Morning folks and welcome to today’s episode called Leon Black: Master of the Universe Undone
Black made billions with junk bonds, complex financial engineering, buying bankrupt companies and turning them around- he was aggressive, ruthless and very good at what he did.
He was Michael Milken’s right hand man. After Milken went to jail, Black built Apollo - an asset manager overseeing $850 billion. He bought the painting The Scream for $120 million. And now he’s forced to explain why he paid Jeffrey Epstein $158 million —after Epstein had served jail time.
It’s a cracking episode—enjoy.
Leon Black was born in 1951, into a pretty wealthy family in Manhattan. His father, Eli Black, is a very interesting character. He was a Polish immigrant from a poor background, he was a rabbi for 3 years but then moved into finance, first working for Lehman Brothers, and then becoming CEO of this obscure company called AMK - it made caps for milk bottles. This was the mid 1960’s, conglomerates were the big thing in business and Eli got in on the act- creating his own sprawling billion dollar conglomerate called United Brands- it included a huge meat packing company as well United Fruit- a company that we now know as Chiquita- one of the largest banana importers in the USA. His mother was an artist, his aunt owned an art gallery, so art and business were the 2 big influences in young Leon’s early life.
He was an excellent student and graduated with highest honours from Dartmouth in 1973 with a degree in philosophy and history. And then he went to Harvard Business School but it was while he was there in February 1975 that a seismic and tragic event unfolded.
So lets circle back to his father-Eli, whose company United Brands was by 1975 under massive financial pressure for many reasons- a hurricane had ripped through Honduras the previous year wiping out the banana crop, governments in South America imposed huge taxes on bananas, and added to all this Black was under investigation for bribing the president of Honduras.
And so February 3, 1975, Eli Black was chauffeur driven from his Park Avenue apartment to his offices on the 44th floor in the Pan Am building. He removed his hat and coat, and then used his heavy attache case to smash the window, before carefully removing any jagged pieces of glass to ensure he didn’t cut himself- and then he jumped.
It was one of the most public and shocking suicides that Wall Street had ever seen, making font page news. And not only that, but the bribery scandal also made headlines, it was dubbed Banangate. I can only imagine the impact this had on the now 25 year old Leon who by all accounts idolised his father. In an interview from 2020 Black mentioned how he and his father read philosophy together, how his father instilled a love of Shakespeare in him. He idolised his father. And so his fathers death, and the nature of it, it must have had a huge and lasting impact on Black’s life.
So this was the mid 70’s- Wall Street was just emerging from a market crash, jobs were scarce. Black applied to Lehman Brothers only to be told he didn’t “have the brains or personality” for Wall Street.
He had a few jobs before eventually working at Drexel Burnham Lambert.
Now at the time, Drexel was a second-tier firm but that was about to change because out in California, they had an emerging star employee called Michael Milken and he was building a revolutionary business around what became known as “junk bonds.”
So let's first look at what a bond is. A bond is basically an IOU. A company needs money, so instead of going to a bank, it borrows from investors by selling them bonds. The company promises to pay interest regularly and give back the full amount later.
“Junk bonds” are bonds issued by companies that aren’t very safe bets—maybe they’re already in debt, or maybe they're new. Credit rating agencies flag them as below “investment grade.” And because of that, the only way these companies can convince people to lend them money is by offering very high interest rates.
So Milken almost single handedly grew this junk bond sector, like to such an extent that it literally revolutionised corporate finance by providing huge amounts of cheap capital that then went on to fund corporate raiders throughout the late 70’s and early 80’s. So the big corporate raiders that we know from back then- i’m talking Carl Icahn, Sir James Goldsmith, Nelson Peltz, and of course the fantastically-named T. Boones Pickens, all of these guys financed their raids using Milken’s junk bonds- and they transformed corporate America.
Milken’s genius was building the pipeline: matching raiders who needed money with investors hungry for high returns, and packaging it in a way Wall Street had never done before.
And Black, who was in his early 30’s at this stage, and by now was head of Mergers & Acquisitions, taking Milken’s junk-bonds and funnelling them into deals in New York. Black was very sharp, and while in interviews that I’ve seen with him, he comes across as very mild mannered, at work he was known for being super aggressive, with a very hot temper.
By the mid-1980s, Drexel was the number 1 player in the hostile takeover boom- and here’s a quote from Black in a 2005 article reflecting on that time: “There was fear everywhere… Every CEO was worried. They’d read the Wall Street Journal in the morning and learn that their company was under attack by some guy we’d financed for $10 billion that morning. Nobody felt safe.”
Well I bet Black and Milken felt very unsafe when on November 14, 1986, the SEC stunned Wall Street when they announce that Ivan Boesky, who at this stage was perhaps one of the most high profile speculators on Wall Street, and who also happened to be a very close business associate of Michael Milken and together with Milken was up to all kinds of shenanigans, he pleaded guilty to insider trading and crucially he agreed to cooperate with investigators.
