts that far exceeded those paid to other professional advisors involved in your tax and estate planning.

Unfortunately, the inadequate responses you have provided the Committee only raise more questions than answers, and fail to address a number of tax issues my staff has uncovered over the course of this investigation. This includes understanding the amount by which you were overpaid income from assets placed in a trust while devising a scheme to ensure that those assets, worth billions of dollars, would remain outside your taxable estate. Additionally, you have refused to answer questions or provide documents related to payments you made to Epstein or substantiate how such payments were calculated or were compensation for services. Your failure to substantiate Epstein’s compensation scheme has heightened the Committee’s concerns about whether such payments were properly characterized as income or gifts for tax purposes.

Background

As you know, on June 22, 2022, the Committee initiated an investigation into your business arrangement with Epstein. As part of the Committee’s investigation, the Committee sent a letter to Apollo Global Management (“Apollo”) with detailed requests for information regarding the findings of a review commissioned by Apollo’s Board of Directors into your financial ties to Epstein.1 The Board’s review was initiated in response to Epstein’s indictment in federal court on sex trafficking charges involving the exploitation and abuse of dozens of underage girls.2 The findings of the Apollo board’s review, compiled in a report prepared by the law firm Dechert LLP (“the Dechert report”), were published in a filing by Apollo with the U.S. Securities and Exchange Commission.3

The Dechert report indicated that you paid Epstein $158 million between 2012 and 2017 for his advice on several tax and estate planning matters.4 These transactions included a “proprietary” solution Epstein devised to help you resolve issues with a grantor trust you created in 2006 to transfer assets to your children while avoiding approximately $1 billion in gift and estate taxes.5 The Dechert report also claimed that Epstein assisted you with a “step-up-basis transaction” (“the step-up-basis transaction”) designed to save you an additional $600 million in taxes.6

The Committee’s initial letter, a copy of which is attached, asked detailed questions on the nature of Epstein’s tax and estate planning services as well as details regarding payments to Epstein. Payments to Epstein, at an annualized rate of $23 to $26 million per year, was higher than the median CEO pay for Fortune 500 companies, which Fortune calculated at $15.9 million for 2021.7 The Dechert report indicated that the amounts paid to Epstein far exceeded those which you paid to other professional advisors.8

Since then, members of my staff held several meetings with your outside counsel at Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”) and Brownstein Hyatt Farber Schreck LLP (“Brownstein”) to discuss your cooperation with the Committee’s investigation. In those meetings, your outside counsel indicated that you were unwilling to answer questions regarding details of payments to Epstein. However, your counsel indicated you were willing to provide the Committee information related to tax issues involving the 2006 Grantor Retained Annuity Trusts (“the 2006 GRATs”), the remainder trust into which the assets from the 2006 GRATs flowed into (“the remainder trust”), and the step-up-basis transaction. The Committee subsequently directed follow up requests for information to you on January 13th, 2023 and February 6th, 2023, which you responded to on January 16th and February 21, 2023, respectively.9

While the Committee appreciates the information you have provided, the responses declined to answer several questions related to important tax issues concerning the assets held in the remainder trust, claiming that these requests were “outside the scope of the Committee’s purview.”10 This claim is without merit, as the Senate Finance Committee has jurisdiction over all matters related to federal tax laws. Investigations into matters pertaining to the operation and enforcement of internal revenue laws are squarely within the Committee’s legislative purview.

Among the issues you refused to address were the extent to which you received excess distributions of income from the assets held in the remainder trust, important details on the mutual release of claims strategy that Epstein may have devised, and the degree to which you retained voting powers with respect to assets held in the remainder trust.11 This information is essential for the Committee to evaluate the means by which you retained income from your ownership of Apollo holdings while avoiding gift and estate taxes on the transfer of enormous wealth to your children.

The Committee also remains concerned by your continued refusal to answer questions related to payments to Epstein and how such amounts were calculated in relation to any services provided. To date, the Committee has not received a sufficient explanation as to why Epstein was paid amounts vastly exceeding that paid to other attorneys and accountants involved in these transactions, and why you were willing to pay Epstein over $100 million without a written services agreement or contract.

Overpayments of income and other issues arising from trust tax avoidance scheme

A central focus of the Committee’s investigation is understanding what role Epstein played in solving an estate tax issue involving the 2006 GRATs. The Dechert report first described this issue as an estate tax “problem” that if left unresolved would lead to a potential estate tax liability for your children of $1 billion or more.12 The Dechert report also claimed that Epstein offered a “proprietary” solution that helped address this problem and allowed you to keep the assets in the 2006 GRATs outside of your taxable estate. In order to better understand this transaction, the Committee sent several requests for information related to tax issues arising from the 2006 GRATs, the assets held in the 2006 GRATs, and the solution Epstein proposed to ensure the assets would not be subject to gift and estate taxes.

In response to the Committee’s investigation, you indicated that there were no issues or problems with the 2006 GRATs themselves. Instead, you clarified that there was a tax-related concern with the remainder trust which the assets held in the 2006 GRATs were to be transferred into upon the expiration of the 2006 GRATs.13 It appears that because you were receiving income from assets held in the remainder trust, there was concern that the assets held in the trust would be included in your taxable estate.14 Under Internal Revenue Code Section 2036(a)(1), if a taxpayer gives away assets to a third party while retaining the right to income from those assets, those assets are included in the taxpayer’s gross estate at the taxpayer’s death. A related tax provision under Section 2035(a) provides that gifts of property made within three years of the donor’s death would be included in the decedent’s taxable estate.15

At the time the 2006 GRATs were funded, the assets in the remainder trust had an appraised value of approximately $585 million.16 The assets in the remainder trust comprised of your interest in various Apollo partnerships prior to Apollo’s initial public offering, which your advisors believed could reasonably be expected to increase in value over time to an amount exceeding $2 billion.17 Operating on the basis of a tax rate of 40% to 50% for net federal and state estate taxes, the estimated tax liability resulting from these assets being included in your estate at time of death could have exceeded $1 billion. 18

In order to prevent the Apollo assets in the remainder trust from being subject to gift and estate taxes, you consulted with Epstein and retained established trust and estate lawyers from Weil Gotshal and Paul Weiss to devise a solution. Epstein proposed that the trustees of the trust prepare an accounting to ascertain the amount of income that was distributable to you under the remainder trust agreement compared to the amounts that were in fact distributed to you.19 That accounting revealed that you had been over-distributed income by the trustees of the remainder trust.20 This review also revealed that the trustees distributed income to you from assets other than those identified in the remainder trust agreement.21 As a result of these overpayments, your advisors believed that the trustees of the remainder trust agreement had a claim against you to claw back excess distributions.22 Conversely, had the trustees removed you as a beneficiary of the remainder trust, you could have alleged a claim for breach of fiduciary duty.23

According to your attorneys, it was at this point that Epstein allegedly proposed a solution, which involved a mutual release of claims by and between you and the trustees of the remainder trust. The settlement and mutual release provided that you would lose your right to income from the remainder trust while confirming that you would not assert any claim for being removed as a beneficiary of the trust, in exchange for the trustees agreeing to not seek to claw back any excess distributions of income.24 You confirmed to the Committee that you and the trustees both formally agreed to a mutual release of claims, with each side “receiving consideration.”25 As a result of this scheme reportedly devised by Epstein, your tax advisors took the position that you no longer had the income rights from the remainder trust that would have caused the trust’s assets to be included in your taxable estate (as outlined in Section 2036(a) (1)).26 Your tax advisors also took the position that this solution eliminated any potential risks of inclusion of the assets in your taxable estate arising from the three-year tail caused by Section 2035(a).

In order to fully understand the tax implications of the trust scheme devised with Epstein’s assistance, Committee staff sent a set of follow up questions on the matter to your counsel on February 6, 2023. Unfortunately, you have refused to answer or provide information regarding several important tax-related questions arising from this transaction, including the following:

 First, you have refused to answer questions regarding the amount by which you were overpaid income by the trustees of the remainder trust. You have also refused to answer questions on the period in which these distributions occurred and how the amount of income that was over-distributed was calculated. The Committee is concerned by the possibility that you may have received impermissible distributions of income worth millions of dollars beyond that allowable by the terms of the remainder trust.

 Second, you have refused to answer questions related to the consideration provided to the trustees or the consideration provided by the trustees as part of the mutual release of claims. As such, the Committee has no idea what financial exchange or other consideration was provided in order to keep assets worth billions of dollars out of your taxable estate. It is possible that, if your release of a right to income from the remainder trust was for less than full and adequate consideration, such release of claims could constitute an additional taxable gift.

 Third, you have refused to answer questions on the extent to which you retained voting control of shares in Apollo and its partnerships while shifting those assets into the remainder trust to avoid gift and estate taxes. As you may be aware, under the principles of Section 2036 of the Internal Revenue Code, property transferred to a trust with respect to which the transferor retains enjoyment or retains certain voting rights may be includable in the transferor’s taxable estate under certain circumstances.

 Lastly, you have refused to answer questions as to whether you borrowed heavily against the assets held in the remainder trust. The Committee requested information on whether you, or any entities you are affiliated with, including your family office (Elysium Management LLC), have taken out any loans against the value of the assets held in the remainder trust. This request included questions on the value of these loans as well as any powers you, the trustees or any other parties held with respect to the loans from the remainder trust.

This arrangement raises serious concerns that, in spite of significant violations of the terms of the remainder trust, you were potentially paid millions of dollars in excess income while keeping enormous amounts of wealth outside of your taxable estate. The Committee needs further information to assess how this scheme essentially served as a workaround to federal tax laws which clearly state that such distributions of income would cause the assets held in the remainder trust to be subject to gift and estate taxes.

Further, questions surrounding retained voting rights of business interests held in trust and the potential to borrow against those assets raises significant public policy concerns. Even if retained voting rights with respect to business interests fall outside of the scope of Section 2036(b), the possibility that wealthy individuals might assert to the IRS that they do not own business interests held in trust for gift and estate tax purposes, while simultaneously borrowing against those interests and retaining voting power, raise serious questions about the integrity of our gift and estate tax system.

