Senate Panel Probes Leon Black’s Financial Ties to Epstein, Tax Maneuvers

The U.S. Senate Finance Committee is investigating former Apollo Global Management Chief Executive Leon Black’s tax strategies and dealings with the late disgraced financier Jeffrey Epstein, pressing the private-equity billionaire for information on Epstein’s high-price tax advice. 

Committee Chairman Ron Wyden on Tuesday released a letter to Black that made public the panel’s investigation, which has been going for a year. In the letter, Wyden asked Black whether trust arrangements improperly moved assets out of his estate and why he paid Epstein—who wasn’t an accountant or tax lawyer—$158 million for advice over six years.

“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,” Wyden, an Oregon Democrat, wrote in the 16-page letter dated Monday to Black. 

A spokesman for Black said he has “fully paid all taxes” and defended the transactions Wyden asked about as legal and vetted by law firms and other advisers. 

“As a foundational matter, the letter repeatedly insinuates something illicit or untoward in the professional relationship between Mr. Black and Mr. Epstein,” Black’s lawyers said in a reply to the committee reviewed by The Wall Street Journal. “Any such insinuation is without basis.”

In the reply, Black’s lawyers said that he wouldn’t provide any more information and that the inquiry appears designed to embarrass and criticize individual taxpayers rather than conduct oversight. 

Black, 71 years old, had more than 100 meetings, including lunches and dinners, scheduled with Epstein over several years, the Journal has reported. Black said that he hired Epstein to advise his family office and that they had a social relationship, according to an independent investigation commissioned by Apollo, the private-equity firm he co-founded. He stepped down from Apollo in 2021.

The Apollo investigation, which Black requested, found he had paid Epstein for tax and estate planning. It concluded he wasn’t involved in and had no knowledge of the extent of the crimes Epstein was alleged to have committed.

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 tax savings, the Apollo report said.

Epstein was first convicted in 2008 of procuring a minor for prostitution. He was a registered sex offender and died in prison in 2019 while awaiting new charges on sex trafficking, in what a medical examiner determined was suicide. 

Wyden’s staff first contacted Black more than a year ago and had several rounds of communication with Black’s lawyers, who answered some questions but didn’t provide all of the desired details, the letter said. 

In the letter, Wyden asked about the arrangement in which Black paid Epstein $158 million for advice, which Wyden called “inexplicably high.” 

He also sought more detail about what he described as written and verbal agreements between the two men. Wyden wrote that there could be potential tax implications for Black if those payments went beyond reasonable compensation for services and were gifts that should have been taxable to Black. 

“The Committee remains deeply concerned by your continued refusal to substantiate and explain Epstein’s compensation scheme,” the letter said.

Wyden also asked about a transaction through which Black, according to the letter, may have pushed assets out of his taxable estate. The assets were worth $585 million at the time of the transaction and could be expected to increase to $2 billion. Such moves using so-called grantor-retained annuity trusts, or GRATs, are relatively common among the superwealthy, but they must follow prescribed rules. 

According to the letter, which includes information provided by Black and his lawyers to the committee, Black’s strategy was at risk of not meeting tax-law requirements because he was receiving income from the trust where the assets landed after the GRAT. 

Epstein proposed a solution in which the trust would calculate the owed and actual payments to Black, according to the letter. The trust found that it had overpaid Black, meaning that it could have had a legal claim against him. But Black could have had a claim against the trustees if they tried to remove him as a beneficiary, according to the letter. 

Epstein suggested that both sides release those claims, and they reached an agreement that kept the assets out of Black’s estate, according to the letter. Wyden’s letter asked for more details about how that deal was structured and whether it complied with tax rules. The transaction hasn’t been scrutinized by the Internal Revenue Service, according to the letter. 

In their response letter to the committee, Black’s lawyers said some of the panel’s descriptions of the trust issue and resolution were inaccurate. 

Wyden has long been interested in making it harder for very wealthy people to lower their tax bills. He has proposed a series of bills to do that, but those measures have so far stalled in Congress. 

Write to Richard Rubin at [email protected] and David Benoit at [email protected]