Now Boesky has featured in other stories that I’ve covered- it was as a result of his testimony that the lid was blown on the Guinness share price scandal that led to the imprisonment of the Guinness CEO Ernst Saunders. We covered that in our 2 parter on Guinness.
Gordon Gekko, the villain in Oliver Stone’s movie Wall Street, was loosely based on Ivan Boesky. And that famous line—“Greed is good”-that came straight from a university commencement speech that Boesky gave in 1986 where he told students: “I think greed is healthy. You can be greedy and still feel good about yourself.”
Now I am going to do an episode on Milken at some stage but if you want to get really deep into this whole scandal, there are 2 fantastic books that I read years ago- The Predators Ball by Connie Bruck, and Den of Thieves by James B Stewart.
Through 1987 and 1988, a grand jury probed Milken’s unit, but business was still booming. The firm posted record profits. Milken’s compensation in 1987 was $550 million. Now, while I couldn’t find any figures for Black’s earnings, I’m sure, while it wasn’t anywhere near what Milken was making, because Milken was the kingpin, it’s safe to assume that Black was earning millions at that time.
But by the end of 1988 the party was coming to an end - the junk bond market had crashed and Drexel’s leadership wanted to cut a deal with prosecutors. Part of the deal included Milken’s removal. Black was Milken’s loudest defender and threatened to resign if Milken was fired and hung out to dry.
But that’s what happened anyway-Drexel fired Milken, and made a settlement in early 1989, pleading guilty to six felony counts of securities fraud and mail fraud and had to pay $650 million in fines, the largest penalty ever imposed on a securities house at that time. Milken was indicted on 98 counts – racketeering, securities fraud, and lots more. Black avoided prosecution.
And despite his earlier threat Black stayed at Drexel but by now the company was in a death spiral- revenue had collapsed, its reputation was in ruins, executives were leaving in their droves and Drexel were so desperate to hold onto Black, that despite their precarious financial situation, they paid him a bonus of $16.5 million, bringing his total compensation that year to over $20 million, making him the highest paid person in the company at just 38 years old.
In 1990 Milken pleaded guilty to six counts of securities and tax violations. Between civil lawsuits and fines he paid out over $1 billion and he ended up serving 22 months in jail.
Also in 1990, Drexel filed for bankruptcy.
Black together with other Drexel executives, set up Apollo. And Credit Lyonnais, a state owned French bank came to him looking to do Mergers and Acquisitions- but Black told them that the M&A market was dead- so he recommended that they go into the business of buying loans.
You see, when the junk bond market crashed, many of the companies it had fueled were in trouble. So Black saw an opportunity. Basically, the junk bonds that Black sold high while at Drexel, he was now going to buy low at Apollo.
That then gave him 2 options- if the companies whose debt he bought thrived, he could resell the debt and make a big profit. Or if the companies didn’t do well, he could swap the debt for big chunks of stock and take control.
And this is key to Black's overall success- he’s very good at reading, at understanding volatile markets and then working out how to profit from them. Here's a quote from him: “We’ve actually made our most money during recessions. Everybody else is running for the doors, and we’re backing up the trucks.” And of course this makes total sense, it’s not rocket science- the best time to make huge profits is when the markets are at their lowest, but of course most investors, and banks and investment firms will have lost so much as a result of a crash, that they just can’t reinvest. That’s the nature of boom and bust cycles.
So with the backing of Crédit Lyonnais, Apollo’s first big deal was when they bought the loans of Executive Life, a California insurer that had been one of Milken’s biggest clients. By 1991 it had collapsed. Their junk-bond portfolio had a face value of about $6 billion. Apollo bought it for $3.25 billion- Black knew that the value of the portfolio would go up once the bond markets stabilised- and he was right- within 2 years the portfolio was worth over $5 billion.
As it grew Apollo also built a reputation for pulling companies out of bankruptcy and building them back up. Some of their more notable early successes included Samsonite- cost them $106 million - and was eventually sold for $1.7 billion. They had big successes with Allied Waste, Telemundo, Vail Resort and many more.
Now by the early 2000s, most of the founding partners had left Apollo and set up competing firms leaving Black in charge, but helping him grow Apollo were two younger and very sharp protégés who had worked under Black at Drexel: Josh Harris and Marc Rowan. Harris is an aggressive tightly wound dealmaker, while Rowan is far more cerebral, a brilliant financial engineer with a knack for creative problem-solving.
For a long time Black had refused to share equity with them, but fearing that he’d lose Harris and Rowan, and also acknowledging the central roles they played in Apollo’s success, in 2007 they got equity and were later named as cofounding partners- so Apollo’s success over the last 25 years has been shared, it’s not all down to Black.
