Jeffrey Epstein’s Fortune May Be More Illusion Than Fact

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Jeffrey Epstein’s Fortune May Be More Illusion Than Fact

ImageProtesters held up photographs of Jeffrey Epstein, a financier facing sex-trafficking charges, outside the federal courthouse in Manhattan on Monday.CreditCreditStephanie Keith/Getty ImagesWhen federal prosecutors announced sex-trafficking charges against Jeffrey Epstein this week, they described him as “a man of nearly infinite means.” They argued that his vast wealth — and his two private jets — made him a flight risk.Mr. Epstein is routinely described as a billionaire and brilliant financier, and he rubbed elbows with the powerful, including former and future presidents. Even after his 2008 guilty plea in a prostitution case in Florida, he promoted himself as a financial wizard who used arcane mathematical models, and he often dropped the names of Nobel Prize-winning friends. He told potential clients that they had to invest a minimum of $1 billion. At his peak in the early 2000s, a magazine profile said he employed 150 people, some working out of the historic Villard Houses on Madison Avenue.Much of that appears to be an illusion, and there is little evidence that Mr. Epstein is a billionaire.Mr. Epstein’s wealth may have depended less on his math acumen than his connections to two men — Steven J. Hoffenberg, a onetime owner of The New York Post and a notorious fraudster later convicted of running a $460 million Ponzi scheme, and Leslie H. Wexner, the billionaire founder of retail chains including The Limited and the chief executive of the company that owns Victoria’s Secret.Mr. Hoffenberg was Mr. Epstein’s partner in two ill-fated takeover bids in the 1980s, including one of Pan American World Airways, and would later claim that Mr. Epstein had been part of the scheme that landed him in jail — although Mr. Epstein was never charged. With Mr. Wexner, Mr. Epstein formed a financial and personal bond that baffled longtime associates of the wealthy retail magnate, who was his only publicly disclosed investor.[President Trump was once a friend of Jeffrey Epstein. Now he’s “not a fan.”]Mr. Epstein’s firm, Financial Trust Company, has released no audited financial statements or performance reports to back up his claims of investment prowess. In a 2002 court filing, Mr. Epstein said he had 20 employees, far fewer than reported figures around that time. Six years later, he lost large sums of money in the financial crisis. And friends and patrons — including Mr. Wexner — deserted him after he pleaded guilty to prostitution charges in 2008.Mr. Epstein, 66, is doubtless very rich: His real estate alone — one of Manhattan’s largest private mansions, a Palm Beach estate, a Paris apartment, his own Caribbean island and a huge New Mexico ranch — is worth more than $200 million. His investment firm reported having $88 million in capital from its shareholders in 2002.VideoA registered sex offender known for his lavish lifestyle and high-profile connections to the rich and powerful, the financier Jeffrey Epstein is facing new charges that he exploited dozens of young girls for sex acts.CreditCreditRick Friedman/Corbis, via Getty ImagesHe appears to have been doing business and trading currencies through Deutsche Bank until just a few months ago, according to two people familiar with his business activities. But as the possibility of federal charges loomed, the bank ended its client relationship with Mr. Epstein. It is not clear what the value of those accounts was at the time they were closed.A lawyer for Mr. Epstein, Reid Weingarten, did not respond to messages seeking comment.Early InfluencesMr. Epstein’s big break came when he was teaching math at the Dalton School, a prestigious Manhattan private school, in the mid-1970s. He had tutored the son of Alan Greenberg, the chairman of the mighty investment bank Bear Stearns, and ended up joining the firm.He left after a few years. Mr. Epstein told Securities and Exchange Commission lawyers in an insider-trading investigation that there were three reasons, according to a 2003 Vanity Fair article. He had been disciplined over lending money to a friend to buy stock, and there were irregularities with his expense account and rumors he was having an affair with a secretary. (Mr. Epstein testified that he had known nothing about any