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.
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.