You have confirmed to the Committee that the IRS has not reviewed the 2006 GRATs, the remainder trust or the mutual release of claims scheme as part of an audit, raising yet more concerns about the IRS’s visibility into such transactions and the agency’s compliance efforts.

Epstein’s role in the step-up-basis transaction lacks substantiation

The Committee submitted detailed requests for information related to Epstein’s role in a step-up-basis transaction involving certain family trusts created for the purpose of avoiding tax. According to the Dechert report, Epstein allegedly provided “significant value” to the step-up-basis transaction, which will apparently save you approximately $600 million in future gift and estate taxes.27 The Dechert report also stated that while the idea for the complex transaction did not originate with Epstein, Epstein “played an instrumental role in completing it.”28

However, responses you provided to the Committee minimized Epstein’s involvement in the transaction, stating that “the idea was in the public domain and originated with Black’s other legal advisors. Nevertheless, Epstein tried to take credit for the idea and secure compensation.”29 Your attorneys further added that the dispute over compensation for the step-up-basis transaction contributed to your decision to terminate your professional relationship with Mr. Epstein.30 The Committee is concerned that these responses are at odds with the Dechert report’s claim that Epstein’s role in the transaction was “significant” or “instrumental.” In fact, your responses did not provide any information clarifying how Epstein contributed any value to the transaction outside of that provided by other legal advisors.

The responses you provided the Committee did not substantiate Epstein’s services related to the step-up-basis transaction and cast further doubt on whether his efforts merited the payment of $20 million. Based on the information you have provided thus far, this is an extraordinary amount to pay any consultant or attorney, particularly without a formal services agreement or contract, written or otherwise. According to the Dechert report, there was an “understanding” between you and Epstein that Epstein would be compensated for some portion of the value conferred from any idea that “originated” from Epstein.31 However, your responses made clear that the idea for the step-up-basis transaction did not originate with Epstein, but instead originated with other legal advisors.

Despite Epstein’s limited and heavily disputed role in the step-up-basis transaction, Epstein demanded payment of $60 million.32 The Committee still does not know how or why you settled on a payment of $20 million instead of the $60 million Epstein demanded for the transaction.33 To date, you have not provided any explanation as to how payments to Epstein with respect to the step-up-basis transaction were determined and whether any statements of work or other documents properly substantiating Epstein’s role in the transaction even exist.

The Committee believes that payments to Epstein with respect to the step-up-basis transaction merit further investigation. Compensation at these amounts in an estate and tax planning matter is irregular and unusually high, particularly since Epstein’s contributions to the transaction relied on the guidance of other legal advisors. In this case, Epstein’s compensation with respect to the transaction was documented to have been significantly higher than your other advisors on these matters.

Refusal to provide information regarding Epstein’s compensation scheme

The Committee remains concerned about the payments to Epstein in amounts that would represent a highly unusual compensation scheme. Unfortunately, you have refused to cooperate with inquiries into payments to Epstein, raising serious concerns regarding the lack of substantiation for the extraordinary amounts of such payments.

According to the Dechert report, you paid Epstein $158 million between 2012 and 2017, an amount that seems inexplicably high based on currently available information. This compensation scheme, which averaged approximately $25 million per year, appears to be well in excess of expected compensation for tax and estate planning services – particularly in a case where Epstein’s work was required to be vetted by other legal and accounting professionals, at times was not viewed as useful, and included instances of substantial misrepresentations of tax laws.34 Despite not being a certified public accountant or licensed tax attorney, Epstein was paid amounts that far exceeded what you paid other professional advisors, including some of the most high-priced legal counsel in the nation.35

In order to better understand Epstein’s compensation scheme, the Committee submitted a detailed set of questions and document requests. These requests included copies of any signed or unsigned agreements with Epstein, the written service agreement you entered into with Epstein on February 13, 2013 and documents related to payments made to Epstein as part of these agreements. This request specified that these documents should include any statements of work or descriptions of the services rendered by Epstein for which he was compensated as part of these agreements.

Additionally, the Committee requested information and documents on subsequent payments that were made to Epstein after 2013 on an ad hoc basis, without negotiating written services agreements.36 This request asked for documents related to the $70 million Epstein was paid in 2014 and the $30 million was paid in 2015, and asked for statements of work or descriptions of services rendered by Epstein related to his work on the step-up-basis transaction and estate, tax planning, tax audits and filings, or any other work provided by Epstein. The Committee also requested an explanation of how compensation amounts for Epstein were decided in payments made on an ad hoc basis where no formal services agreement was negotiated.

At every stage of the Committee’s investigation, you have refused to answer these questions or provide any documents related to how Epstein’s compensation was determined or justified. First, you refused to answer the questions regarding Epstein’s compensation included in the Committee’s letter submitted on June 22, 2022. Following a briefing with Committee staff and your outside counsel on August 1, 2022, Committee staff submitted a second set of questions regarding Epstein’s compensation scheme.37 These questions also inquired about advice Epstein provided in relation to your private art collection, which your outside counsel confirmed in a briefing has a value of more than $1 billion. Again, you refused to provide answers to those questions.

Subsequently, Committee staff met with your outside counsel at Paul Weiss and Brownstein at the Finance Committee’s offices, where your counsel again reiterated your unwillingness to cooperate with any requests related to Epstein’s compensation scheme, including information on how Epstein’s compensation was determined and evidence substantiating the services he provided on tax and estate planning matters. They also reiterated that you were unwilling to describe to the Committee how these payments were categorized for tax purposes.

Arrangement with Epstein raises concerns of whether such amounts represented services income or a gift

The Committee remains deeply concerned by your continued refusal to substantiate and explain Epstein’s compensation scheme. The lack of transparency surrounding payments to Epstein, the extraordinary amount of such payments, the apparent lack of a formal services agreement, and the fact that you apparently did not claim such compensation as a tax-deductible expense raises questions about whether such payments would be properly characterized as a taxable gift, or as payment for services rendered. The Dechert report states that you retained Epstein to advise you and your Family Office on a “variety of topics related to trust and estate planning, tax issues, philanthropic endeavors, and the operation of the Family Office.”38

As noted previously, the amounts paid to Epstein were shown to be far in excess of payments to your other advisors, and even customary compensation of Fortune 500 CEOs. Based on what is known about the services Epstein performed, payments to Epstein, which equated to an average annualized amount of $25 million, would likely represent payments well in excess of reasonable compensation. IRS audit guidance indicates that questions around reasonable compensation typically arise in family businesses and closely-held business arrangements, in which the firm pays compensation in amounts determined to exceed what would reasonably be charged for those services.39 The guidance states that such cases may also implicate gift and estate tax avoidance.

According to IRS guidance, factors considered in determining reasonable compensation include: possible conflicts of interest and relationships to the company, an individual’s role at the company, internal consistency in the company’s compensation to other individuals, and external comparisons of compensation with that of similar companies for similar services, among others.

In addition, the IRS defines a “gift” as any transfer to an individual, either directly or indirectly, where full consideration (measured in money or moneys worth) is not received in return.40 IRS regulations further provide that transfers made in the ordinary course of business are not considered gifts, provided the transaction is “bona fide, at arm’s length, and free from any donative intent.”41

Generally, business payments to an employee or contractor are deductible as reasonable and necessary expenses under Section 162. While personal expenses are generally not taxdeductible, certain expenses involving a family office may be deductible under Sections 162 or 212. In addition, the Internal Revenue Code specifically denies deductions for amounts not representing reasonable compensation.42

The Internal Revenue Code also denies deductions of any amount treated as a gift.43 Gifts in excess of the annual exclusion amount reduce any remaining amount of a taxpayers’ lifetime unified exclusion against the gift and estate tax, and are subject to the 40% gift tax to the extent such gifts exceed that exclusion amount.44

The Dechert report states that from 2013 through 2017, you were under the misconception that your payments to Epstein would be tax-deductible, based on advice from Epstein.45 During that same period, you paid Epstein $158 million. It appears that you determined at some point that such amounts were not tax-deductible, however, the Dechert report does not provide any details on when that determination was made, why you determined those payments were not tax-deductible, or how such payments were characterized for tax purposes. The Committee requested information and documents to determine how such deductions were treated on previously-filed tax returns or whether any payments to Epstein were characterized as gifts.

As Chairman of the Senate Finance Committee I have long been concerned that ultrahigh net worth individuals frequently employ sophisticated tax avoidance schemes to circumvent federal gift and estate tax laws. With the assistance of sophisticated advisors, the wealthiest one percent of Americans often exploit estate planning and loopholes in the tax code to avoid paying hundreds of millions, or billions, of dollars in gift and estate taxes. As a result, this select group of Americans is able to use trusts and other structures to transfer enormous untaxed sums of wealth to their children.

I am also concerned that the decimation of IRS enforcement resources over the last decade has led to a decline in compliance with federal gift tax filing requirements. As IRS audits of gift tax returns have plummeted, the Committee’s investigations have identified several instances where gifts far exceeding the annual gift tax exclusion may not have been properly reported on federal tax filings.

The Committee is conducting several investigations into the means by which ultra-high net worth persons avoid or evade paying federal taxes, including gift taxes. These investigations will help inform legislation to address loopholes in the tax code. For example, the Committee has been investigating the growing use of Private Placement Life Insurance by the wealthiest Americans as a tax shelter to avoid paying billions of dollars in income, gift and estate taxes. The Committee’s investigations into offshore tax evasion schemes involving individuals with dual citizenship have also uncovered other challenges related to the enforcement of gift tax laws. For example, the Committee's investigation into Credit Suisse identified several situations where expatriating from the United States was part of a strategy to evade gift taxes while concealing offshore accounts from the IRS.

