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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- Please describe whether you amended your tax returns after learning that the payments to Epstein were not tax-deductible.
- Please include all substantiation documents with respect to any income tax deductions you previously claimed.
- 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.
- 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:
- 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?
- Please provide more details regarding any art loans that involved Epstein, including Epstein’s role related to those loans.
- 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.
- 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.
Chairman, Senate Finance Committee
Press Contact: Ryan Carey
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