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MarketScreener Homepage  >  Equities  >  Nyse  >  L Brands    LB

L BRANDS

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L Brands : Wexner Blames Epstein for Missing Funds

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08/08/2019 | 02:48am EDT

By Khadeeja Safdar

Leslie Wexner, the billionaire behind Victoria's Secret, said his former money manager Jeffrey Epstein misappropriated more than $46 million of his fortune, revealing for the first time some of the financial fallout from his relationship with the disgraced financier.

In a letter Wednesday, the founder and chief executive of L Brands Inc. wrote to members of his Wexner Foundation that the missing funds were uncovered after Mr. Wexner decided in 2007 to sever ties with Mr. Epstein. Mr. Wexner began the separation process after allegations against Mr. Epstein surfaced involving sexual abuse of underage girls.

"We discovered that he had misappropriated vast sums of money from me and my family," Mr. Wexner wrote in the letter, which was reviewed by The Wall Street Journal. "This was, frankly, a tremendous shock, even though it clearly pales in comparison to the unthinkable allegations against him now."

In January 2008, Mr. Epstein transferred $46 million worth of investments to a Wexner charitable fund, tax records show. Mr. Wexner said the transfer was only a portion of the funds that his money manager had allegedly misappropriated. "All of that money -- every dollar of it -- was originally Wexner family money," he wrote.

A lawyer for Mr. Epstein couldn't be reached for comment. A spokesman for Mr. Wexner declined to comment on whether Mr. Wexner reported the matter to authorities.

Last month, Mr. Epstein pleaded not guilty to sex-trafficking charges stemming from what federal prosecutors alleged was a yearslong scheme to procure and sexually abuse dozens of girls. He faces up to 45 years in prison if convicted. Mr. Epstein has been denied bail and is in federal custody.

Mr. Epstein's two-decade relationship with Mr. Wexner, which extended into the 81-year-old's retail companies, charities and personal life, became crucial to Mr. Epstein's eventual wealth and prominence. In 1991, Mr. Wexner gave him sweeping control over his financial and legal matters through a power-of-attorney document. The Wall Street Journal has reported that Mr. Epstein made more than $200 million from Mr. Wexner.

In the letter, Mr. Wexner explained why he gave Mr. Epstein so much control. He wrote that several friends "vouched for and recommended him as a knowledgeable financial professional." He added that Mr. Epstein claimed he had many well-known clients. When allegations emerged against Mr. Epstein in Florida a decade ago, the money manager "vehemently denied" them, according to Mr. Wexner.

Still, Mr. Wexner decided in the fall of 2007 that Mr. Epstein should be removed from his role as personal money manager, he wrote in the letter. The unwinding of their financial ties involved a legal intermediary. It was during this process that Mr. Wexner discovered Mr. Epstein had misappropriated funds.

Rabbi B. Elka Abrahamson, the Wexner Foundation's president, in a statement posted online last month said the charity had received emails from its community voicing concern about the relationship between Messrs. Wexner and Epstein. She said the foundation, like Mr. Wexner, had cut ties with him more than a decade ago and is "sickened by Mr. Epstein's behavior."

A representative for the Wexner Foundation, which focuses on the development of Jewish volunteer leaders and Israeli public officials, couldn't be reached for comment.

The Journal has previously reported how Mr. Epstein became deeply entwined in the financial lives of his clients, who put him in charge of their charities, placed his name on deeds for their properties and let him control their trusts.

"I am embarrassed that, like so many others, I was deceived by Mr. Epstein," Mr. Wexner wrote Wednesday. "I know now that my trust in him was grossly misplaced and I deeply regret having ever crossed his path."

Working in an office in Midtown Manhattan with a few lawyers, accountants and administrative staff, Mr. Epstein helped with the retail mogul's taxes, managed his investments and ran his charities and trusts. He also became president of a company Mr. Wexner set up to develop the town where he lives near Columbus, Ohio.

Until about 13 years ago, Mr. Epstein served on the board of several of Mr. Wexner's charities, including the Wexner Foundation, tax returns show. Mr. Epstein was listed as being in charge of the accounting books for the Wexner Foundation and the Wexner Heritage Foundation. The two foundations merged in 2003.

In 2008, soon after Mr. Wexner began severing ties, Mr. Epstein's company gave $34.3 million in Apple Inc. shares to a foundation associated with Mr. Wexner's wife, Abigail, tax filings show. Around the same time, a foundation associated with Mr. Epstein gave Mrs. Wexner's charity about $12 million in investments.

Last month, Mr. Wexner sent a companywide message to employees at L Brands denying knowledge of Mr. Epstein's alleged criminal behavior. "I would not have continued to work with any individual capable of such egregious, sickening behavior as has been reported about him," he wrote in the email.

The board of L Brands recently hired an outside law firm to conduct a review of Mr. Epstein's role at the company.

--Rebecca Davis O'Brien contributed to this article.

Write to Khadeeja Safdar at khadeeja.safdar@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
APPLE -0.81% 220.96 Delayed Quote.40.08%
L BRANDS -0.58% 18.85 Delayed Quote.-26.57%
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Financials (USD)
Sales 2020 13 078 M
EBIT 2020 1 283 M
Net income 2020 667 M
Debt 2020 4 582 M
Yield 2020 6,37%
P/E ratio 2020 7,85x
P/E ratio 2021 7,23x
EV / Sales2020 0,75x
EV / Sales2021 0,71x
Capitalization 5 210 M
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Mean consensus HOLD
Number of Analysts 29
Average target price 23,40  $
Last Close Price 18,85  $
Spread / Highest target 123%
Spread / Average Target 24,1%
Spread / Lowest Target -25,7%
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Managers
NameTitle
Leslie Herbert Wexner Chairman & Chief Executive Officer
Charles C. McGuigan Chief Operating Officer
Stuart B. Burgdoerfer Chief Financial Officer & Executive Vice President
Raymond Zimmerman Independent Director
Allan R. Tessler Lead Independent Director
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