On Wall Street, Apollo earned the reputation as the “grim reaper” of private equity. While KKR and Blackstone bought stable businesses, Apollo bought trouble and risk. They loaded companies with debt, cut costs to the bone, and tried to extract value. But it didn’t all go their way, and Black's timing and ability to read the markets hasn’t always been spot on. In 2006 and 2007 they made some very big investments buying Harrahs Entertainment, the owners of Caesars casinos, Claire’s, Linens ’n Things. They paid top dollar because remember- this was at the height of the financial bubble and of course that burst spectacularly in 2008 and now these highly leveraged companies were in huge trouble. Linens ’n Things went bankrupt. Claire’s struggled. The $30 billion buyout of Caesars Palace collapsed under debt and that debacle dragged on for years.
I’m actually reading a book at the moment called The Caesar’s Palace Coup, it outlines in great detail the aggressive and very, very questionable financial restructuring methods that Apollo used in the Caesar’s deal. And while they booked significant losses from those boom time acquisitions, through their aggressive and controversial tactics and some very complicated financial engineering, they definitely minimized their losses.
But as mentioned, Black is very good at understanding that every crisis brings with it opportunities, and so while in 2008 others panicked, Apollo raised $20 billion and bought up distressed assets that banks were unloading at fire-sale prices.
Also as a result of the crash, tighter regulations limited how much risk traditional banks could take on their balance sheets. So of course Apollo, sensing an opportunity, stepped in providing lending and credit services that look a lot like what banks do — but without being regulated as tightly as banks. It’s known as “shadow banking” and this side of Apollo's business has grown from $20 billion in 2008 to about $400 billion by 2024
In 2011 the company floated and Black’s stake was valued at over $1 billion. And that has grown exponentially over the last 14 years
One of the investments that I really liked was when they took over Hostess brands- the company behind Twinkies- it went bankrupt in 2012, Apollo bought it for $410 million, invested an additional $250 million- but of course most of it was financed with debt- their equity investment was just $186 million, they put the right people in place, turned it around and sold it a few years later for $2.3 billion
Why I like that particular investment is because it’s something tangible- you know, they bought an iconic brand that was on its knees and turned it around- brilliant, because most of Apollo's business now just seems like a whole load of boring financial stuff. Private equity is responsible for just 25% of the firm while the remainder is dedicated to life annuities, reinsurance and the alternative credit or shadow banking.
But whatever they’re doing, it's been great for the 3 main partners- at the time of recording Marc Rowan has a net worth of $8 billion, while Josh Harris is worth $11 billion- his additional wealth comes from his ownership or part ownership of sports teams- the Washington Commander NFL team, the Philadelphia 79’ers in the NBA, New Jersey Devils in the NHL and Crystal Palace in the Premier League.
Leon Black’s current net worth $14 billion.
So what is Black spending all his money on? Well art for one thing. Picture the scene—it’s 2012. Sotheby’s, May 2nd, New York- and Edaward Munch’s The Scream is up for sale- I didn’t know this but there are actually 4 versions of this painting and this is the only one that was in private hands. The auction kicks off at $40 million. Five bidders jump in. As the price pushes past $80 million, 3 pull out. Just Black and one other remain. The hammer drops at $119.9 million for Black, at the time, the most expensive artwork ever sold at auction. Black has one of the most prized art collections in the world, valued at over $1 billion and includes Van Gogh, Rapahael, Cezanne, Turner and many, many more.
And of course with this wealth comes prestige. In 2018, Black became chairman of MoMA after donating $40 million to its expansion. So we’re moving into the 2020’s and Black is at the very height of his powers - he is without doubt one of Wall Street's Masters of the universe- revered and feared in business while also sitting at the top table in terms of New York's cultural and social elite.
And then it all comes crashing down.
October 13th, 2020, The New York Times report that Black had paid Jeffrey Epstein at least $50 million dollars since 2008- in other words, after Epstein had been convicted for soliciting prostitution from a teenage girl.
Now as a result of this story, Apollo’s board hired a law firm to investigate, and the findings were even worse than what had been reported in the New York Times article because it showed that between 2012 and 2017, Black had paid Epstein $158 million as well as a $30 million loan- all of the money came from Black’s personal coffers, none came form Apollo.
Initially in 2019, when Epstein died and rumours about Black's relationship with him first surfaced, Black said that he had a very limited relationship with Epstein. That was not true.
And as more information came out Black acknowledged that he knew Epstein since the mid 1990’s. Details from Epstein's calendar show that Black had over 100 meetings with him since Epstein's release from jail in 2008 - so he had more scheduled meetings with Epstein than anyone else -the meetings were at Epstein's mansion or at Black’s offices, so they weren't secret meetings.
Their relationship started to deteriorate in 2016 over a dispute about fees that Epstein said were owed to him and they stopped communicating in 2018.