The facts and circumstances surrounding your business arrangement with Epstein present a variety of novel issues as they relate to circumventing gift and estate tax laws. Due to the limited information you have provided the Committee, a significant number of open questions remain regarding the tax avoidance scheme you implemented with Epstein’s assistance, including whether the exorbitant amounts paid to Epstein should have been classified as a gift for federal tax purposes. The Committee also needs more information to assess whether billions of dollars in assets are being improperly kept out of your taxable estate. In order to better understand your business arrangement with Epstein, please provide answers to the following questions no later than September 1, 2023:

1. The response provided on January 16, 2023 indicated that the trustees of the remainder trust prepared an accounting to ascertain the amount of income distributable to Mr. Black under the trust agreement and the amounts that were in fact distributed to him. Please provide the total amount that was distributed to Mr. Black from the remainder trust, as well as the amount that was intended to be distributed to him under the terms of the trust agreement. Please also provide the period in which these distributions occurred and describe how the amount over-distributed was calculated.

2. The response provided on January 16, 2023 indicated that the mutual release of claims resulted in both sides receiving consideration. Please describe the value and nature of the consideration involved in the mutual release.

3. The response provided on January 16, 2023 indicated that the 2006 GRATs were funded with a 30.35% interest in Apollo Management III LP; a 30.35% interest in Apollo Management IV, LP; a 30.35% interest in Apollo Management V, LP; a 30.35% interest in Apollo Management VI, LP; a 26.8% interest in Apollo Investment Management, LP; a 26.9% interest in Apollo Value Management, LP; a 44% interest in Apollo SVF Management, LP; a 44% interest in Apollo Asia Management, LP; a 44% interest in Apollo Europe Management, LP; a 44% interest in Apollo Alternative Assets, LP; and 142 points of each of Apollo Advisors VI, LP and Apollo Advisors VI (EH). Please answer the follow questions related to the interests that funded the 2006 GRATs:

a. Are any of these assets still held by the remainder trust? If so, please provide an up to date accounting of the capital and/or profit ownership percentage and estimated dollar value of the interest held by the remainder trust in Apollo Management III LP, Apollo Management IV, LP Apollo Management V, LP; Apollo Management VI, LP; Apollo Investment Management, LP; Apollo Value Management, LP; Apollo SVF Management, LP; Apollo Asia Management, LP; Apollo Europe Management, LP; Apollo Alternative Assets, LP; Apollo Advisors VI, LP and Apollo Advisors VI (EH).

b. Please provide the most recent appraisal of the remainder trust’s interest in Apollo Management III LP, Apollo Management IV, LP Apollo Management V, LP; Apollo Management VI, LP; Apollo Investment Management, LP; Apollo Value Management, LP; Apollo SVF Management, LP; Apollo Asia Management, LP; Apollo Europe Management, LP; Apollo Alternative Assets, LP; Apollo Advisors VI, LP and Apollo Advisors VI (EH).

4. Have you, or any entities you are affiliated with, including Elysium Management LLC, taken out any loans against the value of the assets held in the remainder trust (whether held directly or indirectly through ownership of partnerships)? If so, please provide the dollar value of those loans, as well as any loan terms (including interest rates, security, and amounts repaid), and please describe any powers you, the trustees or any other parties have held or exercised with respect to loans from the remainder trust. Do you have a share of recourse debt or guarantee any debt of the entities described in question 3?

5. How many shares of Apollo Global Management, Inc. stock are held by the remainder trust? Please describe the number, value, and class of these shares.

6. Please describe whether you have retained (or previously retained) any voting powers with respect to the assets in the remainder trust. If so, please describe the percentage of voting power you have retained for each of the funds described in question 3, and any other voting powers you have retained with respect to the assets in the remainder trust. Please also describe what percentage of voting power you have retained related to assets held in the remainder trust with respect to Apollo Global Management, Inc., calculated under the principles of IRC 2036(b)(2) as of today or the most recent accounting. Please also confirm whether you are, or previously were, a general partner of, or member of the management company for, any of the funds described in question 3.

7. The Dechert report claims that “in 2013, payments (to Epstein) were memorialized in signed and unsigned agreements.” Please provide copies of any compensation agreements you signed with Epstein. Please also describe any “unsigned agreements” between you and Epstein where Epstein was compensated for work related to trust and estate planning, tax issues, issues relating to artwork, your airplane, your yacht, and other similar matters.

8. The Dechert report claims that you and Epstein negotiated a “written service agreement” that was signed on February 13, 2013. Please provide a copy of this agreement, as well as any documents related to payments made to Epstein as a result of this agreement. These documents should include any statements of work or descriptions of the services rendered by Epstein related to payments made under the agreement.

9. The Dechert report claims that Epstein was paid $56.5 million in five installment payments over 2013 and 2014 as part of an agreement that was never signed. The agreement was apparently renegotiated and the total amount paid was apparently $50 million. Please provide all documents related to payments you made to Epstein resulting from this unsigned agreement, including any statements of work or descriptions of the services rendered by Epstein as part of the agreement.

10. The Dechert report claims that starting in 2014, you began to pay Epstein for his ongoing services on an ad hoc basis, without negotiating written service agreements. As part of this, Epstein was paid $70 million in 2014 and $30 million in 2015. Please provide all documents related to payments made to Epstein in 2014 and 2015, including any statements of work or descriptions of services rendered by Epstein related to his work on the step-up-basis transaction and estate, tax planning, tax audits and filings, or any other advice provided to you and your family office.

11. The Dechert report claims that “it is clear the compensation paid by Black to Epstein far exceeded any amounts Black paid to his other professional advisors.” Please explain how Dechert LLP made this assessment. Please also provide documents showing how Epstein’s compensation compared to other professional advisors, including attorneys providing tax, trust and estate planning services and certified public accountants who assisted you with tax matters.

12. The Dechert report claims that “after 2013 payments were made by Mr. Black to Mr. Epstein on an ad hoc basis based on Black’s perceived value of Epstein’s work.” Please provide a detailed description of how compensation amounts were decided for Epstein, including any documentation of trust and estate planning and tax consulting services rendered by Epstein for you or your family office.

13. In a briefing with the Committee on August 1, 2022, your outside counsel indicated that Epstein would often demand compensation from Black that far exceeded what you were initially willing to pay for his services. Despite the absence of a written services agreement or other contract, it appears that you made large payments to Mr. Epstein in 2014, 2015, and 2017. Please provide a detailed written description of the amounts Epstein initially requested he be paid during those years, the process by which you and Epstein negotiated and agreed to a payment amount, and why you agreed to pay such substantial sums to Epstein despite the absence of a written service agreement. Please also provide copies any relevant documents related to decisions regarding how much Epstein was paid for his services.

14. The Dechert report claims that from 2013 through 2017, you were under the misconception that your payments to Epstein would be tax-deductible, based on advice from Epstein.

a. Please describe whether you claimed income tax deductions for payments to Epstein for any taxable year during this period, as well as when and why you determined that such payments were nondeductible.

b. Please describe whether you amended your tax returns after learning that the payments to Epstein were not tax-deductible.

c. Please include all substantiation documents with respect to any income tax deductions you previously claimed.

d. Please describe whether any payments you made to Epstein were characterized as gifts for tax purposes, and please provide any documents, including tax returns, related to any reportable gifts made to Epstein.

15. In a briefing with the Committee on August 1, 2022, your outside counsel indicated that Epstein provided substantial advice related to your private art collection, which is worth over $1 billion. This advice reportedly included helping you form a new art partnership as well as assistance in connection with the sale of certain pieces of artwork. Please provide detailed answers in writing for the following items:

a. What was the purpose of the new art partnership you formed with Epstein’s assistance? How did Epstein assist in the formation of that partnership?

b. Please provide more details regarding any art loans that involved Epstein, including Epstein’s role related to those loans.

c. Please provide a list of any like-kind exchange transactions Epstein helped execute for any pieces you owned valued at over $1 million, including a detailed description of the tax benefits obtained through the execution of these transactions.

d. Please provide a list of art sales valued at over $1 million Epstein assisted you with.

Thank you for your attention to this important matter.

Sincerely,

Ron Wyden
United States Senator
Chairman, Committee on Finance

_______________

Notes:

1 Letter from Senator Ron Wyden, Chairman, Senate Finance Committee to Apollo Global Management, Jun. 2, 2022.

2 Jeffrey Epstein Charged in Manhattan Federal Court With Sex Trafficking Of Minors, U.S. Department of Justice, Jul. 8, 2019, https://www.justice.gov/usao-sdny/pr/je ... kingminors

3 Apollo Global Management, Inc. Investigation of Epstein/Black Relationship and Any Relationship Between Epstein and Apollo Global Management, available online at https://www.sec.gov/Archives/edgar/data ... dex991.htm

4 Id. at pg. 3: “Epstein regularly advised [Leon] Black on a variety of issues related to trust and estate planning, tax, philanthropy, and the operation of the Family Office” and at pg. 4: “[Leon] Black compensated Epstein for his work in amounts that were intended to be proportional to the value provided by Epstein. Those payments for work performed over the period 2012 through 2017 totaled $158 million.”

5 Id. at pg. 9: “There was a consensus among witnesses that Epstein offered a unique solution to a potential estate planning problem that arose out of a trust known as the 2006 Grantor Retained Annuity Trust (2006 GRAT)” and at pg. 10: “Witnesses differed on what the value of the estate tax would have been today or in the future if the issues had not been resolved, but they believed the estate tax liability could have been as much as $1 billion or more… Epstein approached Black with his solution – which Epstein asserted was proprietary – and Black agreed to pay Epstein to implement this solution. Outside legal counsel described the solution as a “grand slam” and one that met all of Black’s financial and estate planning goals.”

6 Id. at pg. 10: “Epstein appears to have provided significant value to a subsequent transaction that addressed certain loans between [Leon] Black and certain family trusts for the purpose of achieving a tax benefit for his children” and at pg. 11: “Epstein estimated that this transaction had saved $600 million in value and Black appears to have agreed with that estimate.”

7 The top 10 highest paid CEOs of the Fortune 500, Fortune, May 28, 2022, https://fortune.com/2022/05/28/highest- paid-ceos-in-america-2021/.

8 Apollo Global Management, Inc. Investigation of Epstein/Black Relationship and Any Relationship Between Epstein and Apollo Global Management, available online at https://www.sec.gov/Archives/edgar/data ... ex991.htm; (at pg. 17: “It is clear that the compensation paid by [Leon] Black to Epstein far exceeded any amounts Black paid to his other professional advisors.”)

