More questions about how Jeffrey Epstein got island-owning rich

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Ever since the release of the movie “All the President’s Men,” journalists and investigators have taken to heart the advice Bob Woodward got from his famous source Deep Throat: “Follow the money.” But few people have made that as difficult as Jeffrey Epstein, who today sits in jail, accused of sex-trafficking underage girls.

(Disclosure: My wife, who runs a small public relations firm, is representing a number of Epstein’s accusers. Her work does not touch upon Epstein’s finances.)

Instructed by the court to list his assets, Epstein turned in a financial disclosure form claiming a net worth of more than half a billion dollars. He listed $379 million in cash and investments, and valued his six (yes, six) properties at $181 million. There were no further details. At Monday’s bail hearing, U.S. District Judge Richard Berman described the document as “cursory” and unhelpful.

In the short term, the judge and the government need a full accounting of Epstein’s wealth as part of the bail determination. As Assistant U.S. Attorney Alexander Rossmiller put it during Monday’s hearing, “The first question for a defendant of this tremendous means is how much money does he have, where is it, what are the accounts, is it in foreign accounts, how much is in diamonds and art.” He added, “These are all details that would be necessary for the court to consider” in the bail application.

Plainly, the government will need to dig deep to gain a complete understanding of Epstein’s wealth. Under the criminal forfeiture statute, it has the right to take any asset that can be connected to a crime — in Epstein’s case, his properties, if it is proved that underage girls were abused there. It will also want to know if he acquired any of his wealth from trafficking. That money could also be taken away by the government.

Finally, the accusers will want to know the details of Epstein’s wealth because many of them will undoubtedly seek money damages via lawsuits. Paul Cassell, a lawyer representing one of the victims, told the Washington Post that “it’s easy to foresee 160 victims in this case and possibly more.” He added that Epstein’s “exposure” from such lawsuits could exceed $1.5 billion.

How difficult will it be to dissect Epstein finances if he doesn’t cooperate? Pretty hard. His primary charitable foundation, the J Epstein VI Foundation — which made grants to scientists, including the $6.5 million he donated in 2003 to support Harvard mathematician Martin Nowak — does not appear to have ever filed a financial disclosure form with the Internal Revenue Service, as most foundations are required to do. His company, the blandly named Financial Trust Co., is equally invisible. It has no website, no record of any transactions, and no filings with the Securities and Exchange Commission.

The lack of an SEC registration strongly suggests that Epstein never managed money for billionaires (or anyone else) as he long claimed. But after making phone calls for the last few days, I’m pretty sure he did do something useful for the superwealthy. He was a tax and estates adviser — the kind who has a knack for finding loopholes to help clients minimize their taxes. And he was said to charge a small fortune for his services.

Still, how many tax advisers do you know who have a net worth of more than $500 million, no matter how wealthy their clientele? Thus, the mystery of how Epstein became rich enough to own six properties, plus a private jet, plus all the rest of it remains just that: a mystery.

I’ve spent the last few days scouring federal disclosure documents to see what they might tell us about Epstein’s finances. Although he never registered his biggest foundation with the IRS, he routinely filed annual IRS forms — so-called 990s — for two smaller foundations. Because he was a trustee or co-trustee on a number of trusts affiliated with Leslie Wexner, the billionaire chairman of L Brands, his name shows up in virtually every L Brands 13D up until 2007, when Epstein went to prison as part of a plea deal on state prostitution charges in Florida. Although the documents offer fewer answers than one would hope for, they raise a host of questions worth pursuing. I’ve contacted Epstein’s team for a comment, but they have not responded.

What do the disclosure documents tell us about the relationship between Epstein and Wexner?

As many stories have pointed out since Epstein’s arrest on July 6, Wexner was tightly connected to Epstein. Indeed, in the two major profiles of Epstein published in 2002 and 2003 — in New York magazine and Vanity Fair — Wexner is quoted effusively praising Epstein.

(Late Monday, Wexner sent an email to L Brands’s employees saying he had been unaware of Epstein’s “illegal activities” and “regretted that my path ever crossed his.”)

In a story published Saturday, Bloomberg News documented how, after Wexner discovered him in the late 1980s, Epstein became a kind of aide de camp to the billionaire. He was a board member of several of Wexner’s foundations and the president of N.A. Property Inc., a company Wexner started to create the town of New Albany, Ohio, in suburban Columbus, where Wexner lives.

But the L Brands financial disclosure documents from the 1990s and 2000s suggest that their relationship was even closer than that. In Schedule 13D documents filed with the SEC from that era, Epstein is listed as a trustee — sometimes with Wexner, sometimes by himself — on a handful of Wexner trusts, including several for Wexner’s children. Some of the transactions in the 13Ds raise the possibility that Wexner may have paid Epstein by letting him sell L Brands stock out of those trusts.

