Nice try, Leon. 

You must think we are pretty stupid, gullible, or insane to believe the tale you spun to Dechert, the Wall Street law firm, about your decades-long involvement with Jeffrey Epstein, the late convicted pedophile. Well I, for one, am not buying it, not any of it, and neither are many other smart Wall Streeters. “What a sad tale of sycophants,” was the way one longtime Wall Street banker explained it to me. Added a Wall Street lawyer, “It’s preposterous.” 

Leon is, of course, Leon Black, one of the billionaire cofounders of Apollo Global Management, the publicly traded private-equity and investment firm with around $350 billion under management. According to Bloomberg, Black has a net worth of nearly $10 billion. Of course, he has a private jet and a luxury yacht and lots of fancy homes. In 2012, he paid nearly $120 million for one artwork—one of the four versions of Edvard Munch’s 1895 pastel, The Scream. He has a world-class art collection. He is also the chairman of the board of trustees at the Museum of Modern Art; his wife, Debra, is on the board of the Metropolitan Museum of Art. He is rich and powerful. That means he can hire what appear to be reputable law firms to put their stamp of approval on a version of the truth that is not likely to be independently verified by anyone not getting paid by Black, or by Apollo. That’s not the same as transparency.

In October, the conflicts committee of the Apollo board of directors hired Dechert to “conduct a thorough investigation” into the relationship between Black and Epstein, after The New York Times reported that Black had paid Epstein “at least” $50 million for Epstein’s services. Over the years, there has been a lot of bad press about the relationship between Black and Epstein—and many rumors—but the Times’ report appeared to be the last straw for some members of the Apollo board. The conflicts committee comprises Michael Ducey, its chairman, a consultant and something of a professional board member; A.B. “Buzzy” Krongard, the former CEO of Alex. Brown & Sons, the defunct investment bank, and a former executive director of the CIA; and Pauline Richards, a former insurance executive and, like Ducey, a professional board member. During its three-month investigation, Dechert reported that it reviewed more than 60,000 documents, voluntarily provided to it by Black, his family office, Apollo executives, and by Apollo’s outside counsel, Paul, Weiss. Dechert said it spoke with more than 20 individuals—“some more than once”—including Black, and also on a voluntary basis. Dechert did not have the ability to subpoena either documents or witnesses.

According to the Dechert report, which was dated January 22 and then filed with the Securities and Exchange Commission, Black and Epstein had a “social relationship” from the mid-1990s to 2018. They were introduced by an unnamed “mutual friend.” Black “viewed Epstein as someone who was very intelligent and knowledgeable regarding issues relating to estate planning and taxation,” the report allowed. In 1997, Black appointed Epstein to be one of the initial directors of the Black Family Foundation, established to facilitate his charitable giving. Black, apparently, was impressed that David Rockefeller had appointed Epstein to the board of Rockefeller University, a scientific research university on the East Side of Manhattan. According to the Dechert report, Black’s “understanding” was “that Epstein was extremely knowledgeable about science and technology, as well as a strong proponent of scientific research and development.” Epstein had somehow convinced Black, one of our most gifted financial engineers, that he was the ultimate autodidact, exceptionally skilled in both the arcane rules of tax structuring and estate planning and also of scientific research. According to the Dechert report, Epstein introduced Black to “well-regarded” researchers at MIT and Harvard. Epstein stayed on the Black Family Foundation board for 10 years, until he resigned in mid-2007, the year before his 2008 conviction for pedophilia. (Because of “an oversight,” the foundation reported to the IRS that Epstein remained on its board until 2012; when the mistake was discovered in 2013, the reporting was changed.)

