Apollo reiterates denial of any ties to Epstein

Apollo Global Management Inc.'s top executives reiterated Oct. 29 that the firm did not do business with Jeffrey Epstein but acknowledged that Chairman and CEO Leon Black's business relationship with the financier and registered sex offender could cut into fundraising.

Apollo's conflicts committee hired law firm Dechert LLP and is currently conducting a review of Mr. Black's relationship with Mr. Epstein.

Firm executives expect fundraising to slow as investors wait for the findings of an independent review, co-founder Josh Harris said Oct. 29 on a conference call to discuss the company's earnings release. He said that the conflicts committee review is "an important step."

He said that Apollo has "long and durable relationships" with its clients and they are awaiting the results of the review.

Right now, Apollo is focused on its investment strategies, Mr. Harris said.

Some investors are already taking action and have suspended future investments with the firm.

The $59 billion Pennsylvania Public School Employees' Retirement System, Harrisburg, and the $36 billion Connecticut Retirement Plans & Trust Funds, Hartford, each said they will not consider new investments with Apollo.

PennPSERS spokesman Steve Esack said in an email that the pension system made the decision after speaking with the firm "about the ongoing legal investigations involving the late Jeffrey Epstein and his past personal financial relationship with Apollo founder Leon Black."

The "investment team informed Apollo that it will not consider any new investments at this time," Mr. Esack wrote, adding that PennPSERS "is closely following the ongoing legal issues and the newly launched internal Apollo investigation."

PennPSERS currently has $918 million committed to Apollo funds.

Gabrielle Farrell, spokeswoman for Shawn T. Wooden, Connecticut treasurer and principal fiduciary of the pension plan, said in an email: "We reviewed Apollo this spring and determined, based on a variety of due diligence criteria, they did not meet our standards for making a new capital commitment."

Although Mr. Black's connection to Mr. Epstein was not cited as the reason for not committing additional capital to Apollo, Ms. Farrell wrote that Connecticut considers "multiple factors when deciding whether or not to commit to private market funds," with an investment firm's "legal issues" being among the factors under consideration.

The CRPTF currently has a total of $250 million committed to two Apollo funds.

Consultant Cambridge Associates LLC could stop recommending Apollo, according to a report by Bloomberg. Cambridge told clients its deliberations were prompted by lingering questions over the ties between the two men. A representative for the firm declined to comment.

Martin Kelly, Apollo's chief financial officer, said in response to an analyst's question, however, that the majority of Apollo investors cannot pull their capital. Only 3% of Apollo's capital can be withdrawn in the next 24 months, Mr. Kelly said.

Some 60% of Apollo's $433.1 billion in assets under management as of Sept. 30 is permanent capital, while 90% of assets are permanent in nature with a contractual life of five years or more.

Some investors may pause new investments in the near term until a review has been completed, Mr. Kelly said.

The $416.9 billion California Public Employees' Retirement System, Sacramento, is pressing Apollo on the matter.

"Last week, CalPERS initiated a call with Apollo to discuss newly published information" regarding Mr. Black and Mr. Epstein, spokeswoman Megan White said in an email. CalPERS first contacted Apollo last year when Mr. Black's relationship with Mr. Epstein first came to light.

"We expect the general partners we do business with to follow the same core values of integrity and accountability that guide our own investment decision-making," Ms. White said.

"We are monitoring this situation closely."

CalPERS had $20.2 million invested in Apollo Global Management stock and close to $1 billion in private equity investments managed by Apollo as of June 30, 2019, according to CalPERS' most recent investment report.

And last week, during an investment committee meeting of the Illinois Teachers' Retirement System, Springfield, a trustee asked whether staff had contacted Apollo about Mr. Black's relationship with Mr. Epstein.

Scottie Bevill, senior investment officer – fixed income, said "we are watching the situation and talking often with Apollo. We are waiting for the results of the Dechert investigation to see if we need to take action."

Apollo managed a total of $570 million in multiple alts strategies for the $53.4 billion system as of Aug. 31.

In a statement during the call, Mr. Black stressed that it runs counter to his nature to speak about private matters. But after knowing all that he has learned about Mr. Epstein's "despicable conduct," Mr. Black said, "I regret working with him."

He called his relationship with Mr. Epstein a "horrible mistake on my part."

Mr. Black reiterated that neither Mr. Epstein nor any company that he controlled ever invested in any of Apollo's funds. Mr. Epstein did estate planning, tax, and restructuring of art entities and other work for Mr. Black between 2012 and 2017, for which Mr. Black paid him millions of dollars annually.

"There's never been an allegation by anyone that I engaged in any wrongdoing," he said. "Any suggestion of blackmail or any other connection to Epstein's reprehensible conduct is categorically untrue."

It was in 1996 that Mr. Black said he first met Mr. Epstein, who was "advising prominent clients," including heads of state, a U.S. Treasury secretary, Nobel laureates and noted philanthropists.

He said he was not aware of Mr. Epstein's criminal conduct until a 2006 Florida criminal investigation.

After Mr. Epstein was released from jail in 2009 and resumed his advisory business working with "prominent individuals," Mr. Black said he decided to give him a second chance.

"This was a terrible mistake," Mr. Black said. He added that he did not learn of Mr. Epstein's "repulsive conduct" until late 2018.

Mr. Black said he is cooperating fully with the independent review and requested that it confirm information he conveyed about his relationship with Mr. Epstein.

"I believe it will reassure stakeholders that they have the relevant facts and that everything I have said is accurate and truthful," he said.

On Oct. 21, a filing with the Securities and Exchange Commission said Apollo hired law firm Dechert to conduct a "thorough, independent review" of Mr. Black's relationship with Mr. Epstein.

Apollo's board of directors on Oct. 20 asked its conflicts committee, made up of independent directors, to retain outside counsel to independently confirm information Mr. Black has given about his professional relationship with Mr. Epstein.

Mr. Epstein was found dead in his cell at the Metropolitan Correctional Center in New York on Aug. 10, 2019, awaiting trial on federal charges of operating a sex-trafficking ring.

Christine Williamson contributed to this story.