Many readers have been following with prurient interest the saga of serial child-rapist Jeffrey Epstein, and in particular media speculation connected to the Very Important People whose names and personal contacts appear in Epstein’s “Little Black Book,” seized by the FBI and currently publicly archived here, courtesy Jon Cook of Gawker. One listing that got a lot of attention was that of billionaire Leon Black, founder of private equity heavyweight Apollo.
After the black book became public, the press dug deeper into the long-standing relationship between Black and Epstein, with the Wall Street Journal, Bloomberg, and more recently, the New York Times weighing in.
In a sign that Apollo is in the public relations version of Defcon 1 over l’affaire Epstein, we got a call and an e-mail from Apollo’s hired mouthpiece, insinuating that we really should have talked to them. Had the PR professional bothered even a cursory look into our work on Apollo or private equity generally, he might have realized that contacting us could be counterproductive, particularly since no financial firm has ever deigned to
muscle take official interest in this humble website.1
If you’re up to speed on Leon Black and Epstein, you can skip over the next section.
The Plot Thus Far
It wasn’t just that Black’s name appeared in Epstein’s famed black book. Since 1997, Epstein served as an “original trustee” of the Leon Black Family Foundation. Black has disavowed state filings that listed Epstein as on the board through 2012, years after Epstein pleaded guilty in 2008 to solicitation of prostitution. Black claims the state filings were inaccurate and said he asked Epstein to resign in 2007.
This relationship alone is enough to raise eyebrows. Men at Black’s level are hyper-attentive to their personal wealth. The notion Leon Black, who has access to the best tax experts in the world, and himself is a renowned financier, would hire someone with no credentials in tax or accounting to advise on his affairs would seem nonsensical had it not actually happened.
More bad news dripped out. The Wall Street Journal published a long expose, Jeffrey Epstein Burrowed Into the Lives of the Rich and Made a Fortune, Bloomberg reported Jeffrey Epstein Had a Door Into Apollo: His Deep Ties With Leon Black, with insider accounts of how Epstein was permitted to approach Apollo principals to pitch his “tax strategies”. An individual mentioned as hosting one meeting disputed that it had occurred. Black issued a denial that didn’t address a key Bloomberg claim: that Black had allowed Epstein to solicit senior executives at Apollo. Black merely said that Epstein had never done business with Apollo.2
Black first sent an e-mail to employees, then wrote his investors, then read the employee e-mail as part of Apollo’s quarterly conference call. The investor presentation failed to address a New York Times account that a Black-controlled entity had given $10 million to an Epstein charity in 2015.
In addition to covering this ground in a post last week, we also described how CalPERS has featured in this story:, making pious shows of discomfort and earnestly seeking an explanation. We reminded readers that Apollo was central to CalPERS’ decline, by virtue of Apollo’s and four other investment firms with ties to Apollo’s mind-bogglingly large “pay to play” fees by CalPERS that funded bribes to CalPERS’ CEO, eventually landing him in Federal prison. Using some conservative assumptions, it also looks as if CalPERS was had by Apollo in the deal Apollo proposed to kiss and make up. We’d anticipated that outcome when we wrote about the CalPERS pay to play scandal in 2014.
The Flack Call and E-Mail
We received this voicemail at 10:02 EDT when our post had gone live 4:20 AM:
And this e-mail immediately thereafter:
Hello Mr. Webber,
I left a voice mail message for you at Aurora introducing myself as well. I am the spokesperson for Apollo Global Management here in New York. Always please feel free to call us for fair comment prior to publication. We are always available to talk on a not-for-attribution basis to go over facts for accuracy and context and in some cases offer an on-the-record comment in the face of criticism.
Many thanks for your consideration.
Charles V. Zehren | Executive Vice President
This is amusing on so many levels I don’t know where to begin. Zehren makes no formal objection to what’s in our post, but he is trying to sell the idea that anyone who writes about Apollo ought to ring in….to get not-on-the-record comments. When we seek comments on posts with original reporting, we operate only on an on the record basis.
In this case, all of the facts in our piece were previously reported and not corrected or retracted, so there were no “facts to go over”. Since when do op-ed writers, which is the category in which this post would have fallen in a newspaper, check in with the subjects of their op-eds?