Black’s reputation on Wall Street was as a ruthless dealmaker. He learned his craft at Drexel Burnham Lambert, the defunct investment bank, and from its superstar banker Michael Milken, a recently pardoned convicted criminal who helped create the junk bond market. Black was head of mergers and acquisitions at Drexel before it blew up. In one of Apollo’s earliest deals, it negotiated to buy, at a significant discount, the bond portfolio of Executive Life Insurance Company, which had failed after, among other things, buying too many Drexel-underwritten junk bonds. Black was highly adept at fighting for the last penny in deals and was one of Wall Street’s most feared vulture investors, the people who buy bonds of distressed companies at a discount and then get control of companies by converting the debt they own to equity. As Apollo grew, Black and his growing team engineered bigger and bigger deals. Among its biggest successes are LyondellBasell, a chemical company, ADT, the security company, and among its biggest flops are Caesars Entertainment and Linens ’n Things.

For reasons that Dechert does not completely make clear, Black, the rapacious financier—Bloomberg once referred to him as “the most feared man in the most aggressive realm of finance”—had a soft spot for Epstein, even after his 2008 guilty plea for soliciting prostitution and procuring a person under the age of 18 for prostitution. According to Dechert, Black “believes in rehabilitation, and in giving people second chances.” That’s also why, Dechert wrote, Black has stayed friendly with both Milken and Martha Stewart, “who have spent time in prison.” Apparently, Black seemed to be converted to a pushover for two other reasons: first, Black believed Epstein when he said that he had only solicited a minor for prostitution once and that Epstein “mistakenly understood” the prostitute in question was “older,” and, second, because so many other rich and influential people—including CEOs and Nobel laureates—still hung out with him. 

Oh, it was just so cozy. “Black viewed Epstein as a friend worthy of his trust,” according to Dechert. “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.” Black invited Epstein to his son’s 30th birthday party in the Hamptons in 2015, according to someone who was there. These days, apparently, Black is contrite and would not have given Epstein a second chance had he known “more about Epstein’s criminal activity,” according to the Dechert report.

Turns out, according to Dechert, the Times was off by more than $100 million in its estimates of payments from Black to Epstein. In the years between 2012 and 2017—that is after his “second chance” started and after a 2011 report in the Daily Mail about Epstein’s continued atrocious behavior—Black paid Epstein $158 million for advice on issues including tax, estate planning, and structuring that, Dechert wrote, saved Black between $1 billion and $2 billion. Somehow, we are supposed to believe that Jeffrey Epstein, a college dropout who taught math for about two years at the Dalton School, on the Upper East Side, and then worked at Bear Stearns before being fired, is responsible for between 10% and 20% of Black’s net worth.

Apparently, Epstein’s big break for Black came in 2012 when he solved what the report says was a mounting problem in a grantor trust that Black had established in 2006, with the help of a trust and estates attorney recommended to Black by—wait for it—Epstein. But the flaw in the trust, if not fixed, would have cost Black between $500 million to $1 billion, “or more,” Dechert wrote. There seems to be no plausible explanation for how Black allowed this to happen or why a tax expert would make such a colossal mistake. Black tried to solve the problem with all his experts. But he couldn’t, alas. 

But Epstein could! He claimed his solution was “proprietary,” according to Dechert. Black asked outside legal counsel to vet Epstein’s solution and to watch over Epstein generally. (Why didn’t Black’s legal counsel just do his tax and estate work for much less money? One wonders.) According to Dechert, Epstein had hit a “grand slam” because his idea “met all of Black’s financial and estate planning goals.” In 2013, Black and Epstein signed a contract for services including the implementation of Epstein’s solution. Usually, Epstein told Black, he would charge a client $40 million a year for his advice. But he offered to give Black a break: $23.5 million, which was paid to Epstein in two installments in 2013. (Even by Wall Street standards, the fees Black agreed to pay Epstein were preposterous. “You could buy a law firm for what Leon agreed to pay Epstein,” a retired CEO told me.)

