How the Big Time Players Really Operate (Jeffrey Epstein Blackmail Edition)

Jeffery Epstein

By Robert Wenzel

In response to my post, Is This How Jeffrey Epstein Really Operated?, a number of commenters here and on Twitter have questioned whether Epstein could have pulled off a type of blackmail operation proposed in the post.

Consider these objections:

It seems that if you pull that kind of trick on one rich guy after another and, with time, one will have you killed.

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That sounds like a plan for ending up dead. Sooner or later a victim would not just pay up.

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Can anyone explain why this deal does not work both ways and threaten Epstein as much as the client?

These kinds of objections make sense if you are dealing with an average operator. But if you are dealing with a very skilled operator they don't apply.

A very skilled operator is thinking at least three or four steps ahead.

I contend that you could be in a room with a top-flight operator every day watching everything he does and never have a clue as to what he is really doing and he will get you to make the move he wants you to make whenever he is ready.

For a dramatic television depiction of how this is done, watch the first two episodes of the new Showtime series "Loudest Voice in the Room," about Roger Ailes, the creator of Fox News.

The series is getting panned by critics but it is, in fact, one of the best depictions of how real operators operate that you are ever going to see.

The first scene shows Ailes (played masterfully by Russell Crowe) "negotiating" his CNBC severance agreement with Jack Welch chairman of GE. Welch is no flunky in his own right, so you really have to be very, very shrewd to get what you want from him and Ailes, being two steps ahead, got exactly what he wanted from Welch.

We then see scenes with Ailes dealing in a different way with Rupert Murdoch's son and also with the assistant Murdoch assigned to watch Ailes. He takes them on man-to-man in front of others. And we also see how he deals with lowly employees.

Finally, in the second episode after some absurd 9-11 stuff, we see Ailes handle Murdoch brilliantly when Murdoch calls Ailes in after Ailes has a blow up with Murdoch's son Lachlan.

Welch and Murdoch never had a chance against Ailes. Early on he was that good. But I suspect Ailes was an amateur compared to Epstein.

What the commenters above think of Epstein blackmail is likely something along these lines.

Epstein sets up a billionaire, has it filmed and then confronts the billionaire, "Hey, I got you on film having sex with an underage girl, pay up!"

This is in no way the way Epstein would approach.

It would go more like this and this is just an outline. It would have been thought out in much more detail, but along this line:

Underage girl has sex with a billionaire, Epstein gets immediate details about the sex from girl. We know he did this.

From New York Magazine:

In the 2015 filing, Giuffre claimed that Epstein “debriefed her” after she was forced into sexual encounters so that he could possess “intimate and potentially embarrassing information” to blackmail friends into parking their money with him. She also said photographic and video evidence existed.

Let's say the girls says, "Yeah, he wanted his elbows licked during sex."

Next morning, Epstein approaches billionaire: "Hey, what the hell did you do to the girl you had sex with last night? She is all upset. She says you wanted your elbows licked. She is after me to complain to authorities and, Jeez, she is 14."

So he doesn't ask for blackmail but instead says, "Look I will make this go away. Don't worry about it. By the way, I would like you to put $100 million in my hedge fund."

Who knows the exact details, and someone like Epstein would have approached each target differently, but he is skilled and they would most likely have seen him as a friend as opposed to a blackmailer. It is noteworthy that billionaires Les Wexner and Leon Black were longtime friends of Epstein.

So if you can work 5 billionaires into your corner with each putting up, say, $100 million in your "hedge fund," they haven't really paid any blackmail, it is still their money and Epstein is only getting management fees that they would have paid another hedge fund anyway.

The standard hedge fund fee is 2/20, that is, a fee of 2% annually of assets under management and 20% of profits.

With 5 billionaires putting in $100 million, Epstein would have had a half billion under management. Doing some very rough back of the envelope calculations that would earn him a minimum 2% annually which is $10 million. He started his hedge fund in 1981, that was essentially the bottom of what has been a long-term stock market boom ever since. The S&P500 over that period has increased by a multiple of roughly 23.

If Epstein would have simply put the $500 million into the S&P 500 index, it would have roughly grown to $11.5 billion. Epstein's  20% cut would have been roughly $2.2 billion.

I emphasize these are very rough calculations and would have been dependent on when money was put into the fund, how much and the terms. But with just three or four billionaires (maybe even less), he could have had a very nice operation. And for the billionaires, they had an investment of a minor piece of their overall wealth that seemed to perform with the market.

He probably kept them all as friends and with the scam running on no more than 5, it was easy to keep control of.

Beyond that, Epstein obviously had a manic fetish for underage girls and the political power figures he courted (and set up) were his insurance against severe penalties if his fetish became exposed. That, of course, explains his light prison sentence in Florida

Now it appears there has been a turn in his fate. And a good Austrian economist could explain this in terms of the concept that you can't plan everything in advance and there are unknowns. The world is just too complex to have a grasp on all moving parts.

There are obviously parts of law enforcement that at some level he does not have power over and, for some reason, they have decided to move against him. He is probably just a piece in a much bigger play. Over time, we will see who is taken down but this might be a Trump play over the Clintons.

I have always suspected, even before the 2016 election, that the New York branch of the FBI was in the Trump camp and not the Clinton camp.

It is possible that Trump is just fed up with being dragged through Clinton inspired Russiagate and his archenemy Chuck Schumer has quieted down his anti-Trump rhetoric since the Epstein arrest (Epstein was a donor to Schumer campaigns.). So perhaps Trump gave the FBI-connected Rudy Giuliani the go signal This may be a continuation of Trump playing Miss Sloane.

What is really going on will become more obvious as developments continue to break around Epstein. But the arrest of Epstein is more like the capture of a queen on a chessboard rather than the end of the game.

I hasten to add there is some speculation that Epstein has done work for intelligence agencies and that is very possible but the kind of money he was moving around is much bigger than what he would have been able to get from intelligence agencies. This is a very complex operation.

Robert Wenzel is Editor & Publisher of EconomicPolicyJournal.comand Target Liberty. He also writes EPJ Daily Alert and is author of The Fed Flunks: My Speech at the New York Federal Reserve Bankand most recently Foundations of Private Property Society Theory: Anarchism for the Civilized Person Follow him on twitter:@wenzeleconomics and on LinkedIn. His youtube series is here: Robert Wenzel Talks Economics. More about Wenzel here.