In relation to Epstein's 2008 conviction for soliciting prostitution from a teenage girl, Black said he felt that Epstein had served his time and deserved a second chance.
In relation to the actual $158 million in payments that Black made to Epstein, the report commissioned by the board of Apollo found that Epstein's advice was worth anywhere from $1 billion to $2 billion in tax savings for Black.
And the report found that Epstein had provided “legitimate advice” on trust and estate planning, tax issues and matters related to Black’s extensive art collection, and other subjects. It found nothing illegal transpired between Black and Epstein.
However, the report conceded that the compensation that Black had paid Epstein “far exceeded any amounts” paid to his other professional advisers.
And those payments were made through a very elaborate web of shell companies.
Now in an excellent podcast from Tortoise Media on Epstein's relationship with Black, the point was made that Black could have gotten tax advice from a slew of highly experienced professionals- and that Epstein was not a trained tax expert. William D Cohan, a writer who I like a lot, made the same point in an article in Vanity Fair -and it’s true, Epstein had zero qualifications when it came to tax advice.
But then there was a very good article in the New Times which dug into how Epstein actually made money- they interviewed people who had worked with Epstein, including an unnamed tech executive whom Epstein helped on a tax matter and they confirmed that Epstein only worked for very wealthy people and usually charged 10% of the tax savings.
So if he saved Black $1 to $2 billion, and it must be said that the facts on these huge savings aren’t very clear, but lets call it $1.5 billion and took a 10% fee, then that $158 million dollar payment would make sense. Except of course as Willam D. Cohan points out in his article, most people find it very hard to believe.
But at the same time, there is zero evidence coming to the fore that explains what else the payments might have been for.
And if some out there are thinking- well sex, or blackmail linked to sex- well, so far the facts don’t seem to support it.
Black and his wife socialised with Epstein. Black brought Epstein into his family home
In the Tortoise podcast they said that Black visited Epstein on his island twice- and on both occasions he was accompanied by his wife and 1 or more of his children.
Now 3 very serious allegations we made against Black after this story broke.
The first was from a Russian woman who accused him of abuse. Black admitted to having had an affair with her, he had already paid her $10 million since 2015 to keep quiet and was now accusing her of blackmailing him. This woman's case was dismissed. In 2022 a woman accused him of raping her in Jefferey Epstein’s New York town house. This case was and I quote "discontinued with prejudice and without costs to any party as against the other”. The phrasing of this is very particular and based on my research and other media reporting on this it means that Black did not make any payment to settle this case.
And then in 2023 there was a third rape claim but that charge is also very problematic. For example the law firm representing this woman withdrew from the case just days before a key hearing in April 2025. That same law firm had also represented the other women who had made charges against Black that were dismissed or discontinued and Black is pursuing a malicious prosecution lawsuit against the law firm.
And in Wliiam D Cohan’s article he quotes Wall Street insiders saying the report commissioned by Apollo was a whitewash- the problem with this theory is Black wasn’t the only billionaire with skin in the game here- his 2 Apollo partners, Rowan and Harris are massively wealthy and powerful in their own right, and crucially the 3 of them have never been particularly close. Indeed Harris and Black have had a very bitter falling out. And because Apollo had nothing to do with Epstein, it’s not in Rowan’s and Harris’ interest to bury anything that could come back to severely damage them financially and reputationally- it doesn’t add up.
And look if all of this makes it look like I’m taking Black's side - I’m not. Epstein was a deplorable character and there has to be huge question marks hanging over the heads of all individuals Black, Bill Gates, everyone who continued to associate with Epstein after they knew of his 2008 conviction.
But for now, based on the facts we have at the moment, the nature of Black's relationship with Epstein, raises a lot of questions and has resulted in a lot of conjecture.
Now of course, as a result of all of this scandal, Black was forced out of Apollo and withdrew from public life. Yes, he’s still very wealthy, but the power, the prestige, they’re gone. For a man who loved Shakespeare, his fall is Shakespearean because Black lived in the shadow of his father’s dramatic death, and, this is purely conjecture, but I’m sure he vowed that his own life would be remembered for achievements, not for a shameful ending. Yet, in many ways, his fate mirrors his father’s because despite all the wealth, influence, and accomplishments, Black will likely be remembered for the scandal that brought him down.
It’s a fascinating story. And with that, let me get to an email from Sigurd, I hope I’m pronouncing that correctly who would like me to do a story Sir James Goldsmith- I just mentioned him in this story- he was one of the corporate raiders who made great use of Michael Milken's junks bonds, and Goldsmith led a fascinating life- that is a top notch story suggestion, so thanks Sigurd - watch this space.
And remember if you have any comments, any corrections or any story that you’d like us to cover, email me at: info@gbspod.com
All the best folks