Dispute between Apollo co-founders Black, Harris boils over

Tension between Leon Black and his Apollo Global Management Inc. co-founder Josh Harris is boiling over, threatening to buffet the investment giant with fresh controversy.

In a filing last week in a rape and defamation case brought by a woman with whom he has admitted to having a yearslong affair, Black accused Harris of plotting his removal from Apollo in an act of revenge for being passed over to succeed Black as chief executive officer.

The private-equity titan, who stepped down as Apollo’s CEO and chairman in March 2021, further suspects Harris encouraged his ex-lover, Guzel Ganieva, to publicly accuse him of rape and harassment. Mr. Black has been assembling emails and other material to try to prove the allegations, according to people familiar with the matter and copies of some of the emails that were viewed by The Wall Street Journal.

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Harris "waged a highly coordinated and orchestrated campaign to destroy Black’s professional and personal reputation," said Black’s lawyer, Susan Estrich. Harris’s advisers "whispered to investors, placed articles and ultimately supported and encouraged an effort by Ganieva to make knowingly false claims in the courts about her relationship with Mr. Black," she said.

Harris, who stepped down from his day-to-day role at Apollo at the beginning of this year, vehemently denies the claims.

"These allegations and insinuations are desperate and absurd," a spokesman for Harris said. "Harris doesn’t know Ganieva, has never met or spoken with her or anyone representing her, has no financial or any other dealings with her or her representatives, and had no involvement of any kind in the filing of any claims by her."

Ganieva leveled the accusations in a lawsuit against Black in June last year in New York State Supreme Court. In October, Black filed a civil RICO suit in federal court against Ganieva, her law firm and a series of John Does, alleging defamation and racketeering. He detailed his allegations against Harris in an amended filing in that suit on Monday.

"This conspiracy theory, and the idea that Josh Harris is somehow funding our client’s lawsuit or working in conjunction with Ganieva is madness," said Jeanne Christensen of Wigdor LLP, Ganieva’s attorney.

Regardless of whether Black’s allegations have any merit, the spat could become another headache for Apollo, where Harris still sits on the board, after it was forced to endure the twin scandals of Black’s connection to disgraced financier Jeffrey Epstein and Black’s legal battle with Ganieva.

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The firm has worked to move beyond the tumult, instituting a series of governance changes. Marc Rowan, the firm’s third co-founder who became CEO when Black stepped down, already has his hands full integrating the acquisition of the rest of the firm’s big insurance affiliate, Athene Holding Ltd.

"The firm has never been more aligned or better positioned to create value for all of our stakeholders," an Apollo spokesman said. "The legal dispute playing out between two former employees is unfortunate but won’t impact our strategy, businesses, or mission."

The controversy surrounding Black, a private-equity pioneer who built Apollo into a $481 billion behemoth, has weighed on the firm’s shares. While up, they have significantly underperformed those of its chief rivals since the October 2020 publication of a New York Times article detailing for the first time some of Mr. Black’s payments to Epstein. Some analysts also cite the Athene deal as a factor in the underperformance.

Black has obtained a number of emails from early 2021. One of them was sent to Harris by Pendral Capital President Richard Emerson, who would later get a seat on Apollo’s board that he still occupies, minutes after the firm announced Rowan would be CEO. In the email, which bears the subject line "outrageous," Emerson criticized the board for allowing Black, who says he paid Epstein $158 million for tax and estate-planning services, to remain at the firm as chairman. Mr. Emerson stated that Harris was "the right person to be CEO."

Harris forwarded Emerson’s email to a group of outside legal and public relations advisers, one of whom responded, "exactly."

Emerson didn’t respond to requests for comment.

Harris, his spokesman said, "was direct with Black that his connections to Epstein were damaging the company. The notion that Harris was motivated by anything other than the best interests of the company is false — Black’s relationship with Epstein was disqualifying, plain and simple."

The battle represents a bitter twist in one of the most successful relationships in Wall Street history. Black helped make Harris a billionaire, giving him the title of co-founder in 2007 ahead of Apollo’s planned initial public offering. Harris is worth $5.9 billion, according to Forbes, largely by virtue of his 6.4% stake in Apollo; Black’s 11.9% stake has helped put his net worth at $10.4 billion.

Apollo said in January last year that Black would step down as CEO, ceding the role to Rowan, but would remain chairman. The announcement followed a monthslong review by law firm Dechert LLP of Black’s ties to Epstein, a convicted sex offender who killed himself in 2019 while awaiting trial on charges related to sex trafficking of minors.

It came as a surprise to many within Apollo who had assumed Harris was next in line. Then, in March, after Ganieva went public with her allegations in a series of tweets, Black was forced to leave the firm entirely.

The wheels had been in motion for some time for Rowan to take over, according to people familiar with the matter. Harris, who had been overseeing Apollo’s day-to-day operations, came to Black a number of years ago asking to be made CEO, but Black turned him down given that Apollo’s business was moving toward managing assets for insurance companies, the people said — neither Harris’s nor Black’s area of expertise.

Instead, Black asked Rowan, the architect of the firm’s highly successful foray into insurance, to be CEO, but Rowan demurred. Black repeated the request in 2019 when Apollo added to its initial 17% stake in Athene, the people said. Again, Rowan declined, saying he was still focused on building the insurance business, the people said.

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Black again broached the subject with Rowan in October 2020 during a five-mile walk near Black’s Bedford, N.Y., home, the people said. This time, Rowan was more amenable. The two executives discussed the idea of buying the rest of Athene and determined that Rowan should become CEO if Apollo ended up proceeding, the people said.

The last time Black spoke with Harris, during a meeting last January at Black’s Bedford home, Black told him the choice to recommend Rowan wasn’t personal, but was best for Apollo’s future, the people said.

Harris’s spokesman said that Harris supported Rowan’s ascension as CEO.

—Mark Maremont contributed to this article.