9 Letter from Senator Ron Wyden, Chairman, Senate Finance Committee to Leon D. Black, Jan. 13, 2023; Email from Majority Staff, Senate Finance Committee to outside Counsel to Leon Black at Paul, Weiss, Rifkind Wharton & Garrison LLP, Feb. 6, 2023.

10 Memorandum submitted on behalf of Leon Black by Paul, Weiss, Rifkind, Wharton & Garrison LLP to Senator Ron Wyden, Chairman, Senate Finance Committee, Feb. 21, 2023.

11 Id.

12 Apollo Global Management, Inc. Investigation of Epstein/Black Relationship and Any Relationship Between Epstein and Apollo Global Management, available online at https://www.sec.gov/Archives/edgar/data ... ex991.htm; (at pg. 9: “There was a consensus among witnesses that Epstein offered a unique solution to a potential estate planning problem that arose out of a trust known as the 2006 Grantor Retained Annuity Trust (2006 GRAT)” and at pg. 10: “Witnesses differed on what the value of the estate tax would have been today or in the future if the issues had not been resolved, but they believed the estate tax liability could have been as much as $1 billion or more.”

13 Memorandum submitted on behalf of Leon Black by Paul, Weiss, Rifkind, Wharton & Garrison LLP to Senator Ron Wyden, Chairman, Senate Finance Committee, Jan. 16, 2023 (at pgs. 1 & 2: “The memorandum respectfully proceeds on the belief that the premise of the question – that there were ‘issues with the 2006 GRAT’ is based on a misunderstanding. There were no issues or problems associated with the 2006 GRATs themselves. The 2006 GRATs functioned as intended, and were in no way out of the ordinary for such instruments, nor were they problematic. Instead, there was a potential tax-related concern with the trust (‘the remainder trust’) into which the assets held in the 2006 GRATs were to be transferred into upon the expiration of the GRATs.”)

14 Id. at pg. 2: “Under the terms of the remainder trust, the trustees were to distribute to Mr. Black income generated by certain specified assets. The trustees had a right to terminate Mr. Black’s income interest. Under Internal Revenue Code Section 2036(a)(1), if a taxpayer gives away assets to a third party while retaining the right to income from those assets, those assets are included in the taxpayer’s gross estate at the taxpayer’s death.”

15 Id. at pg. 2: “A related estate tax issue involved Section 2035(a), which provides that if the decedent relinquished a power with respect to transferred property (which would include relinquishing an income interest of this nature) during the three-year period ending on his date of death, that property would also be included in his gross estate. Despite the fact that, as noted above, the trustees, rather than Mr. Black, would be terminating Mr. Black’s income interest, and therefore Section 2035(a) would not be implicated, out of an abundance of caution, and given Mr. Black’s age, all parties wanted to act promptly to resolve this issue (without a potential three-year tail).”

16 Id. at pg. 4: “The 2006 GRATs were funded with: a 30.35% interest in Apollo Management III, LP, with an appraised value as of funding of $460,000; a 30.35% interest in Apollo Management IV, LP, with an appraised value as of funding of $1,420,000; a 30.35% interest in Apollo Management V, LP, with an appraised value as of funding of $3,690,000; a 30.35% interest in Apollo Management VI, LP, with an appraised value as of funding of $45,600,000; a 26.8% interest in Apollo Investment Management, LP, with an appraised value as of funding of $227,000,000; a 26.9% interest in Apollo Value Management, LP, with an appraised value as of funding of $9,600,000; a 44% interest in Apollo SVF Management, LP, with an appraised value as of funding of $87,000,000; a 44% interest in Apollo Asia Management, LP, with an appraised value as of funding of $20,800,000; a 44% interest in Apollo Europe Management, LP, with an appraised value as of funding of $98,800,000; a 44% interest in Apollo Alternative Assets, LP, with an appraised value as of funding of $80,500,000; and 142 points of each of Apollo Advisors VI, LP and Apollo Advisors VI (EH), with an appraised value as of funding of $10,535,335.”

17 Memorandum submitted on behalf of Leon Black by Paul, Weiss, Rifkind, Wharton & Garrison LLP to Senator Ron Wyden, Chairman, Senate Finance Committee, Feb. 21, 2023 (at pg. 5: “the values of the assets held in the remainder trust could reasonably be expected to increase to an amount exceeding $2 billion by the time of Mr. Black’s death.”)

18 Id. at pg. 5: “Operating on the basis of an assumed tax rate of 40% to 50% for net federal and state taxes, the estimated tax liability savings as a result of those assets no longer being included in his estate was estimated to exceed $1 billion.”

19 Memorandum submitted on behalf of Leon Black by Paul, Weiss, Rifkind, Wharton & Garrison LLP to Senator Ron Wyden, Chairman, Senate Finance Committee, Jan. 16, 2023 (at pg. 3: “Mr. Epstein proposed that the trustees prepare an accounting to ascertain the amount of income distributable to Mr. Black under the trust agreement and the amounts that were in fact distributed to him.”)

20 Id. at pg. 3: “That accounting revealed that the trustees had inadvertently over-distributed income to Mr. Black.”

21 Id. at pg. 3: “Specifically, the trustees distributed to Mr. Black income attributable to assets other than those identified in the trust agreement as the source of Mr. Black’s income interest.”

22 Id. at pg. 3: “For that reason, the trustees of the remainder trust had a claim against Mr. Black to claw back the excess distributions.”

23 Id. at pg. 3: “On the other hand, had the trustees removed Mr. Black as a beneficiary of the remainder trust, Mr. Black might have alleged a claim for breach of fiduciary duty.”

24 Id. at pg. 3: “Mr. Epstein’s solution contemplated a mutual release of these claims by and between Mr. Black, on the one hand, and the trustees of the remainder trust, on the other. The settlement and mutual release provided that Mr. Black would lose his income right, while confirming that he would not assert any claim for his removal as a beneficiary, in exchange for the trustees not pursuing claims to claw back the excess distributions.”

25 Id. at pg. 3: “Both sides thus agreed to a formal release of these potential claims, with each side receiving consideration.”

26 Id. at pg. 3: “The ultimate result was that Mr. Black no longer had the income rights that would have potentially caused the trust’s assets to be included in his estate at death, without risking estate inclusion under Section 2035(a) (if he were to die within three years of the mutual releases).”

27 Apollo Global Management, Inc. Investigation of Epstein/Black Relationship and Any Relationship Between Epstein and Apollo Global Management, available online at https://www.sec.gov/Archives/edgar/data ... ex991.htm; (at pg. 10: “Epstein appears to have provided significant value to a subsequent transaction that addressed certain loans between [Leon] Black and certain family trusts for the purpose of achieving a tax benefit for his children” and at pg. 11: “Epstein estimated that this transaction had saved $600 million in value and Black appears to have agreed with that estimate.”)

28 Id. at pg. 11: “Outside counsel stated that this transaction did not originate from Epstein but that Epstein had nevertheless played an instrumental role in completing it.”

29 Memorandum submitted on behalf of Leon Black by Paul, Weiss, Rifkind, Wharton & Garrison LLP to Senator Ron Wyden, Chairman, Senate Finance Committee, Jan. 16, 2023 (at pg. 5: “Finally, the question assumes that Mr. Epstein formulated this proposal. This idea was in the public domain and originated with his other legal advisors. Nevertheless, Mr. Epstein tried to take credit for the idea and secure compensation.”)

30 Id. at pg. 5: “The resulting dispute, including over Mr. Epstein’s compensation for his advice on this proposal, contributed to Mr. Black’s decision to terminate his professional relationship with Mr. Epstein.”

31 Apollo Global Management, Inc. Investigation of Epstein/Black Relationship and Any Relationship Between Epstein and Apollo Global Management, available online at https://www.sec.gov/Archives/edgar/data ... ex991.htm; (at pg. 18: “There appears to have been an understanding between Black and Epstein that Epstein would be compensated for some portion of the value conferred from any idea that originated from Epstein.”)

32 Id. at pg. 18: “Epstein claimed full credit for the transaction and demanded payment of $60 million, which would have been 10% of a perceived benefit of $600 million that Epstein asserted the basis transaction provided.”

33 Id. at 19: “As discussed previously, Black agreed to pay Epstein $20 million rather than the $60 million demanded by Epstein.”

34 Apollo Global Management, Inc. Investigation Of Epstein/Black Relationship And Any Relationship Between Epstein and Apollo Global Management, available online at https://www.sec.gov/Archives/edgar/data ... dex991.htm (At page 3, “not all of Epstein’s advice was useful”; at page 4, “such advice was vetted consistently by Blacks’ other advisors, including Family Office employees, Paul Weiss, and other outside legal, accounting, and tax professionals”; at page 11, “[Mr. Epstein’s] ideas would appear plausible at face value, but did not hold up under scrutiny”; at page 17, “Black was under the misconception that his payments to Epstein would be tax deductible (‘sixty cent dollars’) because this is what Epstein had told Black.”)

35 Id. at pg. 17: “It is clear that the compensation paid by [Leon] Black to Epstein far exceeded any amounts Black paid to his other professional advisors.”

36 Id. at pg. 16: “Starting in 2014, Black began to pay Epstein for his ongoing services on an ad hoc basis, without negotiating written service agreements. In total, Black paid Epstein $70 million in 2014 and $30 million in 2015. Of these amounts, Black attributed $20 million to Epstein’s work on the step-up basis transaction and attributed the remainder to the various other matters including his advice about estate, tax planning, tax audits, and filings, managing Black’s artwork, Family Office management, and advice regarding Black’s yacht and airplane as set forth above.”

37 Email from Majority Staff, Senate Finance Committee to outside counsel to Leon Black at Paul, Weiss, Rifkind Wharton & Garrison LLP, Sep. 20, 2022.

