A Senate committee is investigating whether the $158 million billionaire investor Leon Black paid disgraced financier Jeffrey Epstein for tax and estate planning services should have been classified as a gift, as part of a broader investigation into tax evasion by high-net-worth individuals, according to a letter reviewed by The New York Times.
In addition to the fees Mr Black said he paid Mr Epstein, the Senate Finance Committee is investigating several trusts Mr Black used to save on taxes and advice Mr Epstein gave on art purchases, according to the letter, which the committee’s chairman, Senator Ron Wyden, sent to the private equity mogul on Monday.
Mr. Wyden, Democrat of Oregon, wrote that the committee was dissatisfied with the information Mr. Black, a co-founder of Apollo Global Management, had provided to date and requested his cooperation.
“A significant number of open questions remain regarding the tax avoidance scheme you implemented with Epstein’s help, including whether the exorbitant amounts paid to Epstein should have been classified as a gift for federal tax purposes,” the senator wrote. Gifts that exceed an annual threshold are subject to federal taxes ranging from 18 to 40 percent.
A spokesman for Mr Black, 71, said he had “worked extensively with the committee”. Whit Clay, the spokesman, added: “The transactions referred to in the commission’s letter were lawful in all respects; are conceived, vetted and implemented by reputable law firms and tax and other advisors; and Mr. Black has paid all taxes due to the government in full.
In 2020, a law firm found that Mr. Epstein’s work saved Mr. Black and his four children $2 billion in estate and gift taxes. The Dechert firm, which engaged Apollo’s board of directors to review Mr. Black’s dealings with Mr. Epstein, found that he had done nothing wrong. Mr. Black stepped down as Chairman and CEO of the private equity giant in 2021.
The investigation by the Senate Finance Committee is part of an investigation into tax shelters the super-rich use to “avoid or evade paying federal taxes, including gift and estate taxes,” the 16-page letter said. In April, the commission asked Harlan Crow, a billionaire real estate developer, for information about his tax treatment of donations from Supreme Court Justice Clarence Thomas.
Mr. Wyden sent the letter just days after The Times reported that Mr. Black, who is worth an estimated $9 billion, had avoided a potential lawsuit by the US Virgin Islands with a $62.5 million settlement.
The settlement, reached in January but not disclosed at the time, arose out of potential claims the Virgin Islands made against Mr. Black during Mr. Epstein’s three-year investigation into sex trafficking, conducted in part from his private island residence off St. Thomas.
“Jeffrey Epstein used the money Black paid him to partially fund his operations in the Virgin Islands,” the settlement said.
Mr. Black was a longtime social and business acquaintance of Mr. Epstein, who committed suicide in 2019 following his arrest on federal sex trafficking charges. Lawyers for his victims estimate that Mr. Epstein, a high school dropout with little training in tax and estate work, sexually assaulted 200 young women, many of them teenagers.
The Senate Judiciary Committee began an investigation into Mr. Black in June 2022 with a letter to Apollo, then sought information from two major law firms that had worked for Mr. Black. The attorneys told the committee he was unwilling to answer questions about the payments to Mr. Epstein.
Mr. Black’s attorneys did provide some information about several grantor-retained annuity trusts, or GRATs, that were established in 2006 to allow him to pass on shares in Apollo to his children in a tax-advantaged manner — while continuing to earn income from the investment. But Mr Wyden said Mr Black had not provided enough information to the committee to determine whether Mr Epstein’s work was a legitimate tax strategy.
As of 2014, Mr. Epstein allegedly helped restructure the trusts to avoid Mr. Black and his family facing a $1 billion gift and estate tax, according to the Dechert report.
A GRAT is a sophisticated investment vehicle that allows a person to continue to collect income from all sorts of assets — including stocks, real estate, and art — and then hand them over to family members without paying the large gift or estate tax normally associated with such transfers.
Mr. Epstein had often boasted that he was an expert on such trusts and collected hefty fees for helping a small number of wealthy people save taxes.