Bear Stearns AML report on Jeffrey Epstein accounts and 2007 grand jury subpoena

EXHIBIT 197¶

BEAR STEARNS	AML Investigative Report — Regulatory/Law
	Enforcement Inquiry BS -019613
Date Inquiry Received:	August 15, 2007
Type of Inquiry:	Subpoena
Source of Inquiry:	U.S. Attorney’s Office for the Southern District of Florida
Account(s) Referenced in Inquiry:	None
	Account Number Account Name
Period Referenced in Inquiry:	January 1, 2001 — present
	Account Number Account Name Introducing Broker-Dealer/Branch

On August 15, 2007, Bear Stearns received a Grand Jury Subpoena from the U.S. District Court for the Southern District of Florida. The subpoena sought all documents referring or relating to Jeffrey Epstein (“Epstein”) from January 1, 2001 to the present. Additionally, the subpoena sought all employment records maintained at the Firm for Epstein.¶

According to public information, Epstein was employed at the Firm in 1976 as a junior assistant to a floor trader. Apparently, Epstein developed several relationships with the Firm’s executives. Various reports indicate that Epstein may have left Bear Stearns in 1981 under questionable circumstances.¶

Epstein is a money manager for ultra-wealthy clients such as Leslie Wexner, Founder, Chairman, and CEO of the Limited Brands. Epstein is rumored to only accept client’s with over 1 billion to invest in his company, J. Epstein & Co.¶

Public information revealed that in July 2006, a Grand Jury in Florida indicted Epstein on one count of felony solicitation of prostitution. While the Palm Beach Police thought there was “probable cause” to charge him with unlawful sex acts with minors, and lewd and lascivious molestation, the Grand Jury found the claims to be unsubstantiated and not credible. The credibility of some of the teenage girls was undermined by one of Epstein’s lawyers, well-known Harvard Law Professor Alan Dershowitz. Epstein was not charged with unlawful sex act with minors.¶

Based upon the above-described conversation with the AUSA, the federal Grand Jury inquiry into Epstein stemmed from the state investigation.¶

The following is an excerpt from an article in the NY Post appearing on October 1, 2007:¶

Epstein, 54, will admit to felony charges in the next month or so in a Florida state court, sources said.¶

The silver-haired moneyman also is expected to be ordered to serve a shorter period of house confinement in his pink Palm Beach mansion after release from prison.¶

Sources said state prosecutors, who in 2006 charged Epstein with solicitation of prostitution, will upgrade the offense because the females were under 18, the age of consent in Florida. But Epstein, who denies knowing any of the girls were under 18, is not going to be charged with having sex with underage girls, sources said.¶

The feds have agreed to drop their probe into possible federal criminal violations in exchange for the guilty plea to the new state charge, with the understanding that he will do prison time, sources said.¶

A review of the Probable Cause Affidavit (dated 5/1/06) revealed that Epstein had apparently wire transferred via Western Union $1,000 to one or more of the females referenced in various news reports and the Probable Cause Affidavit as a “Christmas Bonus.” Additionally, public information indicated that at some point, Epstein made a $100,000 donation to a massage parlor.¶

Period Reviewed:	From:		To:
	Month	Year	Month	Year
Account(s) Does Not Appear to be Implicated in the Alleged Wrongdoing
Activity Appears to be Normal And Expected
Activity Appears to be Consistent with Legitimate Business Purposes
Other

Bear Stearns reviewed accounts maintained at the Firm for the benefit of Epstein. Specifically, the Firm identify any transfers out of these accounts in the amounts of $1,000 or $100,000. The accounts reviewed sought to were:¶

• 1. Jeffrey Epstein a/c 086-52060: Purged 8/1/00.
• 2. Jeffrey Epstein a/c 038-28825: No outgoing wires in the amounts of $100,000 or $1,000.
• 3. Jeffrey Epstein a/c 353-01417: No outgoing wires in the amounts of $100,000 or $1,000.
• 4. Jeffrey Epstein a/c 107-21034: Purged 6/03/05 (last account activity 4/30/03).
• 5. Jeffrey Epstein a/c 207-40729: This a/c # has been recycled.
• 6. Jeffrey Epstein a/c 107-21012: Purged 6/3/05 (last account activity 4/30/03).
• 7. Jeffrey Epstein a/c 612-40991: Purged 6/21/07 (last account activity 4/30/03).
• 8. Jeffrey Epstein a/c 612-40990: Purged 6/21/07 (last account activity 8/31/05).
• 9. Jeffrey Epstein a/c 086-50771: Purged 8/1/00.
• 10. Jeffrey Epstein a/c 222-90343: Epstein transferred his assets out of the account in June and July
• 11. Epstein Interests a/c 207-42032: Purged a/c no. recycled (new beneficial owner).
• 12. Epstein Interests a/c 038-39970: Several same-name $100,000 wire transfers sent from this account. 1997.

The review of these accounts revealed no suspicious or unusual third party wire transfers consistent with those mentioned in the above-describe Probable Cause Affidavit or news articles.¶

Based upon the available facts, this investigation is closed and nothing further is deemed necessary.¶

Due Diligence Report Received and Attached
Account(s) Added to Due Diligence Watchlist
Scratchpad Added to Account(s)
Account(s) Added to AMLMS Focus List
Discussed Relevant Issues with Appropriate Personnel
AML Representative:	Matthew Truax
Name
AML Officer	Arthur Middlemiss
Name