Paul L. Caron

Monday, February 1, 2021

NY Times: College Dropout Jeffrey Epstein Earned Hundreds Of Millions As His Cut Of Billions Of Taxes Saved By Clients Using His Strategies — Typically GRATs

New York Times, What Jeffrey Epstein Did to Earn $158 Million From Leon Black:

He styled himself as a math whiz and “financial doctor” to the rich — even though he was a college dropout who had only a brief tenure at a traditional Wall Street firm. It was said his services were available only to billionaires, whose affairs he handled mostly from a tropical island hideaway.

So what did Jeffrey Epstein do to earn hundreds of millions of dollars from a handful of wealthy clients like the private equity billionaire Leon Black?

The answer: help rich people pay less in taxes.

In the case of Mr. Black, the chief executive of Apollo Global Management, his advice could have been worth as much as $2 billion in savings, according to a law firm’s review of Mr. Black’s business dealings with Mr. Epstein. On Monday, Mr. Black announced that he would step down as Apollo’s chief executive this year after the review found he had paid Mr. Epstein $158 million over five years for his services.

Mr. Epstein’s specialty was suggesting ways for wealthy clients to use sophisticated trusts and other investment vehicles to reduce their tax liability while passing on assets to their children, according to documents reviewed by The New York Times and interviews with 11 people familiar with his work. In the process, he collected hefty fees — usually based on a cut of the anticipated tax savings.

In the years after 2008, when Mr. Epstein pleaded guilty in Florida to prostitution charges involving a teenage girl, he often advised clients on the use of grantor retained annuity trusts, or GRATs, according to three people familiar with his work.

GRATs are a form of sophisticated trust that broke into the mainstream after a high-profile court fight involving a Walmart heir, and have been used by wealthy people including the father of former President Donald J. Trump, according to published reports. These trusts permit a person to keep collecting income from assets of all kinds — including stocks, real estate and art — and then hand them off to family members without paying the large gift or estate taxes normally associated with such transfers. One person who did business for Mr. Epstein over the past decade said the disgraced financier’s “biggest thing was GRATs.” ...

Jack Blum, a Washington lawyer who has led corruption investigations for several Senate committees, said he was surprised by the size of the fees Mr. Epstein’s work commanded. “You could be the best lawyer in Manhattan working on the most complicated trusts and estates and it would never come anywhere close to that kind of money,” he said. ...

Mr. Epstein frequently functioned as an ideas generator who would then outsource some of the work to high-powered law firms or to his clients’ current financial and tax advisers, according to five people familiar with the arrangements.

That was how it worked when Mr. Epstein advised a technology executive on a tax matter, according to a representative of the executive who agreed to discuss the matter on the condition of anonymity. Mr. Epstein offered his help after learning that the executive — an acquaintance he once deemed not rich enough to qualify for his services — needed help reducing his taxes on a large stock grant from his employer. The executive believed Mr. Epstein was offering his services as a favor to a friend, because Mr. Epstein referred much of the work to a large law firm, which billed the executive for the assignment.

The executive and Mr. Epstein had never discussed any payment, according to the representative, so the executive was surprised when Mr. Epstein sent his own bill — for a sum that was 10 percent of the tax dollars saved. The executive initially balked but ultimately paid up to avoid a public spat with Mr. Epstein and never worked with him again.

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