How I made the Epstein Files

Local Man Linked to Epstein Blackmail Tax Planning

I am in the Epstein Files.

There’s no sugarcoating it. Go to the Department of Justice searchable Epstein Files database, certify that you are 18 years old, type in “Joe Kristan,” and sure enough, there I am.

I could tell stories about the wild nights of partying with Prince Andrew. But since that never happened, I’ll confess to the sad truth: I’m in the Epstein files for tax reasons.

Not my taxes.

My place in the Epstein files is an email that Epstein wrote to himself on September 10, 2015 consisting entirely of text cut and pasted from a 2015 New York Times article by Josh Barro. It addresses the taxation and deductibility of blackmail or extortion payments. Here is a screengrab of the relevant part:

The confidentiality disclaimer at the bottom provides comic relief. It evidently didn’t work - a cautionary tale for anyone thinking magic words in an email footer will ward off demons.

So: the Epstein files reveal that Epstein saw an article in which I was quoted on a tax item in the New York Times on an obscure topic. He found it worthy of copying and pasting it in an email to himself.

The article goes on for a while after his excerpt in the email cuts off after the quote from me, which implies that Epstein found it of interest only to my part. Why? He’s no longer with us to explain, but his associate Ghislaine Maxwell was sued by Virginia Giuffre later that month. Virginia Giuffre was a whistleblower in the Epstein case who died under disputed circumstances. The timing of Epstein’s email and the lawsuit may or may not be coincidental.

Is blackmail really deductible?

If Epstein or Maxwell were being extorted, would they have been able to deduct blackmail payments? It might well depend on when they delivered the cash.

The tax law considers blackmail and extortion payments to be “theft” if it is considered such under local law. Theft losses are treated as “casualty” losses eligible for itemized deduction treatment - subject to a floor of 10% of adjusted gross income. A different rule applies to investment-related theft losses, such as those from Ponzi schemes, which have no AGI floor.

Starting in 2018, non-investment theft losses are only deductible if you have the double misfortune of being a theft victim in a qualifying official disaster area - a limitation that applies to other casualty losses as well. It would take an unusual set of facts to relate extortion to an investment opportunity. For run-of-the-mill non-investment blackmail, the practical answer now is that it is non-deductible. Unless, of course, you are in a disaster area, in which case you get to deal with the extortionist and the disaster together.

Being in the Epstein Files

One other lesson here is that being “in the Epstein files” can be pretty random. If you hear that somebody shows up there, don’t assume the worst without some context. My involvement could be covered by the headline “Local Man Linked to Epstein Blackmail Tax Planning” without being precisely wrong, but it wouldn’t exactly be accurate either. Reader beware.

Speaking of disclaimers: Nothing in this article is tax advice for you, dear reader, or to anyone else. If you have a tax problem, pay someone for help. Nor is anything here the opinion of any employer or firm I am or ever was associated with. Cut and paste to an email to yourself at your own risk.