38 Apollo Global Management, Inc. Investigation Of Epstein/Black Relationship And Any Relationship Between Epstein and Apollo Global Management, available online at https://www.sec.gov/Archives/edgar/data ... dex991.htm (At page 3, “Black retained Epstein to advise Black and the Family Office on a variety of topics related to trust and estate planning, tax issues, philanthropic endeavors, and the operation of the Family Office..”)

39 Reasonable Compensation Job Aid for IRS Valuation Professionals*, Internal Revenue Service, Oct. 29, 2014; available online at https://www.irs.gov/pub/irs-utl/Reasona ... 0for%20IRS %20Valuation%20Professionals.pdf

40 Frequently Asked Questions on Gift Taxes, Internal Revenue Service, https://www.irs.gov/businesses/smallbus ... gift-taxes

41 Treas. Reg. § 25.2512-8.

42 I.R.C. § 162.

43 I.R.C. § 274 (b).

44 For 2013 to 2017 the annual gift tax exclusion was $14,000 and the lifetime exclusion amount was approximately $5 million.

45 Apollo Global Management, Inc. Investigation Of Epstein/Black Relationship And Any Relationship Between Epstein and Apollo Global Management, available online at https://www.sec.gov/Archives/edgar/data ... dex991.htm (At page 17, “Black was under the misconception that his payments to Epstein would be tax deductible (‘sixty cent dollars’) because this is what Epstein had told Black.”)

[admin]

Part 3 of 3
https://www.justice.gov/epstein/files/D ... 731774.pdf (cont'd.)

https://www.sec.gov/Archives/edgar/data ... dex991.htm [librarian comment: During Biden's Term]

EX-99.1 2 d118102dex991.htm EX-99.1

Dechert LLP

MEMORANDUM

DATE: January 22, 2021
TO: Apollo Conflicts Committee
FROM: Dechert LLP
RE: Investigation Of Epstein/Black Relationship And Any Relationship Between Epstein and Apollo Global Management, Inc.

In October 2020, the Conflicts Committee of Apollo Global Management, Inc. (“Apollo”) retained Dechert LLP (“Dechert”) as independent counsel to conduct a thorough investigation into (1) the relationship between Leon Black (“Black”) and Jeffrey Epstein (“Epstein”), including any financial, business or personal dealings between Black and any Black affiliate, on the one hand, and Epstein and any Epstein affiliate on the other; (2) any work performed for, or services rendered to, Black or any Black affiliate by Epstein or any Epstein affiliate; (3) the financial or other relationship, if any, between Apollo or any Apollo affiliate, and Epstein and any Epstein affiliate, including without limitation, any financial or other dealings between them; and (4) any statements made by or on behalf of Black or Apollo referring, relating to or characterizing either Black’s or Apollo’s relationship with Epstein. The Committee placed no restriction on Dechert’s investigation. This memorandum summarizes Dechert’s findings.

I. EXECUTIVE SUMMARY

Over the past three months, Dechert has reviewed over 60,000 documents obtained from Black, Apollo, Elysium Management LLC (Black’s “Family Office”), and Paul, Weiss, Rifkind, Wharton & Garrison LLP, outside legal counsel to Black and the Family Office (“Paul Weiss”). Such documents include emails, text messages, banking statements, and other forms of communication. Potentially relevant documents were collected from Apollo for current and former employees of Apollo dating back to 1998 as well as for all current and former employees of the Family Office, including from the inception of the Family Office and prior to implementation of the separate Family Office (Elysium) email address. Text messages were also collected from Black’s cell phone.

Dechert was assisted in its document collection efforts by Paul Weiss, as well as by Apollo’s legal counsel for the purpose of this investigation, Milbank LLP (“Milbank”).1 Both Paul Weiss and Milbank fully cooperated in the investigation and agreed to provide every category of documents that Dechert requested. Paul Weiss and Milbank also assisted Dechert in providing access to not only materials but also various witnesses thought to be relevant to the investigation.

Specifically, Dechert interviewed more than 20 witnesses (some more than once), including Black, current and former Apollo employees, the co-founders of Apollo, current and former Family Office employees, and current and former legal counsel to obtain their recollection of events that may have been relevant to Dechert’s investigation. With only one exception, Dechert interviewed every witness that it had requested; that witness, a former employee of the Family Office, declined to participate in the investigation but is not believed to have any additional information likely to be material to the investigation. Based on Dechert’s thorough review of the documents and witness testimony, Dechert has made the following findings, each of which is set out in more detail below:

1. Dechert has seen no evidence that Black or any employee of the Family Office or Apollo was involved in any way with Epstein’s criminal activities at any time. There is no evidence that Epstein ever introduced Black, or offered to introduce Black, to any underage woman.

2. Black and others at Apollo and the Family Office were aware that Epstein had been convicted in 2008 for the charges of solicitation of prostitution and procuring a person under 18 for prostitution. There is no evidence suggesting knowledge of any other of Epstein’s criminal activity or the scope and details of such activity, at any time prior to such activities being publicly reported in late 2018 and culminating with Epstein’s arrest in July 2019. When Black first retained Epstein, he believed that Epstein had served his time for the originally charged offenses and believed that it was not inappropriate to give Epstein a second chance, as many other prominent figures in business, science, politics and academia had done.

3. From approximately the mid-1990’s to 2018, Black had a social relationship with Epstein, and from 2012 to 2017, Epstein provided professional services to Black as well. There is no evidence that Black paid Epstein for any services after April 2017, although the two men did continue to communicate until October 2018. Professionally, Black retained Epstein to advise Black and the Family Office on a variety of topics related to trust and estate planning, tax issues, philanthropic endeavors, and the operation of the Family Office. Socially, Black was friendly with Epstein and confided in Epstein regarding personal matters. Epstein would, at times, allude to their personal relationship when attempting to negotiate aspects of their business relationship, but Dechert has seen no evidence suggesting that either their professional or personal relationships ever touched upon Epstein’s criminal activities or any other illegal activity.

4. Epstein regularly advised Black on a variety of issues related to trust and estate planning, tax, philanthropy, and the operation of the Family Office. Although witnesses agreed that: (a) not all of Epstein’s advice was useful and (b) Epstein was generally a disruptive and caustic force within the Family Office, many witnesses believed that Epstein had creative ideas that no other advisor had proposed and would push Family Office employees to achieve greater performance than they might have achieved on their own. As a result of Epstein’s work, Black believed, and witnesses generally agreed, that Epstein provided advice that conferred more than $1 billion and as much as $2 billion or more in value to Black.

5. Black compensated Epstein for his work in amounts that were intended to be proportional to the value provided by Epstein. Those payments for work performed over the period 2012 through 2017 totaled $158 million. In 2013, payments were memorialized in signed and unsigned agreements. After that point, payments were made on an ad hoc basis based on Black’s perceived value of Epstein’s work. Dechert has seen no evidence suggesting that Black ever compensated Epstein for any service other than Epstein’s legitimate advice on trust and estate planning, tax issues, issues relating to artwork, Black’s airplane, Black’s yacht, and other similar matters, philanthropic issues, and the operation of the Family Office. Moreover, such advice was vetted consistently by Black’s other advisors, including Family Office employees, Paul Weiss, and other outside legal, accounting and tax professionals.

6. Beginning in 2016, Black and Epstein’s professional and personal relationship deteriorated over a payment dispute that had long been brewing, with Black refusing to pay Epstein tens of millions of dollars that Epstein believed he had earned. Black’s last payment to Epstein was made in April 2017; in 2018, Epstein repaid a portion of two loans that were outstanding to Black but never repaid the balance. Black and Epstein ceased communications in or around the fall of 2018, prior to the renewed public revelations of Epstein’s conduct and Epstein’s arrest and suicide.

7. Epstein and his entities did not invest in any Apollo-managed funds. However, in 2011, one of Epstein’s entities, Financial Trust Company, purchased 263,257 shares of Apollo’s stock in its initial public offering. Those shares appear to have later been transferred to a second Epstein entity, Southern Financial LLC, and appear to have been held through at least September 2019. Aside from this stock purchase, and the tangential matters described below, Dechert has seen no evidence of Epstein or any Epstein entity having any relationship with Apollo or any Apollo-managed fund.

8. Epstein made repeated efforts to ingratiate himself with other senior executives at Apollo and appears to have relied on Black to help him make those introductions. Despite these efforts, Dechert has seen no evidence of any other Apollo executive ever retaining Epstein for his services.

II. BLACK AND EPSTEIN DEVELOP A PERSONAL AND THEN A BUSINESS RELATIONSHIP

Black was introduced to Epstein in the mid-1990’s by a mutual friend. Following the introduction, they grew to know each other better and developed a personal relationship. While Black and Epstein discussed estate planning, philanthropy, and related issues over the years, Black did not engage Epstein to provide him with any services until 2012. Initially, Black viewed Epstein as someone who was very intelligent and knowledgeable regarding issues relating to estate planning and taxation. Black also was impressed by Epstein’s connections to many prominent figures in business, politics, and science. Epstein spoke knowledgeably about scientific innovation and technology. He introduced Black to well-regarded researchers at Harvard University and the Massachusetts Institute of Technology and encouraged Black to donate to charitable causes that supported scientific development. In 1997, Black appointed Epstein as one of the initial directors of the Black Family Foundation, which was established for the purpose of facilitating contributions by Black and his family to philanthropic endeavors. Black was further impressed when he learned that David Rockefeller had appointed Epstein as a director to the Board of Rockefeller University. This appointment was consistent with Black’s understanding that Epstein was extremely knowledgeable about science and technology, as well as a strong proponent of scientific research and development.

In the mid-1990’s, Black’s business and net worth were growing and his children were young so Black was less focused on matters related to estate planning. Although he may have discussed such matters with Epstein, such discussions were peripheral at the beginning of their relationship. As the importance to Black of effective tax and estate planning grew over time in the 2000’s, Epstein eventually recommended that Black retain the services of a particular trusts and estate attorney from a prominent law firm. That attorney was primarily responsible for Black’s trust and estate planning until approximately 2012 or 2013, when Epstein started to take a more active role.

