A Senate committee is investigating whether the $158 million paid by billionaire investor Leon Black for tax and wealth planning services to disgraced investor Jeffrey Epstein should have been classified as a gift, as part of a broader probe into tax avoidance schemes by the ultra-rich, according to a letter seen by The New York Times.
In addition to the fees Black allegedly paid to Epstein, the Senate Finance Committee is investigating several trusts Black used to save taxes and advice Epstein gave on buying art, the committee said in a letter sent Monday by Senate Finance Committee Chairman Senator Ron Wyden to Private Equity King. It is also investigating advice on buying art works.
Wyden, an Oregon Democrat, wrote that the committee was dissatisfied with information provided so far by Black, the co-founder of Apollo Global Management, and asked for help.
“Many unresolved questions remain regarding the tax evasion scheme that Mr. Epstein sponsored and implemented, including whether the exorbitant sums paid to Mr. Epstein should have been classified as gifts for federal tax purposes,” the senator wrote. Gifts above the annual threshold are subject to federal taxes of 18-40 percent.
A spokeswoman for Black, 71, said he “has cooperated extensively with the committee.” Spokesperson Whit Clay added: “The transaction referred to in the Commission letter was legal in all respects.
In 2020, a law firm found that Epstein’s actions saved Black and his four children $2 billion in inheritance and gift taxes. Dechart, the firm sent by the Apollo board to investigate Black’s dealings with Epstein, found that Black had done nothing wrong. Black will step down as chairman and CEO of the private equity giant in 2021.
The Senate Finance Committee investigation is part of an investigation into tax shelters used by the ultra-wealthy to “avoid or avoid paying federal taxes, including gift and inheritance taxes,” according to the 16-page letter. At the April Committee meeting, Information requested by Harlan CrowBillionaire real estate developer, about him Handling of taxes Gift to Supreme Court Justice Clarence Thomas.
Wyden sent the letter days after The Times reported that Black, who has an estimated net worth of $9 billion, had settled a $62.5 million settlement to avoid a potential lawsuit by the U.S. Virgin Islands.
The settlement, reached in January and undisclosed at the time, stemmed from a potential allegation that the Virgin Islands rolled out against Black during a three-year investigation into sex-trafficking activities conducted using part of Epstein’s private island off the coast of St. Thomas.
According to the settlement, “Jeffrey Epstein used a portion of the money Black paid him to partially fund his activities in the Virgin Islands.”
Black was a longtime social and business acquaintance of Epstein, who committed suicide in 2019 after being arrested on federal sex trafficking charges. Lawyers for the victims estimate that Epstein, a college dropout who knew little about taxes and real estate, sexually abused 200 young women, many of them in their teens.
A Senate committee launched an investigation into Black in a letter to Apollo in June 2022, after which it sought information from two large law firms that worked for Black. Lawyers told the committee they would not answer questions about payments to Epstein.
Mr. Black’s attorneys provided information about several Donor Retained Annuity Trusts (GRATs) established in 2006 to allow Mr. Black to transfer Apollo shares to his children in a tax-friendly manner while continuing to earn income from his investments. But Wyden said Black did not provide enough information for the commission to determine whether Epstein’s work was a legitimate tax strategy.
Beginning in 2014, Epstein allegedly helped restructure the trust to avoid a $1 billion gift and inheritance tax burden on Black and his family, according to the Dechert report.
GRAT is a sophisticated investment vehicle that can continue to generate income from all types of assets, including stocks, real estate, and works of art, and pass them on to family members without paying the hefty gift and inheritance taxes normally associated with such transfers.
Mr. Epstein often boasted that he was an expert in such trusts, helping a few wealthy people save taxes and collecting high fees.
