NELSON MANDELA / Reuters.
Apollo Global Management Chief Executive Leon Black will meet with the board of the buyout firm’s fund-of-funds business on Thursday to ask for their backing in a high-stakes legal fight with billionaire Jeffrey Epstein.
In an interview, Black said he will remind the board of their pledge to recuse themselves from all matters relating to Epstein, who has admitted soliciting underage girls for sex — a crime that carries a prison sentence of 25 years to life — during the 1980s and 1990s.
Black, whose firm manages more than $150 billion, joins a parade of executives, including Irving Picard, the federal bankruptcy judge in the long-running lawsuit against Epstein, and Epstein lawyer J.W. Carney Jr., who have urged the fund-of-funds team to pull out. Such a move would allow board members to shield their pension funds from a multi-million-dollar payment in connection with the suit brought by Epstein against the fund-of-funds team and civil lawsuits filed by the investors to recoup the millions in fees and expenses they have already paid.
In his lawsuit, Epstein accuses the fund-of-funds group of falsely claiming he “personally” paid some of the private equity executives for their legal fees and legal expenses in the lawsuit. Epstein says he provided those sums of money as part of what he calls “gifts” to officials of the fund-of-funds group.
“There are no lawful or legitimate arguments for the board to recuse,” said Meyer Modell, a partner with Wolfe Pacheco Gigante in New York and the former head of law firm Gibbons, which specializes in securities and derivatives law. “I don’t understand why so many prominent and wealthy people, with thick resumes and even more thick wallets, would take this on.”
The seven-member fund-of-funds board is made up of leaders from major Wall Street banks — namely Goldman Sachs, Morgan Stanley, JPMorgan Chase, Barclays and Deutsche Bank — as well as Black and Jeremy Lipsky, a former executive at Salomon Brothers and Bear Stearns, which were both bought by Goldman in 2001. Black controls the most votes on the board.
The board was supposed to start meeting in December, but it was forced to postpone indefinitely after a three-judge panel in Manhattan, which was hearing Epstein’s lawsuit against the fund-of-funds team, determined a panel of federal judges should take another look at the case, perhaps as soon as the end of November.
It has been controversial to begin a major action on behalf of a client in private equity — or a funder for that matter — without first having a board of trustees. The idea is to provide some level of supervision to give “boots on the ground” to ensure the investments are getting done properly.
But many professional investors have no problem paying out of pocket for legal fees for certain matters related to litigation. Therefore, some worry that forcing the fund-of-funds to take out any money from court damages it may be awarded against Epstein would be duplicative and create a situation that might pose “potential conflicts of interest.”
A spokesman for the fund-of-funds group, Peter Sherman, declined to comment on the reasons why Black and others have urged the board to do away with the Epstein lawsuit. But he said: “This is not a boardroom situation. It is an opinionated position on the case, which the board has yet to decide.”
A spokeswoman for Black declined to comment. But in a written statement, she said: “Mr. Black is only seeking a small portion of the approximately $30 million paid to individuals with connections to Mr. Epstein. That money was personal, given as gifts by Mr. Epstein in need of financial assistance.”
Epstein has spent the better part of the last decade in and out of jail on solicitation charges. In recent years, he has been married to a doctor with whom he has two children. Prosecutors allege the financier engaged in a pattern of forced oral sex with at least eight underage girls. But to date, Epstein has never been convicted of a crime in connection with the allegations of sex.
Epstein’s attorneys also declined to comment on Black’s request for the board to step aside, saying that his particular case would be considered separately.