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The Senate Finance Committee has been conducting an investigation for more than a year into the tax implications of billionaire and Apollo Global Management Inc. co-founder Leon Black’s ties to convicted sex offender Jeffrey Epstein, Sen. Ron Wyden said Tuesday.
Wyden, a Democrat from Oregon, said the Senate committee, which he chairs, is seeking additional information from Black on “inconsistencies” in a report that was written by law firm Dechert LLC and released by the Apollo
APO,
board in 2021, the year Black stepped down as CEO of the private-equity firm.
“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,” Wyden wrote in a16-page letter to Black and his law firm.
Wyden said Black has provided “inadequate responses” to queries from the committee about $158 million paid by Black to Epstein between 2012 and 2017 for tax- and estate-planning advice.
The Dechert report said Epstein worked with Black to revolve issues with a grantor-retained annuity trust, or GRAT, that Black created in 2006 to transfer assets to his children in a way that would avoid about $1 billion in estate and gift taxes.
It also cited a “step-up-basis” transaction that Epstein advised on to save Black another $600 million in taxes.
The dealings raise “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,” said Wyden, who has been working to close apparent loopholes in the law that allow billionaires to avoid tax payments.
“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,” Wyden said in the letter.
The compensation earned by Epstein, who was not a licensed tax lawyer or certified public accountant, was well in excess of what Black paid any other financial advisers. It was also above the median compensation of Fortune 500 CEOs during the same time period, Wyden said.
In response to Wyden, lawyers for Black wrote a letter to the Senate Finance Committee. “As a foundational matter, the letter repeatedly insinuates something illicit or untoward in the professional relationship between Mr. Black and Mr. Epstein,” they wrote in the letter, as reported by the Wall Street Journal. “Any such insinuation is without basis.”
In the letter, Black’s attorneys said that the billionaire would not provide additional information, the Journal reported. The letter also said the questions raised by the panel do not amount to oversight actions, but rather appear to be designed to embarrass and criticize individual taxpayers.
A spokesperson for Black said in an email to MarketWatch that the former Apollo CEO “has cooperated extensively with the committee, providing detailed information about the matters under review.”
Black vetted the transactions and implemented them via “reputable law firms and tax and other advisors” and fully paid all taxes owed to the government, the statement said.
“The transactions referenced in the committee’s letter were lawful in all respects,” the statement from Black said.
The Dechert study commissioned by Apollo and concluded in 2021 found no evidence that Black “was involved in any way” with Epstein’s criminal activities at any time, Apollo said.
Apollo co-founder Marc Rowan took over as CEO of the company in 2021 and remains in the job.
In a 2020 statement, Black apologized for his friendship with Epstein.
“Knowing all that I have learned in the past two years about Epstein’s reprehensible and despicable conduct, I deeply regret having had any involvement with him,” Black said at the time. “With the benefit of hindsight, working with him was a horrible mistake.”
Over the weekend, the New York Times reported that Black agreed to pay $62.5 million to the U.S. Virgin Islands to be free from any potential claims arising from the territory’s three-year investigation into Epstein’s sex-trafficking crimes.
The previously undisclosed settlement followed a November settlement for $105 million with Epstein’s estate by the U.S. Virgin Islands.
The next month, the territory sued JPMorgan Chase & Co.
JPM,
in federal court over its 15-year relationship with Epstein. The Virgin Islands government is seeking at least $190 million in damages from the bank. That suit continues, along with JPMorgan Chase’s legal action against Jes Staley, the former head of its wealth unit, who also had dealings with Epstein.
In June, JPMorgan settled a lawsuit with Epstein’s victims for $290 million.
Epstein died in 2019 of an apparent suicide in his jail cell while awaiting federal trial on sex-trafficking charges.
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