He appointed himself a ‘mathematician and a financial doctor’ for the rich – even though he was a colleague who only had a short term at a traditional Wall Street firm. It was said that his services were only available to billionaires, whose affairs he handled mostly from a tropical island refuge.
So what did Jeffrey Epstein do to earn hundreds of millions of dollars from a handful of wealthy clients like private billionaire Leon Black?
The answer: help rich people pay less taxes.
In the case of mr. Black, the CEO of Apollo Global Management, said his advice could be worth as much as $ 2 billion in savings, according to a law firm’s review of Mr. Black’s business transactions with Mr. Epstein. On Monday, Mr. Black announced that he would retire as CEO of Apollo this year after being found to have paid Epstein $ 158 million over five years for his services.
Mr. Epstein’s specialty was to suggest ways for wealthy clients to use sophisticated trusts and other investment vehicles to reduce their tax liability while transferring assets to their children, according to documents reviewed by The New York Times and interviews with 11 people familiar with is with his work. In the process, he collected hefty fees – usually based on a reduction in the expected tax savings.
In the years after 2008, when Mr. Epstein in Florida pleaded guilty to prostitution charges involving a teenage girl, according to clients, he often gave notice of the use of annuity trusts, or GRATs, awarded.
GRATs are a form of sophisticated trust that has entered the mainstream after a genuine court battle involving a Walmart heir, and which, according to well-published reports, has been used by wealthy people, including the father of former President Donald J. Trump. These trusts allow a person to continue to collect income from all kinds of assets – including shares, real estate and art – and then transfer it to family members without paying the large gift or estate tax that is normally associated with such transfers are related.
One person who has been doing business for Mr. Epstein did, saying the disgrace financier was ‘GRATs’. The person, who in 2018 stopped working with Mr. Epstein to work, but talked about the condition of anonymity because he advises wealthy clients, said Mr. Epstein boasted about using GRATs to save money for a small group of customers, including Mr. Black. .
In the case of mr. Black, according to the investigation by the law firm Dechert, the savings were enormous: about $ 1 billion for a single GRAT. Mr. Epstein’s detection of a problem in a trust set up in 2006 and his proposed solution was ‘the most valuable work’ he has done, the report said.
“Apart from legal advice, the solution described a ‘grand slam’, according to the Dechert report, which at the request of Mr. Black was brought into use after The Times reported in October that he had Mr. Epstein paid at least $ 75 million in fees.
The Dechert report – 22 pages with double space provided to Apollo’s board – presented Mr. Black was struck off any offense, but he said he would retire as CEO by the time he turns 70 in July. Another Apollo founder, Marc Rowan, will take over the role and Black will remain chairman of the company. Apollo shares rose 7 percent on Tuesday.
The report does not contain any details about the problems with the GRAT or the solution of mr. Epstein nie William LaPiana, a professor and associate dean at New York Law School and a trust and estate expert.
Mr. LaPiana said GRATs could offer huge savings – especially when packed with assets that are expected to rise sharply over time. And a wealthy person would pay expensive advice on such trusts.
Mr. According to the report, Epstein was compensated for solving the GRAT problem as part of a $ 23.5 million deal with Black in 2013. After that, they entered into a series of agreements that Mr. Epstein raised more than $ 100 million more before the two men divorced in 2018.
The split was the result of a dispute over the claim of Mr. Epstein for a ten percent fee for another transaction, which according to the Dechert report could be $ 600 million in savings. Black eventually paid $ 20 million for the deal, which involves loans between Black family trusts to provide a tax benefit to Mr. To achieve Black’s children, the report reads.
In 2019, Mr. Epstein killed himself in a Manhattan jail cell while facing federal charges of sex trafficking.
Jack Blum, a Washington lawyer who has led corruption investigations for several Senate committees, said he was surprised by the amount of money Mr. Ordered Epstein’s work. “You can be the best lawyer in Manhattan working on the most complicated trusts and estates, and it will never come close to that kind of money,” he said.
The Dechert report concedes that the compensation that Mr. Black to mr. Epstein paid, far exceeding the amounts paid to his other professional advisers.
Mr. Black has repeatedly said that all the work of Mr. Epstein was thoroughly investigated by external attorneys and accountants. The only law firm mentioned in the Dechert report is Paul, Weiss, Rifkind, Wharton & Garrison, who have been taxing and estate work for Mr. Black did. It is also one of Apollo’s most important law firms.
The Dechert report does not identify who describes the description as the problematic trust for Mr. Black did not draw up, except to say that the person was a tax and estate expert who Mr. Epstein recommended. The lawyer who does most of the early work for Mr. Black did, was Carlyn McCaffrey, a tax and estate partner at McDermott Will & Emery, according to three people familiar with the matter, who spoke on condition of anonymity.
Mrs. McCaffrey, widely recognized as a leading expert on GRATs, said: “We will not comment on any issues concerning Jeffrey Epstein.”
Mr. Epstein regularly operated as an idea generator that, according to five people familiar with the arrangements, outsourced some of the work to strong law firms or the current financial and tax advisors of its clients.
That was how it worked when Mr. Epstein advised a tech executive on a tax issue, according to a representative of the executive who agreed to discuss the matter on condition of anonymity. Mr. Epstein offered his help after learning that the executive – a knowledge he once considered rich enough to qualify for his services – needed help to reduce his employer’s large stock allowance tax. The executive officer believed that Mr. Epstein offered his services as a favor to a friend, because Mr. Epstein referred much of the work to a large law firm, which paid the executive for the assignment.
According to the representative, the executive and Mr. Epstein had never discussed any payment, so the executive was surprised when Mr. Epstein sent his own account – at a rate of ten percent of the tax money saved. The executive was initially deterred, but eventually paid to have a public spat with Mr. To avoid Epstein and never worked with him again.
Although Mr. Epstein regularly took his compensation in percentage, he also offered services at a fixed rate – a compensation structure he proposed as part of a place to a real estate manager in New York, which was otherwise short.
In 2013, Mr. Epstein wrote a six-page letter to management, which The Times reviewed. It is proposed that an own ‘database of financial information’ be used to analyze and evaluate estate planning matters. It did not describe what kind of information the database contained.
For this service, Mr. Epstein proposed $ 10 million in fees for 10 months of work. According to a representative, the executive dismissed him who spoke on condition of anonymity.
Katherine Rosman contribution made.