Leon Black, the billionaire co-founder of private equity giant Apollo Global Management, will be stepping down from his role as CEO of the $433 billion in assets firm. Black, who will remain as chairman, will be replaced by co-founder Marc Rowan by mid-year. The announcement of changed leadership came on Monday evening as Apollo released findings of an investigation directed by its board of directors into Black’s relationship with Jeffrey Epstein, the deceased financier who was criminally charged with human trafficking in 2019.
Apollo said its investigation, conducted by law firm Dechert, found “no evidence that Mr. Black was involved in any way with Mr. Epstein’s criminal activities at any time.” However, the report did show that Black paid Epstein a stunning $158 million in fees for services, loaned him over $30 million in loans and made a $10 million donation to Epstein’s charity, all figures that are multiples of what was previously reported. While the changing of guard atop one of the world’s largest private equity firms was characterized as part of its succession planning—Black is turning 70 this year and has been one of Wall Street’s most feared dealmakers for decades—it is also a maneuver by Apollo to move past well over a year of Epstein-related questions, which have slowed the firm’s growth, sunk its stock at times, and been a troubling mystery for its investors.
Black is the most prominent Wall Street A-lister connected to Epstein, a disgraced financier who was convicted and jailed in 2008. After a Miami Herald investigation into Epstein in 2018, it was revealed that his trafficking operation was far greater than the public had known due to a sweetheart deal he cut with Florida prosecutors. The Herald found Epstein’s alleged trafficking was international and included numerous victims who came forward with allegations. The investigation, which won reporter Julia K. Brown a Pulitzer prize, caused prosecutors to reopen their investigations of Epstein, and exposed deep ties between Epstein, Wall Street power players like Black and well connected politicians and heads of state. Epstein was then charged with extensive trafficking crimes in 2019, but died by suicide while in custody awaiting trial.
For almost two years, Black has been facing questions about his dealings with Epstein. As his name emerged as the biggest on Wall Street to be connected with to the criminal, Black sought to distance himself. In July 2019, Black sent an email to Apollo employees stating that the firm had never done business with Epstein, and that his connection was providing “professional services to my family partnership and related family entities, involving tax, estate planning and philanthropic advice.” Later, it was revealed Black had worked with Epstein extensively, paying him what appears to be tens of millions of dollars annually for his services between 2012 and 2017. In total, the Dechert report pegs Black’s payments to Epstein as reaching $158 million, according to a securities filing that disclosed the findings.
Dechert says its findings “are consistent with statements made by Mr. Black and Apollo regarding the prior relationship.” Notably, Epstein was never retained by Apollo and was never an investor in the firm’s funds. All of the tens of millions in fees Black paid Epstein, Apollo added in a press release, “were for bona fide tax, estate planning and other related services, and the amounts were intended to be proportional to the value provided by Mr. Epstein.”
Regardless, Apollo’s numerous high profile institutional investors were taken aback by Black’s deep ties to Epstein. For months, some investors have balked at investing in Apollo funds until more information was disclosed. In 2020, Apollo’s Board of directors hired Dechert to conduct an independent investigation and the full findings were released on Monday evening, after three months of investigation.
Dechert said it reviewed over 60,000 documents obtained from Black, Apollo, Black’s family office Elysium Management, and legal counsel, including emails, text messages, banking statements, and other forms of communication dating as far back as 1998. Dechert also says it interviewed more than 20 witnesses, including Black, current and former Apollo employees, the co-founders of Apollo, current and former family office employees, and current and former legal counsel to obtain their recollection of events that may have been relevant to Dechert’s investigation.
It found that Black and Epstein had a relationship stretching about two decades and that Black’s financial work with Epstein commenced after his 2008 conviction. The law firm said the financial ties deepened as Black began to increase his estate planning and philanthropic work, including creating a family office. Black hired Epstein even after his conviction on the belief that he had paid his dues to society, Dechert said.
“Black viewed Epstein as a confirmed bachelor with eclectic tastes, who often employed attractive women. However, Black did not believe that any of the women in Epstein’s employ were underage. Black has no recollection of ever seeing Epstein with an underage woman at any time,” says Dechert. It adds, “[T]here is no evidence that Epstein ever introduced Black, or offered to introduce Black, to any underage woman.”
