The $158 million in payments that private equity titan
The probe, which hasn’t been previously reported, began a year ago after a 2021 report by the law firm Dechert LLP for
Senator
While the Senate Finance Committee doesn’t carry enforcement powers, the investigation adds to embarrassing revelations about Black, who retired as Apollo’s longtime chief executive officer in 2021 amid public revelations over Epstein and their business ties. On Friday, the New York Times
“A significant number of open questions remain regarding the tax avoidance scheme you implemented with Epstein’s assistance, including whether the exorbitant amounts paid to Epstein should have been classified as a gift for federal tax purposes,” Wyden, an Oregon Democrat, wrote in the letter Monday.
A spokesman for Black said that the 71-year-old has cooperated extensively with the Senate probe, providing detailed information.
“The transactions referenced in the committee’s letter were lawful in all respects, were conceived of, vetted and implemented by reputable law firms and tax and other advisors,” the spokesman said in a statement. “Mr. Black has fully paid all taxes owed to the government.”
Epstein, who had widespread ties to powerful financiers and academics, was convicted in 2008 for soliciting prostitution from a teenage girl. He died by suicide in his jail cell in August 2019 after he was arrested on sex-trafficking charges.
The Dechert report found no evidence that Black knew of Epstein’s criminal activities. The law firm examined the relationship between the two men, which stretched from the mid-1990’s to 2018.
The Wyden letter examines complex estate planning transactions that top advisers helped structure with an eye to lowering Black’s taxes after Apollo went public in 2011. Black is
Wyden has conducted several investigations of how wealthy Americans avoid or evade gift and estate taxes. His committee could introduce legislation to amend the US tax code or hold hearings.
‘Inexplicably High’ Payments
Black has refused to answer questions about “inexplicably high” payments to Epstein, who gave advice that wasn’t always sound, Wyden said in the letter.
At an average of about $25 million a year, the payments were “well in excess of expected compensation for tax and estate planning services,” according to the letter. Epstein’s advice also “included instances of substantial misrepresentations of tax laws.”
Wyden cited portions of the Dechert report claiming that from 2013 to 2017, Black was under the “misconception,” based on Epstein’s advice, that his payments to Epstein were tax deductible.
The committee is “deeply concerned” about Black’s “continued refusal” to explain Epstein’s compensation and whether it amounted to service income or a gift, Wyden wrote. Under US tax law, Black would be responsible for paying gift taxes beyond a certain threshold.
Among Wyden’s demands were for tax returns and any related documents showing whether any payments made to Epstein were reported to the Internal Revenue Service as gifts.
$1 Billion Art Collection
The letter revealed that Black’s lawyers said the former
Epstein advised him on forming an art partnership and selling certain pieces of artwork. Wyden asked Black the purpose of the partnership, details on any “art loans” that involved Epstein, and a list of art sales valued at over $1 million in which Epstein assisted.
The committee is reviewing Epstein’s advice on an estate planning mechanism that Black set up in 2006, known as grantor retained annuity trusts, or GRATs. They included stakes in Apollo partnerships, which were later transferred into a so-called remainder trust.
But the arrangement carried the risk of an estate-tax liability that could have been $1 billion or more.
Epstein helped find a solution, proposing that the trustees of the remainder trust determine how much Black had received in distributions. Black’s advisers later found Black had been overpaid by the trust, and he faced possible clawbacks.
Wyden’s letter said the committee is “concerned by the possibility that you may have received impermissible distributions of income worth millions of dollars beyond that allowable by the terms of the remainder trust.”
Epstein received $20 million to advise Black on a transaction to save as much as $600 million in future gift and estate taxes, the letter said. Epstein had demanded $60 million for his advice, and the dispute helped end his relationship with Black.
The Dechert report said Epstein played “an instrumental role” in the complex arrangement, while Black’s team told the committee that “the idea was in the public domain and originated with Black’s other legal advisors.”
(Updates with other tax investigations by Wyden in 11th paragraph)
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Anthony Aarons
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