The Rise and Fall of
Leon Black
“Behind every great fortune there is a
great crime.”
Honoré de Balzac
Financial journalist
and former investment banker William Cohan brings together the intertwined
history of financier Leon Black and Apollo Global Management, the private
equity firm he founded. The most formative event in Leon Black’s life was the
suicide of his father Eli in 1975. The senior Black founded the 1960’s
conglomerate United Brands which fell to hard times in the early 1970’s. It was
Eli who convinced him to give up on his love of art history, which came from
his mother and aunt, to go to Harvard Business School. Nevertheless, his
knowledge of art and the big bucks he made enabled him to accumulate one of the
largest private collections in the world whose value exceeds one billion
dollars.
Black gets his start
as a young associate at Michael Milken’s Drexel Burnham’s junk bond empire. By
the mid-1980’s Milken became the “King of Wall Street” by first using high
yield bonds to finance hitherto noncredit worthy smaller companies, especially
in cable television (See: https://shulmaven.blogspot.com/2025/09/my-review-of-john-malones-born-to-be.html ) Black expanded the
use of junk bonds to acquire established companies through the use of “highly
confident letters” that sent shivers down the corporate establishment. It was
that innovation that made Black’s reputation at Drexel.
However, Drexel and
Milken were soon charged with securities law violations that brought down the
firm and sent Milken to jail in 1990. Out of the wreckage Black formed Apollo.
It was here where the great crime took place. Apollo received funding from
France’s Credit Lyonnaise to acquire the junk bond portfolio of Executive Life
Insurance that was in receivership in California. Executive Life was one of
Drexel’s biggest clients and Black had intimate knowledge of its portfolio. As
the junk market recovered Apollo made a fortune and its reputation. Although
Apollo was never charged, Credit Lyonnaise was charged with violating state and
Federal banking laws and ended up paying a $770 million fine.
Working hand and glove
with Black in the early 1990’s Marc Rowan, now head of Apollo, and Josh Harris
became key members of the firm. Although they were not exactly cofounders,
Black gave them the title in the early 2000’s and made them billionaires. One
of the keys to Cohan’s book is that Black, Rowan, and Harris talked freely to
him. Thus, we get here inside views as to how Apollo grew from being primarily
a private equity company to a leader in private credit. It was Rowan’s idea to
establish a captive annuity company that would buy Apollo’s debt products. That
company, Athene, has become a leader in the sale of annuities.
The advantage of
having an insurance company to hold private debt is that it is not subject to
the vagaries of short-term finance. It also has the benefit of being regulated by
the generally understaffed state insurance departments. The risk here is that
should private debt experience a wave of defaults the annuitants and the backup
state insurance funds would be at risk.
After riding high for
years, Leon Black got caught up in the Jeffrey Epstein sexual predator scandal.
It was discovered that he paid Epstein a staggering $158 million fee for tax
advice on his estate plan. To be sure Epstein found a way to correct a major
mistake that Black’s white shoe law firm made, it hardly justifies the $158
million. Cohan goes into unsubstantiated reports of Black’s sexual
proclivities, too much for my taste, but I guess it sells books and might
explain the $158 million.
Then there is Black’s
long time Russian paramour who claimed that Black sexually abused her. Black
paid her off for years, but then she broke her nondisclosure agreement and the
whole sordid mess became public. With that the Museum of Modern Art removed
Black as its chairman but left him on the board. Why? Cohan suggests they want
his art collection.
One of the great
attributes of Cohan’s book is that he goes into great detail about the
successful and failed deals that Apollo was involved in. Here his investment
banking knowledge is crucial. Of particular note is the dispute with the
Huntsman family of Utah and their eponymous chemical company. It was a knock
down drag out fight that Huntsman won, but afterwards the relationship remained
cordial.
Cohan makes all his
leading players come alive. It becomes very clear that Black, Rowan, and Harris
continue to have money to burn and they all show it. As a postscript Leon Black
continues to ignore a congressional subpoena to discuss his involvement with
Epstein.
