Tuesday, August 13, 2019

Every Decent Person v. The Estate of Jeffrey Epstein: What Now?

by Diane Klein

The news of Jeffrey Epstein's death (apparently by suicide) in the federal Metropolitan Detention Center in Manhattan early on the morning of Saturday, August 10, 2019, has taken the Internet by storm, and spawned a thousand conspiracy theories.  Of course, there is a great deal that is still not known, and won't be known, until a much more thorough investigation is undertaken.  One thing is certain: the criminal prosecution of Jeffrey Epstein is over.  The death of the defendant brings any such legal action to an end.

Does that mean all the lawyers go home?  Not by a long shot. The legal farrago that is the Epstein matter carries on.
First off, any ongoing civil suits can continue, and even though Epstein is already dead, it is possible for additional civil suits to be filed, in any and all jurisdictions where the underlying events occurred.  Those plaintiffs who had not filed yet - who might have been waiting for the Southern District of New York federal prosecutors to convict Epstein and enable the use of non-mutual offensive collateral estoppel against him in subsequent civil suits - will need to act more promptly. Those unfiled suits will be governed not only by the applicable statute of limitations, but also by what is likely to be a much shorter time limit, the time for presentment of claims against the estate.  Assuming the primary probate takes places in the Virgin Islands, where Epstein officially resided, once an executor or administrator is appointed, that person is required to file a notice regarding all claims against the estate, which are then to be filed within six months of that notice, under Section 392 of their Probate Code.  Failure to present claims within six months does not result in the claims being barred, but means they will not be paid until those claims presented timely have been satisfied.  Suits that have not yet been filed seem unlikely to result in a judgment that quickly, unless the executor or administrator agrees to settle them, jeopardizing a full recovery.  In addition, New York and Florida (both likely states for civil litigation against Epstein's estate) join the majority in not permitting punitive damages to be awarded against deceased tortfeasors.

And then there is the estate.

Nothing has yet been reported on whether Epstein had a will or other estate plan; his closest family member is a younger brother, Mark, who would be his sole intestate heir under applicable law. The Virgin Islands Probate Code applies a traditional per stirpes approach to the estate of an intestate decedent leaving one or more siblings but no spouse, parent, or child, as appears to be the case here.  Although the Virgin Islands does not permit holographic wills (except in very unusual circumstances), it does allow them to be probated if executed in a place that permits them.  So it's possible that scribbled notes or other materials may be presented as potential wills, if no more formal instrument appears.

Epstein was not a "billionaire" - but it appears that he was very rich.  At his bail hearing, evidence was presented of approximately $559 million (itemized here), including the mansion on E. 71st St. (worth $56 million), a private jet, property in New Mexico, Palm Beach, Florida; Paris, and the Caribbean, including the private island in the U.S. Virgin Islands that is his primary residence; $56 million in cash, and more than $300 million in securities.  Plus the safe full of diamonds, of course.



Even property transferred outside of probate (for example, by trust) is potentially liable for claims made against the estate, under Virgin Islands banking law (although such assets are not liable for taxes).

It is also possible that the estate will be enlarged by the proceeds of a wrongful death suit, should the administrator of his estate choose to sue the government for Epstein's death in custody.  Suits against the federal government based on inmate suicides (generally using a negligence theory under the Federal Tort Claims Act) have not often succeeded, but this case might be a strong one.  The duty of the Bureau of Prisons is found at 18 U.S.C. 4042, and requires that it provide for the "protection" of prisoners.  The best-known case of this kind, Logue v. U.S., is distinguishable because Logue committed suicide in a county jail run by an independent contractor.  Even in Logue, however, the district court found the Bureau of Prisons liable; they were reversed by the higher court.  The Supreme Court also remanded on the issue of the liability of a federal marshal in that case, and so it is possible that individuals aware (at least) of Epstein's prior possible suicide attempt on July 23 were also negligent in failing to make provision against a subsequent attempt.

Whatever the ultimate size of the estate - or the recipient by will or intestacy - the first creditor in line will be the U.S. Treasury, followed by a variety of other taxing authorities.  An estate worth $556 million would owe estate taxes of about $219 million, and the federal priority statute, 31 U.S.C.A 3713(a)(1)(B), makes sure it gets paid.  A New York estate tax return will also have to be filed (even if Epstein was a non-resident), because the mansion on E. 71st St by itself exceeds the New York estate tax exclusion amount (a measly $5.74 million in 2019); the diamonds in the safe count, too ("tangible" assets). The New York State tax rate for large estates is 16%.  Florida and New Mexico do not have estate taxes - but France does.  A sibling inheriting real property in France pays a whopping 45%, meaning it would cost Mark Epstein about $4 million to become the owner of the place at 22 avenue Foch.  (There is a tax agreement between France and the U.S. to avoid double taxation.)  So the estate is likely to be whittled down considerably (and that is assuming there are no other creditors we haven't yet heard about).

The materials already in the hands of law enforcement can potentially be used in the criminal prosecution of other defendants, luridly (though perhaps accurately) described as a "gang of accused [sex] slave 'recruiters."  Ghislaine Maxwell, his ex-girlfriend and second in command, unsuccessfully sought to prevent the release of documents that might have prompted the suicide.  They contain abundant evidence of the involvement of numerous other people in Jeffrey Epstein's criminal behavior, and evidence obtained in the criminal prosecution of Epstein can be used against them.  Unlike Larry Nasser, Jeffrey Epstein will never sit in court and be publicly accused by those he abused of the wrongs he committed against them.  On the other hand, even after the tax man and the attorneys are done, we can hope there will be enough money to give these women some of the life opportunities otherwise so blighted by their teenage victimization by Epstein and his enablers.

4 comments:

Shag from Brookline said...

What might a wrongful death suit bring into the estate, considering Epstein's reputation? Might AG Barr have to recuse himself from such a lawsuit because of Kirkland & Ellis' earlier representation of Epstein in the 2009 deal obtained?

Shag from Brookline said...

Query: Epstein's estate might presumably include various information on his many celebrity friends, including photos, that could be quite valuable for literary purposes. Might such enhance the value of Epstein's estate significantly?

Joe said...

AG Barr is not a decent person so would not take part.

  said...

This is entirely hypothetical, but points out yet another avenue for litigation. What if someone shows up claiming to be an unacknowledged biological child, such that the brother is not the only intestate heir? (Although I specifically have no evidence of this, including even any specific allegations, it's a tenable side issue given the supposed "breeding ranch" Epstein advocated... and the strong tendency toward "unsafe sex practices" in trafficking matters.)

Now combine that with whatever the law is in the Virgin Islands regarding how to prove descent from a man after his death, and we're in for some high-priced and really salacious proceedings, if only because the stakes are so high that someone very well might come out of the woodwork with a claim (however ill-founded).