insider trading, and neither he nor anyone else at the firm was charged.)In 1981, he struck out on his own. He founded his own advisory firm, Intercontinental Assets Group, which he ran out of his apartment on East 66th Street. In 1987, he met Mr. Hoffenberg, then the chief executive of Towers Financial Corporation.Mr. Hoffenberg said in an interview that he had met Mr. Epstein in New York at the height of the 1980s takeover boom, when Ivan Boesky’s “Merger Mania” was a national best seller. Towers Financial was buying unpaid debt from hospitals, nursing homes and phone companies and trying to collect it — a distinctly unglamorous niche. Mr. Hoffenberg hired Mr. Epstein as a consultant for $25,000 a month, and the two men refashioned themselves as corporate raiders.Two takeover efforts were spectacular failures. They made a run at Pan Am, and a news release issued by Towers in November 1987 listed their advisers as John Lehman, a former secretary of the Navy; John N. Mitchell, the attorney general during the Nixon administration; and Edward Nixon, former President Richard M. Nixon’s brother. But the bid collapsed after a jetliner exploded over Lockerbie, Scotland, which sent Pan Am into bankruptcy.Mr. Epstein and Mr. Hoffenberg also made a run at Emery Air Freight — an “epic failure,” according to an affidavit filed by Mr. Hoffenberg in a 2018 lawsuit against Mr. Epstein, which was brought by investors defrauded in Mr. Hoffenberg’s Ponzi scheme. The suit was dismissed.ImageAmong his valuable properties, Mr. Epstein owns one of Manhattan’s largest private mansions, at 9 East 71st Street.CreditYana Paskova for The New York TimesOne takeover bid involving Mr. Epstein met with success: He told Vanity Fair in 2003 that he had invested $1 million, including $300,000 of his own money, in a raid on Pennwalt, a chemical processing firm in Philadelphia. Pennwalt eventually accepted an offer from a French company that was nearly double the price at which the investor group began acquiring shares, giving Mr. Epstein a profit.A Rapid RiseIn 1988, when Mr. Epstein was still working for Mr. Hoffenberg, he formed the investment firm that would be the nexus for his connections to powerful people: J. Epstein & Company. One of those people, Mr. Wexner, would become the apparent foundation of Mr. Epstein’s riches.Mr. Epstein met — and evidently charmed — Robert Meister, the vice chairman of the insurance giant Aon, on a flight from New York to Palm Beach, Fla., according to an account by the novelist James Patterson in his nonfiction book “Filthy Rich.”Mr. Meister, who could not be reached for comment, introduced Mr. Epstein to Mr. Wexner. There appears to have been a near instant rapport.Robert Morosky, who had been the vice chairman of The Limited, was surprised Mr. Wexner took to Mr. Epstein so readily. “Everyone was mystified as to what his appeal was,” Mr. Morosky said. “I checked around and found out he was a private high school math teacher, and that was all I could find out. There was just nothing there.”At the time, Forbes estimated Mr. Wexner’s net worth at $1.8 billion, placing him 52nd on its billionaires list. Managing his money would be a lucrative business, but Mr. Epstein did more than that: A corporation controlled jointly by the two men bought a mansion on East 71st Street in Manhattan in 1989 for $13.2 million, at the time the highest price ever paid for a Manhattan townhouse, according to property records.Mr. Epstein was also closely involved with Mr. Wexner in a corporation that oversaw the transformation of New Albany, an Ohio suburb near The Limited’s Columbus headquarters, into a manicured, neo-Georgian utopia. In 1998, they appeared as co-presidents on the New Albany Corporation’s Ohio registration. Both men owned mansions in the community.ImageWith Leslie H. Wexner, a retail magnate, Mr. Epstein formed a financial and personal bond that baffled Mr. Wexner’s longtime associates.CreditFred Squillante/The Columbus Dispatch, via Associated Press“I think we both possess the skill of seeing patterns,” Mr. Wexner told Vanity Fair in 2003. “But Jeffrey sees patterns in politics and financial markets, and I see patterns in lifestyle and fashion trends.”By 1998 — the year he bought Little St. James, a 70-acre island off St. Thomas — Mr. Epstein had renamed his firm Financial Trust Company and moved it to the Virgin Islands. Mr. Epstein said