How Jeffrey Epstein got paid
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It's been one of the central mysteries of the Jeffrey Epstein saga: How did the notorious pedophile get so rich?
Driving the news: A partial answer to that question arrived on Monday with the release of a report detailing how and why Apollo Management founder Leon Black paid Epstein some $148 million, including $70 million in 2014 alone.
The big picture: Epstein seems to have sought out individuals who were so rich that they faced tax bills well into the billions of dollars. He would then offer his services as a friend, confidante, and general billionaire whisperer — the kind of person who will help you buy a yacht, or renegotiate an airplane lease, or staff a family office.
- His pay: Either a flat fee of as much as $40 million per year, or — more commonly — a percentage of the money he saved you on taxes. For every $100 you saved, he would take between 5% and 10%.
What they're saying: More than 20 people who dealt with Epstein agreed that he was "disruptive and caustic" and eager to take credit for others' ideas, according to the report. He also, they said, "had creative ideas that no other advisor had proposed," and "provided advice that conferred more than $1 billion and as much as $2 billion or more in value to Black."
- Epstein was an expert on Grantor Retained Annuity Trusts, or GRATs, despite having no training as an accountant or lawyer. Epstein saved Black at least $500 million in taxes on one of his GRATs.
- Black credited Epstein with also saving him at least $600 million in taxes on a separate transaction, although later Epstein failed to demonstrate that the central idea was really his.
- Epstein would take on "managing and responding to audit inquiries" from the IRS and other tax authorities.
Beyond taxes, Epstein played a central role in building up Black's family office (the group of people managing Black's wealth) — in large part by persuading Black and his family to concentrate on such matters.
- There were "myriad esoteric issues" where Epstein made himself useful, ranging from art to yachts to airplanes.
The bottom line: Epstein was not really a provider of financial services. As Washington lawyer Jack Blum told the NYT, the best lawyer in the world would never be able to charge this kind of money. Rather, Epstein held himself out as someone who understood billionaire problems in a way that only a fellow billionaire could. And he charged accordingly.