But clearly, Zehren lives in a world populated by access and trade journalists who regularly write up big company press releases and planted stories. Those writers are over there.
The “Mr. Webber” is very inattentive. Zehren had just called and left a voicemail for one “Susan Webber,” and he started his message with “Mrs.” Does he think women don’t write about finance, and that Susan Webber is the wife or sister of the moving force behind the blog, who obviously must be male?
Even though Zehren did manage to track down the Aurora Advisors phone number, presumably from our antique website (which I keep up only for its archive of articles in the 1990s and early-mid 2000s), he didn’t look at the bios, where the only Webber is female.
But the really rich part is the notion that Apollo is entitled to a “fair comment”. Did Apollo have any concern for fairness when it bankrupted companies like Caesars, Hexion, and Claire’s, resulting in job and pension losses, including lawsuits accusing Apollo of acting in bad faith, as with CEVA Logistics? How fair was Apollo when it failed to inform investors about termination of monitoring fees and had to cough up a record $52.8 million in SEC fines and disgorgements? Even the normally finance-friendly Matt Levine of Bloomberg fame made clear that monitoring and other portfolio company fees are an exercise in extraction (emphasis his):
The basic idea is that private-equity firms charge their portfolio companies a “monitoring fee” for … monitoring them? It seems silly to insist on a reason. They charge the monitoring fee to get more money. They could charge portfolio companies a Fee For Being Nice Guys, and the portfolio companies would cheerfully pay up….They can send a portfolio company a bill, and then send themselves back some money.
We could go on, but you get the picture. Apollo for once is faced with a problem it can’t solve by using its ginormous checkbook, so it falls back on spurious requests for fairness. Help me.
Moreover, as established readers know, we’ve been writing about private equity regularly and critically since 2013. We’ve published 25 limited partnership agreements, documents the industry implausibly insists are trade secrets in their entirety, including one for a recent Apollo flagship fund, Apollo Investment Fund VIII, L.P., aka Apollo VIII. We’ve had six other posts with “Apollo” in the headline, and also discussed Apollo’s conduct at length in the aforementioned 2014 post on the CalPERS pay to play scandal.
So why the interest now, particularly since Google algo changes have downgraded articles by small sites like ours, no matter how on point they are relative to search terms? It’s pretty clear from Mr. Zehren’s dilatory contact that his mission from Apollo entails trying to push the Apollo party line, even to people who a cursory inspection of their record would show they’d be unreceptive and perhaps even annoyed at the re-education attempt.
Maybe Apollo is concerned that Naked Capitalism is about to move up in the Google search criteria.
1 There is one exception that proves the rule. We got a call from an in-house lawyer at Oak Hill Capital Partners asking us to take their limited partnership agreement down. It was a very short call. The lawyer’s voice had the tired sound of knowing she’d been asked to do something that wasn’t going to work. My recollection is she tried arguing that the limited partnership agreement was confidential. I said, “Are you kidding? It’s been up for eighteen months.” I said I didn’t engage with lawyers on the phone, that she needed to deal with me in writing and the limited partnership agreements were staying up. I never heard anything more.
2 The Wall Street Journal makes the notion that Black would use Epstein seem not crazy:
Around 1995, Mr. Epstein brought his staff to meet with Apollo Global Management LLC, a private-equity firm run by Leon Black, to pitch his company as an ideal service for Apollo’s wealthy clients, including tax strategy. “He found every single provision that could justifiably be utilized, and he worked with some very smart tax lawyers,” said a person who attended the meeting.
But even then Black would have had access to top tax attorneys; clever tax structuring is a big part of private equity’s returns. So why would he need to pay a markup to get them through Epstein?
The Bloomberg story depicts Apollo’s executives reacting as you’d expect:
Almost a decade after Jeffrey Epstein was first accused of preying on young women, he still had access to the inner sanctum of Apollo Global Management.
Leon Black, Apollo’s billionaire chairman, met with the financier from time to time at the company’s New York offices, and he allowed Epstein to pitch personal tax strategies to the firm’s executives, according to people familiar with the matter.
The executives were puzzled. Why invite Epstein, a registered sex offender since 2009, into one of Wall Street’s most powerful private equity firms? What services could he possibly provide?