In mid-2007, Epstein resigned from the Black Family Foundation. However, due to an oversight, the IRS Form 990s filed for the Black Family Foundation during the period 2008-2012 failed to reflect his resignation. Following discovery of the error in or around 2013, the Black Family Foundation issued a confirmation of his earlier resignation.

In 2008, Epstein pled guilty in Florida to two felony offenses: procuring a person under the age of 18 for prostitution and solicitation of prostitution. As a result, he received a 13-month sentence, the majority of which was spent on work release, and one year of house arrest before being released in August 2010. Black was aware of Epstein’s guilty plea and understood from Epstein that these offenses arose out of a single instance in which Epstein had received a massage from a 17 year old prostitute. According to Black, Epstein had told him that the woman had shown Epstein false identification suggesting that she was not underage. Black had no client relationship with Epstein at the time.

Black formed the Family Office in 2008 to better manage his finances, trusts, and estate planning. At its inception, the Family Office included only a single employee, but it gradually grew over time as Black hired additional management, legal counsel, and staff. By 2014, the Family Office had approximately 10 employees.

Following Epstein’s prison sentence, Black believed that Epstein had served his time and that it would not be inappropriate to maintain a personal and professional relationship with Epstein. This decision appears to have been informed by at least three factors. First, Black believed that the severity of Epstein’s offenses was limited to a single instance of soliciting a 17 year old prostitute that Black believed Epstein had mistakenly understood was older. Second, numerous prominent figures, including CEOs, banking institutions, leading figures in technology, science and business, diplomats, and Nobel Laureates, continued to maintain social and business relationships with Epstein. Third, Black describes himself as someone who believes in rehabilitation, and in giving people second chances. Based on this belief, he has maintained relationships with other notable figures in the business world, such as Michael Milken and Martha Stewart, who have spent time in prison.

Black agrees, in hindsight, that he should not have given Epstein a second chance and that he would not have done so if he had known more about Epstein’s criminal activity. Dechert has not found any evidence to suggest that Black, during the period of their relationship, knew anything about Epstein’s criminal activity aside from the one instance described above, to which Epstein had admitted when he pleaded guilty in 2008.

In 2012, Epstein and Black began to discuss a business arrangement pursuant to which Epstein would advise Black and the Family Office on trust and estate planning, tax issues, philanthropic issues, and the operation of the Family Office. The terms of this arrangement, a description of the work provided, and a summary of the payments for this work are set forth below. Black and Epstein’s relationship deteriorated between 2016 and 2018 over a dispute that had long been simmering regarding payment for Epstein’s work, which also is described in more detail below. Black severed all ties with Epstein in approximately October 2018.

Throughout Epstein and Black’s relationship, Black viewed Epstein as a friend worthy of his trust. They attended social events together, Black confided in Epstein on personal matters, and Black introduced Epstein to his family. Black regularly visited Epstein’s townhouse in New York to either discuss business or to meet other prominent guests who were visiting Epstein, including well known businessmen, political figures, diplomats, scientists and celebrities. In general, one-on-one breakfast meetings between Black and Epstein would be more common for business meetings, whereas afternoon meetings with other guests would be more common for social visits.

Regarding travel, Black and his wife briefly visited Epstein at his residence in Paris for drinks on a single occasion. Black and his wife also visited Epstein at his property in Santa Fe on a single occasion, while Black and his wife were on their way to California on Black’s personal airplane.2 Black also briefly visited Epstein in Florida on one or two occasions. Black recalls visiting Epstein’s island in the Caribbean on two occasions and was accompanied by his wife and one or more of his children on both. Black never spent the night at any property owned by Epstein. Black only recalls flying on Epstein’s private airplane on a single occasion, when he and one or more of his children went to meet with professors at academic institutions in the Boston area.

Black viewed Epstein as a confirmed bachelor with eclectic tastes, who often employed attractive women. However, Black did not believe that any of the women in Epstein’s employ were underage. Black has no recollection of ever seeing Epstein with an underage woman at any time.

Black stated that he was repulsed by the details of Epstein’s crimes that were published in late 2018 and regretted ever having worked with Epstein. Other witnesses agreed that Black was shocked when the allegations became public. Some witnesses noted specifically that they did not believe Black would have allowed Epstein to be introduced to Black’s wife and children if Black had had any suspicion that Epstein had done anything inappropriate or illegal with girls or young women.

III. EPSTEIN PROVIDED SUBSTANTIAL VALUE TO BLACK AND THE FAMILY OFFICE

Many witnesses believed Epstein provided significant value to Black and the Family Office in the areas of estate and tax planning. Although witnesses had different opinions about the extent of Epstein’s value on specific projects, it was generally agreed that Epstein was an active participant who provided unique solutions to several issues raised in the Family Office. Dechert found support for this in its document review: Epstein communicated often with members of the Family Office, proposed distinct solutions to issues raised, and provided specific feedback with regard to works in progress. Other Black advisors, including employees of the Family Office, Paul Weiss, and other outside accountants, lawyers and tax professionals would vet his ideas, and he would regularly challenge them to think outside the box as well as to defend their positions from both a legal and pragmatic standpoint. In short, there is no question that Epstein performed substantive work for Black and that Black genuinely believed that Epstein was extremely smart, capable, and saved him substantial amounts of money.

In addition, Epstein helped manage, and provided oversight to, the Family Office between late 2012 and 2017. In that capacity, he worked on a variety of projects. Witnesses described the following as being the most significant projects during Epstein’s tenure, although there were a number of other estate and tax-related projects and issues with which Epstein was involved during this time period.

A. 2006 Grantor Retained Annuity Trust (“GRAT”)

There was a consensus among witnesses that Epstein offered a unique solution to a potential estate planning problem that arose out of a trust known as the 2006 Grantor Retained Annuity Trust (“2006 GRAT”). Many witnesses opined that this solution – which Epstein offered in the beginning of Black and Epstein’s working relationship in late 2012 – was the most valuable piece of work Epstein provided Black.

A GRAT is an estate planning mechanism that allows a grantor of a trust to transfer to his or her beneficiaries that portion of the assets contributed to the trust that have appreciated in excess of an assumed growth rate set by the Internal Revenue Service (“IRS”). If done properly, the assets should be transferred out of the estate without gift or estate tax liability. The grantor retains the right to receive a series of annuity payments from the GRAT for a specified period of time. Each annuity payment is based on a percentage of the fair market value of the assets transferred to the GRAT at the time of transfer.

Black was interested in establishing GRATs because they would allow him to transfer certain assets outside of his taxable estate as well as to accomplish other financial and estate planning objectives. Originally, the 2006 GRAT was established by Black’s former trusts and estates attorney who had been recommended to Black by Epstein. However, it appears that because of the way the 2006 GRAT had been structured,3 there was a serious risk that, absent additional action, the GRAT would carry a future risk of a large estate tax assessment and thus would not perform as Black understood it would. Both a former Family Office employee and outside counsel agreed that, at the time the issue was identified, the estate tax would have been around $500 million. Witnesses differed on what the value of the estate tax would have been today or in the future if the issues had not been resolved, but they believed the estate tax liability could have been as much as $1 billion or more.

Once the potential issues were identified, Black and his advisors attempted to find a way to resolve them. Although Family Office employees and outside counsel offered various solutions, all witnesses agreed that Epstein proposed the best and most creative solution to the problem. Epstein approached Black with his solution – which Epstein asserted was proprietary – and Black agreed to pay Epstein to implement this solution. Outside legal counsel described the solution as a “grand slam” and one that met all of Black’s financial and estate planning goals.

By solving an estate tax problem potentially worth at least $500 million, and possibly substantially more, Epstein contributed significant value to Black and his estate. This was the first project that Epstein worked on for Black and Epstein’s success on this project appears to have validated Black’s trust in him and strongly influenced Black’s decision to continue to use Epstein’s services going forward.

B. Step-Up Basis Transaction

Beginning in fall 2015, Epstein also appears to have provided significant value to a subsequent transaction that addressed certain loans between Black and certain family trusts for the purpose of achieving a potential tax benefit for Black’s children. Although witnesses were less certain of the specific value of this transaction because the extent of savings was not likely to be known until the future, witnesses agreed that this transaction provided significant value. Epstein estimated that this transaction had saved $600 million in value and Black appears to have agreed with that estimate. Outside counsel stated that this was a complicated transaction that took approximately nine months to plan and execute.

Witnesses noted that there was a dispute following this transaction over whether Epstein had come up with the idea for this transaction on his own or if the transaction had first been proposed by outside counsel. Outside counsel stated that this transaction did not originate from Epstein but that Epstein had nevertheless played an instrumental role in completing it. The extent of Epstein’s role in this transaction led to a dispute over Epstein’s fees, which is described more fully below.

C. Other Estate Planning Advice

Leveraging his success on the GRAT issue, Epstein continued to provide ongoing advice on a variety of issues regarding Black’s estate. This general estate planning advice touched on many different subjects, including providing further advice and planning with respect to various trusts, generation planning, establishing additional GRATs, tax planning, enhancing the Family Office (which, until that time was, by all accounts, inadequate to handle Black’s growing estate), and preparing detailed “fire drill” plans that would test how Black’s estate would be treated in multiple different scenarios based on a variety of assumptions regarding timing of death, price of Apollo stock and other variables. Witnesses, including outside counsel, remarked that, despite Epstein’s lack of formal training in law or accounting, his fire drill plans were more detailed and comprehensive than any similar plans they had seen prepared for other clients.

In describing Epstein’s contributions to Black’s estate planning and other advice, witnesses had varying opinions on the value of Epstein’s work. Epstein put forth a variety of ideas on many different tasks by circulating lengthy lists of ideas that he thought should be pursued. Many of those ideas would appear plausible at face value, but did not hold up under scrutiny. Witnesses, including Black, believed that part of the challenge of working with Epstein was separating the good ideas from the bad ones. There was a general consensus that some of Epstein’s ideas were uniquely creative and useful, while others were unremarkable or not viable.