he had told clients that he accepted only investments greater than $1 billion.A corporate disclosure form from 2002 portrays a less impressive picture. Thomas Volscho, a sociology professor at the College of Staten Island who has been researching for a book on Mr. Epstein, recently obtained the form, which shows Financial Trust had $88 million in contributions from shareholders. In a court filing that year, Mr. Epstein said his firm had about 20 employees, far fewer than the 150 reported at the time by New York magazine.There were clients other than Mr. Wexner. Mr. Epstein performed some services for the Johnson & Johnson heiress Elizabeth Johnson, showing up as a co-trustee on 14 parcels of land owned in Dutchess County, N.Y. Most of the deeds were recorded in 1998, but Mr. Epstein resigned as a trustee for Ms. Johnson’s revocable trust at the end of that year, according to a document reviewed by The New York Times.It was also in 1998 that Mr. Epstein took sole possession of the 71st Street mansion. Mr. Wexner conveyed his interest in the corporation that owned it to one controlled by Mr. Epstein for $20 million, according to a person familiar with the transaction.By 2003, Mr. Epstein had the means to pledge $30 million to Harvard University to fund a program in evolutionary dynamics, seeded with a $6.5 million gift.A Stunning FallBut the financial crisis cost Mr. Epstein some of his fortune, and allegations of sexual abuse with teenage girls cost him some of his friends.ImageSteven J. Hoffenberg, a onetime owner of The New York Post, was convicted of running a $460 million Ponzi scheme.CreditDanny Johnston/Associated PressBear Stearns — the bank that had given Mr. Epstein his start — was still among his investments when the crisis hit. According to a lawsuit he later filed against the bank, Mr. Epstein controlled about 176,000 shares of Bear Stearns, worth nearly $18 million, in August 2007.Mr. Epstein sold 56,000 shares at $101 each that month. He sold the remaining 120,000 shares in March 2008 as the firm was collapsing — 20,000 at $35 and the rest at $3.04, losing big. He also lost about $50 million in one of Bear’s hedge funds.By the time Bear Stearns came apart, Mr. Epstein was at the center of his first abuse case. He pleaded guilty to prostitution charges in 2008, receiving a jail sentence that allowed him to work at home during the day but also required him to register as a sex offender.A spokeswoman for Mr. Wexner said he “severed ties” with Mr. Epstein 12 years ago. But not everyone immediately abandoned Mr. Epstein after he was charged in 2006.Mr. Epstein was an investor in Environmental Solutions Worldwide, a maker of emission-control products, in 2011 with several people close to Leon Black, the billionaire founder of the private equity firm Apollo Management, including Mr. Black’s four children. It was for that company that Mr. Epstein’s company filed its lone S.E.C. disclosure form.The company’s current shareholders are not publicly available; it no longer trades on a registered exchange, and does not have to make public filings.Mr. Epstein was also listed as a director of the Debra and Leon Black Family Foundation until 2012, although the foundation said he had resigned in 2007. “The inaccuracy was discovered and corrected,” the foundation said in a statement.In recent years, Mr. Epstein was a client of Deutsche Bank’s private-banking division, which caters to ultrawealthy individuals and families. The bank provided Mr. Epstein with loans and wealth-management accounts, as well as trading services through its investment banking arm, according to two people familiar with the relationship. At one point, compliance officers at Deutsche Bank raised concerns about transactions by Mr. Epstein’s company, because he posed reputational risk to the bank, the people said.Deutsche Bank managers overruled their concerns, the people said. They noted that there was nothing illegal about the transactions and that Mr. Epstein was a lucrative client.Earlier this year, the bank ended its relationship with Mr. Epstein.Sapna Maheshwari and Emily Steel contributed reporting.A version of this article appears in print on , Section A, Page 1 of the New York edition with the headline: Epstein’s Wizardry, and Fortune, May Be More Illusion Than Fact. Order Reprints | Today’s Paper | Subscribe

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