Exclusive: Investor group says Apollo director overseeing Epstein review
is not independent
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[October 30, 2020] By
Jessica DiNapoli
NEW YORK (Reuters) - A group representing
U.S. pension funds says the head of an Apollo Global Management Inc
committee overseeing the investigation of CEO Leon Black's ties to late
financier and convicted sex offender Jeffrey Epstein is not independent.
The group told Reuters that the chairman of the committee, Michael Ducey,
was not independent because of his previous dealings with the buyout
firm.
Ducey was on the board of printing paper manufacturer Verso Paper Corp,
which was controlled by Apollo, from May 2006 until July 2016, according
to corporate disclosures.
The head of the Council of Institutional Investors (CII), which
represents pension funds, said it disagreed with Apollo's
characterization of Ducey as an independent board director, because he
was on the board of a company owned by the private equity firm less than
five years ago.
"CII believes a five-year look-back helps avoid conflicts or the
appearance of a conflict of interest," executive director Amy Borrus
said in an email.
CII, whose members include investors in Apollo's funds, does not keep
track of how many companies adhere to its guidance. It states on its
website that its guidelines are not binding on its members or
corporations.
The New York Stock Exchange, where Apollo is listed, asks companies to
consider business relationships going back three years when assessing
independence, rather than five as CII recommends.
An Apollo spokeswoman said Ducey met the requirements to serve as an
independent director set by the New York Stock Exchange as well as the
U.S. Securities and Exchange Commission (SEC).
"We are confident that our practices for director independence are
consistent with best practices followed generally by publicly listed
companies, including companies in our industry," the spokeswoman said.
Ducey and a spokeswoman for Black did not respond to requests for
comment.
Black controls Apollo, which he co-founded in 1990 and turned into one
of the world's largest private equity firms. Last week, he asked Ducey
and two other Apollo board directors to independently verify that he had
not engaged in any wrongdoing. The three directors, who comprise
Apollo's so-called 'conflicts committee', hired law firm Dechert LLP to
help them with their review.
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Leon Black, Chairman, CEO and Director, Apollo Global Management,
LLC, speaks at the Milken Institute's 21st Global Conference in
Beverly Hills, California, U.S. May 1, 2018. REUTERS/Lucy Nicholson
Black said earlier this month that he regretted payments to Epstein of between
$50 million and $75 million over the last decade for what he called
"professional services." He was responding to a story in the New York Times,
which revealed the payments.
The outcome of the probe could determine whether Black continues to lead Apollo.
On the firm's third-quarter earnings call on Thursday, executives said some
investors had paused their commitments to Apollo's funds as they waited for the
findings of the review.
"I would have concerns about those ties between the director and Apollo. But the
proof will be in how directors handle themselves," said Nell Minow, vice chair
of corporate governance consultant ValueEdge Advisors.
Black said on Thursday that in 2012, three years after Epstein got out of jail
following his conviction in Florida on soliciting prostitution from a minor, he
retained Epstein for "personal estate planning, tax structuring and
philanthropic advice." He called this decision a "terrible mistake" that he
regretted.
Epstein was found hanged at age 66 in August 2019 in a Manhattan jail, while
awaiting trial on sex trafficking charges for allegedly abusing women and girls
in Manhattan and Florida from 2002 to 2005. He had pleaded not guilty.
CII is an association representing the interests of pensions funds, foundations
and endowments with total assets under management of approximately $4 trillion.
Borrus said CII engages with companies to convey shareholder worries, and it had
not yet contacted Apollo about its concerns. No Apollo shareholder has spoken
out against the firm's handling of Black's relationship with Epstein, although
some investors in the New York-based firm's funds have expressed concerns.
The Pennsylvania Public School Employees Retirement System (PSERS) said last
week it would not consider any new investments in Apollo's funds in the wake of
the investigation.
(Reporting by Jessica DiNapoli in New York; Additional reporting by Chibuike
Oguh in New York; Editing by Greg Roumeliotis and William Mallard)
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