One area where witnesses believed Epstein provided value to Black’s estate included being able to motivate Black to concentrate on certain Family Office issues in a way that others could not. Epstein played an active role in convincing Black to bring Black’s family members into the conversation about estate planning, trust formation, and philanthropy. As confirmed by both witnesses and the documentary evidence, Epstein played a central role in meeting with Black’s family and explaining to them how Black’s estate was organized and to encourage them to be more engaged in the planning process and philanthropy.

D. Tax Planning, Compliance And Audit Advice

Although Epstein had no formal tax training, witnesses agreed that he was very knowledgeable on a variety of issues relating to tax planning, tax compliance, and managing and responding to audit inquiries from taxing authorities. Both witness testimony and the documentary record confirm that Epstein played an important role in resolving a number of potentially significant tax-related issues for Black during the time period 2013 through 2017, which included, among others: (1) addressing an IRS audit letter relating to the 2013 tax year; (2) planning and coordinating the submission of statements of reasonable cause for a series of tax years to address an apparent failure to file certain tax forms, including IRS Forms 8865, relating to Black’s interests in BRH Holdings L.P., a partnership through which Black and the other Apollo co-founders hold their ownership interests in Apollo and related foreign partnerships; (3) addressing an IRS audit letter regarding Black’s 2012 tax filings, including interfacing with the IRS to achieve a positive resolution; and (4) advising on tax matters related to Phaidon, a UK publishing entity that Black had acquired and that had a particularly complex organizational structure. Epstein would not draft materials related to tax issues on his own, but he would make suggestions, provide criticism, and generally manage the process for addressing tax concerns as they arose.

E. Epstein’s Other General Advice

Epstein also appears to have provided substantive advice to the Family Office on myriad esoteric issues, which included (i) managing Black’s artwork, (ii) advising on issues relating to Black’s yacht, and (iii) advising on issues relating to Black’s airplane. While witnesses had differing opinions on the precise value added, there was general consensus that Epstein would get into the weeds on obscure issues about which otherwise highly competent Family Office employees were not knowledgeable, such as aspects of specific regulations governing airplane usage, and frequently provided valuable assistance.

1. Managing Black’s Artwork

Family Office witnesses generally agreed that Epstein advised Black in a few areas related to Black’s artwork, including: (i) the formation of a new art partnership, (ii) the contested ownership of a Picasso sculpture, (iii) Black’s art loans, (iv) like-kind exchanges, and (v) obtaining a potential advisory opinion from the New York State Department of Taxation and Finance regarding a contemplated transaction involving Black’s art. The value provided from each project differed depending on the project. Although Family Office employees generally agreed that Epstein was not an expert in art management or art law, witnesses also opined that he was helpful in the formation of the art partnership and was fairly involved in assisting Black in connection with the sale of certain pieces of artwork.

2. Advice Regarding Black’s Yacht

Witnesses confirmed that Epstein advised Black on the management of Black’s yacht. One witness said that Epstein was involved with Black’s initial purchase of his yacht, which involved assisting in structuring the entity that owned the vessel and moving it. Another witness recalled Epstein advising Black on how to charter the vessel. A third witness said Epstein generally flagged issues regarding the vessel, but Epstein did not get into the nuances of managing and advising on tax structuring relating to the vessel. As such, it appears Epstein’s involvement in yacht-related items varied depending on the specific project.

3. Advice Regarding Black’s Airplane

Family Office employees opined that Epstein was very knowledgeable about selling and purchasing airplanes, the organization of airplane entities, and the relatively complex and obscure regulations and requirements applicable to airplane usage. Witnesses confirmed that Epstein added value in the restructuring of airplane entities and advising on the certification of the airplane. One Family Office employee recalled that an airplane broker was not pleased when Epstein got involved in the negotiation for an airplane purchase because the broker knew Epstein was sophisticated when it came to airplanes and that it would be hard to negotiate against Epstein. Although the Family Office regularly vetted Epstein’s views and advice with outside counsel, Family Office employees agreed that Epstein often pointed Black in the right direction regarding airplanes. There thus appears to be a general consensus that Epstein’s input regarding a range of issues pertaining to airplanes was valuable to Black.

F. Improving The Family Office

In addition to assisting on specific projects, Epstein also played an important role in developing, managing and improving the Family Office, improving recordkeeping, and locating misplaced assets. Witnesses agreed that in 2012, when Epstein began working for Black, the Family Office was ill-equipped to manage Black’s growing estate at the sophisticated and expert level that Black expected and needed. Epstein appears to have taken the reins in developing the Family Office by extensively reviewing its operations, advising on personnel changes, including interviewing candidates for employment and recommending terminations of those he felt were inadequate performers, and consistently pushing the employees to improve the quality of their work. Family Office employees were instructed to run most decisions relating to tax and estate planning by Epstein so that he could provide comments and criticism. Several contemporaneous emails from Epstein describe an effort to develop the Family Office to a point where it could operate autonomously. Epstein would liken the Family Office to a house, for which he would play the role of architect.

By all accounts, Epstein was a strict taskmaster who could be difficult to work with. Epstein was often quick to criticize Family Office employees and had a habit of overdramatizing even minor perceived errors. At the same time, Epstein would seek to take credit for good ideas, regardless of his level of involvement, which likely was intended to bolster his perceived value to Black. As a result of these actions, some witnesses described a toxic and destructive work environment under Epstein. That being said, several witnesses agreed that the pressure that Epstein exerted upon the employees did drive an improvement in their performance.

Black also found Epstein difficult to work with and would often grow frustrated with the frequency and length of Epstein’s communications, in which he would identify long lists of perceived issues and problems within the Family Office. Black knew Epstein was greedy and a self-promoter and was likely attempting to prove his own value. At the same time, Black also felt that Epstein was identifying genuine issues that needed to be resolved. As their business relationship continued, Black wanted to “wean” the Family Office off Epstein so that he was less reliant on Epstein’s services, but Black found it difficult to do so because, from Black’s perspective, Epstein was identifying and solving significant issues that were not being addressed by other employees or advisors. As Black explained, he was annoyed by how often Epstein would complain about the “cavities” that Epstein was finding in Black’s “mouth” (the Family Office), but, at the same time, they were all “real cavities” that needed to be filled.

Thus, although Epstein’s management style made him difficult to work with, and in many ways an overly demanding overseer of the Family Office, there appears to be general agreement that Epstein played an important role in driving excellence and developing the Family Office in the period from 2012 to 2017.

IV. BLACK COMPENSATED EPSTEIN BETWEEN 2013 AND 2017 FOR EPSTEIN’S BONA FIDE PROVISION OF TAX, ESTATE PLANNING AND OTHER RELATED SERVICES

With the assistance of legal counsel, Epstein and Black negotiated a written service agreement that was drafted by Black’s counsel and signed on February 13, 2013. Under this agreement, which was entered into between Black and Southern Trust Company, Inc., an Epstein affiliate, Epstein agreed to provide “services deemed appropriate by [Epstein] and Mr. Black in connection with” “estate planning matters in respect of Mr. Black’s assets and estate.” Those services included Epstein’s work on the resolution of the complex 2006 GRAT issue starting in 2012. Although Epstein represented to Black that he generally charged clients $40 million per year for his advice, Epstein agreed to provide this initial work for $23.5 million, which was expected to be made in two installment payments occurring in 2013. Both of these payments were made to Southern Trust Company, Inc.: the first payment of $15 million was made on February 15, 2013, and the second payment of $8.5 million was made on October 15, 2013.

Given Epstein’s success on the GRAT issue, Black and Epstein appear to have reached agreement on a second service contract in around May 2013 containing a similar description of the scope of services to be rendered. It was also negotiated by legal counsel and multiple drafts were exchanged. Although this agreement appears never to have been signed, both Black and Epstein appear to have largely abided by the negotiated terms in 2013. Pursuant to this agreement, Epstein continued to provide additional advice to Black and the Family Office in 2013 and 2014. In exchange, Black agreed to pay Epstein $56.5 million in five installment payments over 2013 and 2014. Black made the first two installment payments in 2013, totaling $26.5 million, but the agreement appears to have been renegotiated in early 2014 to cover the outstanding balance plus additional amounts. The total amount paid in 2013 was $50 million.

Starting in 2014, Black began to pay Epstein for his ongoing services on an ad hoc basis, without negotiating written service agreements. In total, Black paid Epstein $70 million in 2014 and $30 million in 2015. Of these amounts, Black attributed $20 million to Epstein’s work on the step-up basis transaction and attributed the remainder to the various other matters including his advice about estate, tax planning, tax audits, and filings, managing Black’s artwork, Family Office management, and advice regarding Black’s yacht and airplane as set forth above.

Black did not pay Epstein in 2016. In April 2017, he made a final payment to Epstein of $8 million, which appears to be attributable to certain tax advisory and compliance services provided by Epstein. From 2013 through 2017, Black was under the misconception that his payments to Epstein would be tax deductible (“sixty cent dollars”) because this is what Epstein had told Black. Thus, Black erroneously believed that all of the amounts he was paying to Epstein would be fully deductible on his tax returns.

Although Black appears to have paid Epstein specific amounts for Epstein’s work on the GRAT issue and the basis transaction, Black did not generally view the payments he was making to Epstein as compensation for specific tasks. Instead, Black viewed the payments as compensation for the overall value he believed Epstein was providing to him through Epstein’s advice on trust and estate planning, tax issues, philanthropic issues, and the operation of the Family Office. In this context, although not every one of Epstein’s ideas produced substantial value to Black, Black, as well as a number of witnesses, agreed that the value provided by Epstein to Black and the Family Office substantially exceeded the total compensation that Black paid to him. However, it is clear that the compensation paid by Black to Epstein far exceeded any amounts Black paid to his other professional advisors.

V. BLACK LOANED $30.5 MILLION TO EPSTEIN

Separate from the payments made to Epstein or his entities between 2013 and 2017 for services rendered, Black made two loans to Epstein, for $22.5 million and $8 million, respectively, in early 2017. These two loans were negotiated and documented by legal counsel. The loans were structured as being made by BV70 LLC, an entity owned by Black, to Plan D LLC, an entity owned by Epstein. These loans were payable on demand from BV 70 LLC, were intended to be short-term loans and were made in connection with an art transaction involving Epstein.