Dechert characterized Black’s relationship with Epstein as one in which bona fide professional and estate planning services were performed. From 2012 through 2017, Black paid Epstein a whopping $158 million, which Dechert said “conferred more than $1 billion and as much as $2 billion or more in value to Black.” That value came in the form of trust and estate planning, tax issues, and financial issues related to Black’s artwork, his plane, his yacht, and his philanthropy and family office.
The investigation did find that one of Epstein’s entities, Financial Trust Company, purchased 263,257 shares of Apollo’s stock in its 2011 initial public offering. Those shares “appear to have later been transferred to a second Epstein entity, Southern Financial LLC, and appear to have been held through at least September 2019,” said Dechert. Though Epstein also sought to ingratiate himself with other Apollo executives, he didn’t make inroads with anyone at the firm other than with Black, according to Dechert.
As Apollo tries to move on from many months of innuendo and whispers about Black and Epstein, it will revamp its executive ranks, its board and even its corporate structure.
By July 2021, Black will hand the reins of Apollo to Marc Rowan, a billionaire who has built up the firm’s insurance business, Athene. As the investigation into Black was ongoing, Rowan took temporary leave from Apollo and will now return. In addition to the change of guard atop the firm, Apollo will expand its board by adding two new independent directors, Pamela Joyner and Siddhartha Mukherjee, and co-presidents Scott Kleinman and James Zelter, as directors. Furthermore, the firm will eliminate its Class C voting stock and examine moving to a single class of common stock. Such a maneuver would loosen insiders’ grip over the control of Apollo.
“Given the extraordinary strength and depth of Apollo’s management team and consistent with best-in-class governance practices, I have advised the Apollo Board that I will retire as CEO on or before my 70th birthday in July and remain as Chairman,” Black said in a statement Monday, adding that he will continue to focus on strategic planning, growth initiatives, investment opportunities and supporting Apollo. Black added, “it is an appropriate time to begin a transition... Marc is well equipped to continue driving innovation across our opportunistic and yield businesses to deliver industry leading results.”
Said Rowan in a statement, “Our business has been, and will continue to be successful, because we have maintained consistent and disciplined focus on meeting our client’s needs.” Added Apollo’s third billionaire co-founder, Josh Harris, “I am pleased that Marc will return and fully support him as CEO of Apollo... While Marc will move into the CEO role, I will focus on expanding our global search for investor returns, which is at the core of our success, and evolving our integrated platform.”
The changes were taken positively by investors, who bid Apollo shares higher by over 2.5% in the aftermarket. Rowan’s ascendance to the CEO role makes sense given Apollo’s heavy reliance on insurance-related assets, and diminished insider control could help the firm eventually join the S&P 500 Index, said analyst Jeffrey Campbell of Barclays in a client note.
The son of Eli M. Black, the chief executive of the United Brands Company, Leon Black studied philosophy and history at Dartmouth University and earned a Harvard MBA in the 1970s. He went on to join Drexel Burnham Lambert, an investment bank that sold junk bonds, and rose through the ranks to become head of mergers and acquisitions. The bank’s fortunes floundered in 1989, when senior advisor Michael Milken was convicted of securities fraud, forcing the firm into bankruptcy. (Milken, nicknamed the “junk bond king,” was pardoned by President Trump, a former Epstein friend, in February.) Black struck out on his own the following year, cofounding Apollo Advisors with colleagues Harris and Rowan, both of whom are also now billionaires.
Black is worth $8.2 billion, according to Forbes’ estimates, much of it his Apollo shares and performance fees paid to him stretching many decades. Rowan is worth $3.8 billion and Josh Harris is worth $4.8 billion.
In a letter to Apollo’s investors, which span the globe and include some of the world’s largest sovereign wealth and pension funds, Black added: “It is important to emphasize that both Apollo and I condemn Mr. Epstein’s reprehensible conduct in the strongest possible terms, and, as I have previously stated, I deeply regret having had any involvement with Mr. Epstein.”
This article originally appeared on Forbes.