For instance, in a 13D filed in late March 2002, Epstein is listed as trustee or co-trustee for the Wexner Children’s Trust II, which held 1.3 percent of L Brands stock, as well as something called Health and Science Interests II, which held 3 percent of the shares. (Wexner himself held 15 percent of the stock.) The document shows that on March 26, Wexner moved 15 million shares, worth over $250 million, from the Wexner Children’s Trust, which he solely controlled, to the Health and Science Interests II, where he was a co-trustee with Epstein. The next day, Health and Science Interests II sold 49,800 shares at $17.50 a share.

It is possible that the sale was simply a diversification move — though, as I noted earlier, Epstein had never registered with the SEC as an investment professional. It seems more likely that it was a way to put money in Epstein’s pocket. There are a half-dozen 13Ds that show a similar pattern: Wexner transfers L Brands stock from trust he solely controls to one where Epstein is a trustee. Within days, the Epstein-managed trust sold the stock. (An L Brands spokesperson would not respond to any questions about Epstein’s involvement in Wexner’s trusts.)

It is impossible to know for sure whether the proceeds from those stock sales wound up in Epstein’s pocket, because we don’t have access to his tax returns. But it is a very real possibility.

What can we learn about Epstein from his foundation disclosures?

For more than a decade, Epstein had a foundation called the C.O.U.Q. Foundation Inc. At its peak it had more than $20 million in assets. There’s no particular theme to Epstein’s donations: In 2002, for instance, according to the C.O.U.Q. 990, he gave $400,000 to the Institute for Advanced Study, $50,000 to the University of Maryland, $50,000 to the Nelson Mandela Children’s Fund, and $25,000 to the Edge Foundation, an offbeat nonprofit where he was friends with its creator John Brockman.

What is striking about the two Epstein foundations that filed 990s is that they don’t contain any contributions from Epstein himself, despite his supposed wealth. In the case of C.O.U.Q., its entire corpus came from — you guessed it — Wexner.

In late February 2002, Wexner, through the Wexner Children’s Trust, gave the C.O.U.Q. Foundation 600,000 shares of Too Inc., worth $11.2 million. (Too Inc. was the stock of the Limited Too.) A year later, Wexner made a $10 million donation to C.O.U.Q., this time through the Wexner Charitable Fund. The three trustees of the Wexner Charitable Fund were Wexner; his wife, Abigail; and Epstein.

But why? Why would Wexner give millions to Epstein’s charity? Wexner’s best-known charity, the Wexner Foundation, was devoted to “developing Jewish professionals, volunteer leaders and leaders in Israel.” In 2002, it had a corpus of over $80 million. Wexner gives it millions of dollars every year.

So why did he feel the need to contribute $21 million to Epstein’s foundation? Was it a form of payment? Documents alone cannot answer this question. They can only raise it.

Did Epstein really donate $46 million to a Wexner foundation prior to going to prison in 2008?

Technically, the answer is yes. But the transaction is a head-scratcher. Here’s the sequence of events: In December 2007, a new foundation was established called the YLK Charitable Fund. It had two trustees: Wexner’s wife, Abigail, and Peggy Ugland, a longtime Wexner employee. This took place two months after Epstein had agreed to his now infamous plea deal in Florida. Few people knew about the plea, however, because the agreement was still under seal.

In January 2008 — one month later — Epstein transferred $46 million to Abigail Wexner’s new foundation, $14 million of which came from C.O.U.Q. and the rest from Epstein’s company. Among the conditions: YLK had to account for Epstein’s money “separately on its books and records.”

Just three years later, with Epstein out of prison, the YLK Charitable Fund shut down, having made exactly two donations. The money that remained — some $33 million — was then folded into yet another of Wexner’s foundations, the Wexner Family Charitable Fund.

Why would Abigail Wexner set up a foundation solely to accept money from Epstein? Why would it remain largely dormant for the next three years? What happened to the money once it was transferred to the Wexner Family Charitable Fund? Again, it is impossible to know simply from reading the documents. But it is a question investigators are likely to ask as they attempt to get to the bottom of Epstein’s finances.

Did Epstein win the Powerball lottery while he was in prison?

It’s not a completely crazy question. In August 2008, shortly after Epstein began his 13-month prison sentence in Florida, an entity called the Zorro Trust submitted the winning ticket for an $85 million jackpot. The ticket had been bought at a convenience store in Altus, Oklahoma. (The trust took the money as a lump sum, which came to $29.3 million after taxes.)

As it happens, Epstein had an entity called the Zorro Trust; he used it to make donations to politicians in New Mexico, where he had a ranch called — yep — the Zorro Ranch. (A federal prosecutor in New Mexico has begun an investigation into whether Epstein abused underage girls at his ranch.)

A few years ago, a lawyer representing some alleged victims took the prospect of Epstein winning the lottery seriously enough that he brought it up during a deposition with Epstein’s former pilot. But the Oklahoma City newspaper, the Oklahoman, did a little more digging and discovered that the anonymous winner worked in a grocery store across the street from the convenience store where the winning ticket was sold. Apparently, she decided to use the same name for her trust as Epstein did for his.

Not everything’s a mystery. Sometimes, it’s just a coincidence.

Bloomberg News
Wealth management Tax planning Crime and misconduct Trusts Estate planning IRS