Black demanded repayment of the loans in full in early 2018. In response, Epstein repaid only $10 million of the outstanding amount. The remaining balance of the loans remained unpaid at the time of Epstein’s death, despite Black’s repeated demands for repayment in full during 2018.

VI. BLACK AND EPSTEIN MADE CHARITABLE DONATIONS AT EACH OTHERS’ REQUESTS

Throughout their relationship, Black and Epstein each donated to charitable causes and encouraged each other to donate to charitable causes. For example, on at least two occasions, Epstein made significant donations to the Melanoma Research Alliance, a charitable foundation established by Black and his wife, at Black’s request. Similarly, Black made donations at Epstein’s request to various scientific and charitable organizations, including the Massachusetts Institute of Technology, Harvard University, the Arizona State University Origins Project, and the Peace Initiative Foundation. Black also made a $10 million donation to Gratitude America in October 2015, which was a charitable organization affiliated with Epstein.4 Black felt comfortable making this donation because he understood that Epstein was a strong proponent of scientific innovation.

VII. BLACK CUT TIES WITH EPSTEIN IN 2018 OVER A FEE DISPUTE

Black and Epstein’s relationship deteriorated between 2016 and 2018, largely as a result of a dispute over payment regarding the step-up basis transaction. There appears to have been an understanding between Black and Epstein that Epstein would be compensated for some portion of the value conferred from any idea that originated from Epstein. However, although witnesses agreed that Epstein had played an integral role in completing that transaction, there was a dispute over whether the idea for the transaction had originated with Epstein. Epstein claimed full credit for the transaction and demanded payment of $60 million, which would have been 10% of a perceived benefit of $600 million that Epstein asserted the basis transaction had provided. Black’s legal counsel disputed Epstein’s assertions both that the idea had originated with Epstein and that the perceived savings could accurately be measured and quantified in advance. As discussed previously, Black agreed to pay Epstein $20 million rather than the $60 million demanded by Epstein.

Following that payment, Epstein sent numerous emails in 2016 and 2017 in which Epstein complained about the lack of further payment and attempted to pressure Black to provide greater compensation. Epstein’s communications on these issues were lengthy and often included unsubstantiated assertions regarding work Epstein had purportedly performed for Black, the value of that work, and agreements that had purportedly been made relating to compensation. Epstein’s communications also included extended warnings about a number of perceived issues affecting the Family Office and Black’s estate planning, coupled with assertions that Epstein no longer wished to play any role in resolving those issues. Epstein also would invoke his friendship with Black in those emails, including by referencing personal matters that Black had shared with Epstein in confidence, although 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.

Epstein’s efforts to push Black for additional compensation proved unsuccessful, with Black refusing to provide any additional payment in 2016 and agreeing to pay $8 million in 2017 to compensate Epstein for what appears to be work Epstein had performed relating to certain tax advisory and compliance advice. Both Epstein and Black repeatedly suggested throughout 2016 and 2017 that they should meet with legal counsel from Paul Weiss to address their payment dispute but such meeting did not occur until April 2018 largely because of delay caused by Epstein. The April 2018 meeting was demanded by Black after growing tired of Epstein’s constant pleas for additional compensation. At the meeting, Black gave his legal counsel and Epstein each an opportunity to demonstrate who had first come up with the idea for the step-up basis transaction; it appears that while Epstein had been instrumental in implementing and consummating the transaction, the idea was in fact originated by one of Black’s outside lawyers, and not Epstein. Black made no additional payments to Epstein following this meeting.

Due to the above fee dispute, the difficulty of dealing with Epstein, Epstein’s failure to repay $20 million in loans and the realization that Epstein had mischaracterized his fees as being fully tax deductible, Black severed relations with Epstein by October 2018.

VIII. PUBLIC STATEMENTS BY BLACK AND APOLLO

Black and Apollo have made several public statements about their relationship or lack thereof with Epstein. For example, following Epstein’s July 2019 arrest, on July 31, 2019, Black sent a letter to Apollo’s limited partners (the “July 31 Letter”). Black also made several statements to investors in quarterly calls. As part of Dechert’s review, Dechert sought to verify the accuracy of these public statements. Dechert has determined that the public messaging from Black and Apollo has been substantially accurate but, in two instances, may warrant additional context or clarification.

In the July 31 Letter, Black stated that “From time to time, Mr. Epstein provided professional services to my family partnership and related family entities, involving tax, estate planning, and philanthropic advice.”5 And in an Apollo earnings call on October 29, 2020, Mr. Black reiterated that Epstein provided “professional services to my family partnership and related family entities, involving [estate] planning, tax, structuring of art entities and philanthropic advice.” He further stated that Epstein’s “work extended over a period of six years from 2012 to 2017 and I paid him millions of dollars annually for that work.” Black further asserted that “There exists substantial documentary support for the services provided. All of Epstein[‘s] advice was vetted by the leading law firms, accounting firms and other professional advisors.”6 As detailed above, Dechert’s investigation has confirmed these statements to be true, based on both documentary support and the testimony of witnesses.7

In the July 31 Letter, Black further stated that he “was completely unaware of, and am deeply troubled by, the conduct that is now the subject of the federal criminal charges brought against Mr. Epstein.”8 As detailed above, Dechert’s investigation has found nothing to contradict this statement. While Mr. Black was aware of Epstein’s guilty plea in 2008, he was unaware of the scope and extent of the criminal offenses that later surfaced publicly through media reports in 2018, and that culminated in Epstein’s arrest in July 2019, and suicide shortly thereafter.

In the July 31 Letter, Black also stated in pertinent part that: “Apollo never did any business with Mr. Epstein at any point in time9 [and] [n]either Mr. Epstein nor any company controlled by him has ever invested in any funds managed by Apollo.”10 He also stated that “Apollo does not have, and never has had, any relationship with Mr. Epstein.” Dechert has found no indication that Apollo ever retained Epstein for his services or that Epstein ever invested in an Apollo-managed fund, and thus Dechert’s review can confirm that these statements are accurate. That said, the phrases “never did any business with” and “does not have, and never has had any relationship with” are quite broad in scope. Dechert’s investigation has determined that Financial Trust Company, a company owned by Epstein, purchased 263,257 shares in Apollo during its initial public offering pursuant to a directed share offering program managed by the lead broker-dealer in March, 2011.11 Black did not recall that transaction almost a decade later. Dechert has further determined that in the early 2000’s, Financial Trust Company invested in two other entities, AP SHL Investors LLC and AP Technology Partners LLC, which are not Apollo funds and do not have any formal relationship with Apollo, but were formed by certain Apollo executives to explore investment opportunities that Apollo chose not to pursue.12 In addition, in 2011, Epstein, through Financial Trust Company, appears to have invested in Environmental Solutions World Wide (“ESWW”), a small emissions control company, alongside Black and certain Black family members. Dechert has also determined that Epstein unsuccessfully sought to pitch business opportunities to certain Apollo senior executives, none of which were pursued by Apollo or those executives. While these facts do not render any prior statements false or misleading, it is clear that the facts informing what it means to “do business with” or have a “relationship with” are perhaps more nuanced than might appear at first glance.

Regarding Epstein’s efforts to solicit business from Apollo or Apollo senior executives, Black stated in the July 31 Letter that he “never promoted Mr. Epstein’s services to other Apollo senior executives . . . .” Dechert’s investigation reflects that while Black did not try to pressure his co-founders to use Epstein, he did positively comment on the substantial value of Epstein’s services and, at Epstein’s repeated request, did try to introduce Epstein to his co-founders. In the end, neither co-founder hired Epstein or consulted with him on their personal matters. In light of these facts, the statement that Black “never promoted” Epstein is not false but could have been more precise. And it is clear that no Apollo employee other than Black ever seriously considered hiring Epstein, much less actually retained him.


_______________

Notes:

1 Paul Weiss has previously served as outside legal counsel to Apollo but did not do so for the purposes of this investigation.

2 At Epstein’s request, Black and his wife provided transportation from Santa Fe to California on Black’s plane to two or more of Epstein’s adult guests in Santa Fe.

3 Witnesses differ as to whether an issue with the GRAT had been discussed at the outset, or was only later appreciated or identified; regardless, the issue became apparent to Black, Epstein, and Black’s other advisors at or around the time Epstein first began providing his services to Black.

4 Separate from this $10 million donation, Dechert’s investigation also found a letter from Gratitude America to Black on August 21, 2015 in which Gratitude America thanks Black for a $5 million donation. It was also confirmed in an email from Epstein to Black. However, Dechert did not find any document prepared by Black or the Family Office confirming this donation or any bank record reflecting such payment.

5 This statement in sum and substance also appears in Black’s statement to Apollo employees, dated July 26, 2019, and in Apollo’s Q2 earnings call on July 31, 2019.

6 Transcript of October 29, 2020 Apollo Earnings Call at 7.

7 Black also stated in the July 31 Letter and elsewhere that on occasion, he had donated money to certain charitable organizations with which Mr. Epstein was affiliated, and that Epstein had made contributions to certain charitable organizations that were meaningful to Black. As detailed above, these statements are substantially consistent with Dechert’s findings.

8 See also Transcript of July 31, 2019 Apollo Earnings Call; Black statement to Apollo employees dated July 26, 2019.

9 See also Transcript of July 31, 2019 Apollo Earnings Call at 14; Black statement to Apollo employees dated July 26, 2019; Transcript of October 29, 2020 Apollo Earnings Call at 7.

10 See also Transcript of October 29. 2020 Apollo Earnings Call at 7.

11 The documentary record suggests that shares were transferred in 2013 to Southern Financial LLC, another entity affiliated with Epstein, where they remained through at least September 2019. It is unknown whether these shares continue to be held, directly or indirectly, by Epstein’s estate today.

12 Certain Apollo employees assisted with respect to the operational functions of these entities, such as assisting in the preparation of tax returns for the investors of the entities. However, witnesses agreed that these entities are not Apollo entities and Dechert has not reviewed any evidence that suggests Epstein had any role in these investments other than as a passive investor.