Apollo seeks to tame investor concerns over CEO’s ties to Epstein

In this news, we discuss the Apollo seeks to tame investor concerns over CEO’s ties to Epstein.

(Reuters) – Apollo Global Management Inc said on Wednesday that it will launch an independent review of CEO Leon Black’s ties to deceased financier and convicted sex offender Jeffrey Epstein, as some of the private equity firm’s investors released statements for the first time expressing their concerns.

Black wrote to Apollo fund investors last week that he regretted making payments to Epstein for what he called “professional services,” but denied any wrongdoing or improper conduct. related to his professional and social relations with him.

Black, whose net worth is set by Forbes at $ 7.8 billion, was responding to a New York Times article that said he had wired Epstein between $ 50 million and $ 75 million over the past decade. The 69-year-old private equity veteran said the payments were for advice on estate planning, taxes and philanthropy.

The news sent shockwaves through Wall Street, where Apollo reigns as one of the largest investors in corporate credit and debt buybacks, with $ 414 billion in assets under management at the end of June.

The $ 57 billion Pennsylvania Public School Employee Retirement System (PSERS) said on Wednesday it would not consider any further investment in the Apollo funds after discussing with the buyout company Black’s involvement. with Epstein.

“PSERS is closely following the ongoing legal issues and the new internal Apollo investigation,” PSERS spokesman Steve Esack said in a statement.

A spokeswoman for New York City Comptroller Scott Stringer, who manages the city’s five public pension funds totaling approximately $ 228.67 billion in assets, said in a statement they were “troubled. By these reports. “We are monitoring the situation closely in accordance with our fiduciary duty.”

The Financial Times was the first to publish the PSERS commentary. Bloomberg News reported that Cambridge Associates, which manages about $ 32 billion on behalf of institutional investors, said it may stop recommending Apollo funds to investors. Cambridge Associates declined to comment.

Black, who co-founded Apollo in 1990, asked the board’s conflict committee, made up of independent board members, to retain an outside lawyer to perform a “thorough review” of the information he had shared about his. relationship with Epstein, Apollo said in a statement. regulatory filing Wednesday.

The board committee appointed the law firm Dechert LLP to conduct the review.

Apollo stock closed 2.6% higher on Wednesday, after falling 13% last week.

“I think the damage has been done to the stock and there is a tendency for investors to hold on short term to get some clarity to remove that overhang,” Jefferies analyst Gerald O’Hara said.

Epstein, who was charged by federal prosecutors with sex trafficking last year, committed suicide in his New York jail cell in August 2019, ahead of his trial.

Black and two other Apollo co-founders, Joshua Harris and Marc Rowan, control 52.9% of the private equity firm, according to regulatory documents.

“From a common sense point of view, it’s hard not to wonder whether the directors of a controlled company will exercise true independence when investigating allegations against the controlling party,” said Eric Talley, professor at Columbia Law School and expert in corporate governance.

Talley said he needed to know more about the organization of Apollo’s hiring of an independent lawyer to assess its effectiveness.

Reporting by Anirban Sen in Bengaluru and Chibuike Oguh and Jessica DiNapoli in New York; Edited by Howard Goller, Tom Brown and Matthew Lewis

Original © Thomson Reuters

Originally posted 2020-10-21 17:06:10.

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