Based on the “grand slam,” Black agreed to hire Epstein again in mid-2013 for future services, agreeing to abide by terms similar to the initial contract, but apparently without a signed agreement. According to Dechert, Black paid Epstein a total of $50 million in 2013, and “on an ad hoc basis” another $70 million in 2014 and another $30 million in 2015. Epstein went on to advise Black about some loans he had made to “certain family trusts,” which appeared to save Black some money; his art collection; his yacht; and his airplane, which apparently unnerved a broker of private jets, who was not pleased because, according to Dechert, “the broker knew Epstein was sophisticated when it came to airplanes and that it would be hard to negotiate against Epstein.” Once again, we are asked to believe that Jeffrey Epstein was a better negotiator than Leon Black.

There is more of course, not all of it fully explained—$20.5 million of unpaid loans to Epstein from Black; a dispute between the two men over Epstein wanting even more money from Black that led to their falling out in 2018—but the report suggests that it was all legit and that the “value” Epstein provided to Black “substantially exceeded the total compensation that Black paid to him,” while also noting that Black paid more in fees to Epstein than he paid to any other professional. Concurrent with the release of the Dechert report, Black agreed to resign as Apollo’s CEO in July—around his 70th birthday—but will remain chairman of the board. Marc Rowan, one of Apollo’s founders, will succeed Black. Josh Harris, another Apollo cofounder who was reportedly angling to succeed Black, has—at least publicly—endorsed Rowan as CEO. Black also agreed to donate $200 million to “initiatives that seek to achieve gender equality and protect and empower women,” according to a statement, including those that help survivors of sexual assault and human trafficking. Dechert’s report cleared him of wrongdoing, of course. These are not the droids you’re looking for.

The Wall Street lawyer says it’s all just a load of crap. He uses the words “whitewash” and “cover-up.” His unproven theory is that Black was using Epstein to pass money to people who he didn’t want to be associated with by name. “There’s no way Jeffrey Epstein was keeping [$158 million],” he says. (An Apollo spokesperson did not respond to questions about whether Black used Epstein as a conduit to pay others in this manner, or if Black had any plans to return as CEO after he gives up that position in July).

Apollo’s board allowing Black to remain as chairman reminds the lawyer of the old Wall Street saw—the “King’s Horse Can Talk” strategy. “There’s a plot against the king,” he explains. “The king catches the head plotter. He throws him in the dungeon and says, ‘Two weeks hence, off with his head.’ The plotter is down in the dungeon, in the bottom of the castle. He whispers to the guard, ‘Look, before the king kills me, he better realize that I can make his horse talk.’ The guy says, ‘Yeah, sure.’ He goes, ‘No, I mean it. You better tell the king. I can make his horse talk.’ The guard wanders upstairs, sees the king, says, ‘Look, I don’t know whether to make heads or tails of this, but the guy says he can make your horse talk.’ The king says, ‘Hmm, let me think about it.’ The guard goes back downstairs. The guys says, ‘What did the king say?’ ‘The king said he’d think about it,’ and the guy smiles. The guard said, ‘What are you smiling about? You can’t make his horse talk.’ He says, “Well, a lot of things can happen between now and two weeks hence. The horse could die. The king could die. And who knows? I might figure out a way to make the horse talk.’ So, Leon in his mind has between now and July to make the horse talk. Josh could die. Marc could die. Anything could happen.”

I have known Marc Rowan for more than 25 years. I used to cover him at Apollo when I was a banker at Merrill Lynch. I used to try to present him with actionable ideas—companies that Apollo might want to buy that were open to being bought. I shared with him a bunch of ideas, a few of which Apollo ended up doing. But Apollo never paid Merrill any fees as a result of my ideas. I got the sense that Apollo was not the kind of firm that would let anyone get a dollar out of them if it could be avoided, let alone $158 million. Rowan is now a billionaire. In May 2009, Rowan gave a talk to the Jewish Enrichment Center. He got to talking about people he worked for over the years: “I worked directly for Dennis Levine”—a former Drexel M&A banker—“who went to jail…and then went to work for Marty Siegel”—another Drexel M&A banker—“who also went to jail. I then moved out to California to work for Mike Milken, who also went to jail. There are so many ethical dilemmas you are presented with over your career.… The choices you make just determine who you are over time.”

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