(…) the twentieth century’s most powerful , most important, and most notorious oil trader.
(…) it was mainly due to the intercession of Israeli politicians on Rich’s behalf that Bill Clinton finally agreed to grant him a pardon.
The capitalist without a country who makes deals with the enemy. The speculator who creates nothing of his own but only acts as an intermediary while profiting from others. The « bloodsucker of the Third World », as Rich was once referred to in the Swiss parliament? The perfidious profiteer, who would rather leave his own country and give up his citizenship than pay taxes.
As economists put it, a high degree of trust lowers the costs of transactions and compensates for a lack of information. According to the American philosopher Francis Fukuyama, trust is a key prerequisite for prosperity.
Most important, Rich has the strength of will and the patience to listen, observe, and learn.
« It’s only a good deal when the two signatories are laughing together at the table. That’s the only way a partnership can have any future. Otherwise it’s the only deal you’ll make », he explained to me.
I later found out that he worked every Saturday, and every Sunday too. He thinks about business twenty-four hours a day. Fifteen-hour days beginning at 7:00 a.m. and ending at 10:00 p.m. were the rule rather than the exception. As a joke, Rich would greet colleagues who arrived for work at 8:30 a.m. with a casual « Good afternoon ».
The price for a barrel of oil remained more or less constant - 2,50 $ to 3 $ per barrel - from 1948 to 1970 (…) This situation must have been a great annoyance to the oil-producing nations, as the prices for industrial goods had increased considerably over the same period of time.
In August 1971, President Richard Nixon abandoned he gold standard, whereupon the dollar immediately lost 20 to 40 percent of its value against mots other currencies. As the global oil trade was based on dollars, this meant that the oil-producing nations were earning even less « real » income in terms of purchasing power.
An increase in insecurity and volatility within a commodities market goes hand in hand with an increasing demand for independent traders who can guarantee supplies for solid cash. These traders allow buyers to compensate for market fluctuations (…) Rich realized that if the oil-producing countries wished to break the dominance of the corporations, they would need independent traders like him.
Up to 90% of Israel’s oil imports came from Iran. The Persian country, which is not Arab, had secretly supplied Israel with the black gold since the middle 1950s. In the summer of 1965, Golda Meir, then Israel’s foreign minister, visited the shah in Tehran. She suggested the two nations cooperate in the construction and management of a pipeline (…) The pipeline, 254 kilometers long and 106 centimeters in diameter, was completed in 1969… « Thanks to the pipeline, the shah was able to gradually outrival the multinational oil companies and become a powerful force in the oil trade », a participant in the tarde told me (…) Israel, on the other side, earned good money on the transit fees for the pipeline and was at the same time able to secure a constant supply of oil.
The letter of credit represents the bank’s promise to pay for the commodities. It is a form if insurance for the seller as well as the buyer. The buyer only has to pay after the seller has delivered the agreed quantity and quality of raw materials. The seller has a guarantee that he will be paid after te goods have been delivered if he can present the required documents as evidence (…) In these commodity trades, the risk was primarily carried out by the bank that had extended the line of credit.
First of all, Rich’s company was willing to take on higher level of risk than its competitors. Second, the best people in the business were working for the company. Finally Marc Rich + Co. was the first company to develop a sophisticated system for trading oil independently. It is no exaggeration to state that Marc Rich and Pincus Green truly did invent the spot market for crude oil.
The partners recognized opportunities and followed up on them faster than the competition (…) Ecuador is selling oil ? Fly over there immediately, and don’t just buy the oil that is up for sale. Get the client to agree to a long-term contract. Turkey is looking for oil ? Fly over there right away and sell it to them.
In short, supply and demand could be balanced much more efficiently. The spot market brought with it an increase in productivity that helped to turn the entire industry inside out (…) Marc Rich invented the concept of independent oil trade. That’s why he is such an important person in the history of trade.
The distinguished economist and Nobel Prize winner Kenneth J. Arrow characterizes trust as « an important lubricant of a social system. It is extremely efficient ; it saves a lot of trouble to have a fair degree of reliance on other people’s word… Trust and similar values, loyalty…
« Rich is a man of his word. Being reliable, keeping your word, being honest - these are the reasons he is successful. » (Robert Fink, who has served as Rich’s lawyer for many years).
It was not unusual for employees to work fifteen or sixteen jours a day (…) « I was in the office at a quarter to eight in the morning. I left at 1:00 A.M. I went Saturday and Sunday. I was in the office on December twenty-fifth or on January first. All the other traders were there as well. »
Rich’s traders could sometimes achieve celebrity status within their industry, and if they were successful they could earn even more money than an investment banker. The company is proud of the fact that it has created more millionaires than any other company in Switzerland. Rich’s employees were encouraged to become shareholders in the company from its inception (…) Even the secretaries received company stock.
At the end of the 1960s, only 5 percent of the world’s crude oil was traded outside of the Seven Sisters oligopoly. A mere ten years later, more than half of all crude was sold on the spot market or traded at prices that were tied to the market price.
The attack on the U.S. embassy and the taking of hostages was a violation of diplomatic immunity as laid out at the Vienna Congress of 1814-15, an agreement that even the Nazis had respected during World War II.
I asked him how he had managed to gain the trust of te new Khomeini regime, even though he has worked closely with the shah’s government. His laconic answer helps to explain why traders as Rich exist in the first place and why they are in such great demand. « We performed a service for them », Rich explains. « We bought the oil, we handled the transport, and we sold it. They couldn’t do it themselves, so we were able to do it. »
Rich’s most important client in these years was one that would remain forever grateful to him and would later come to his aid : Israel (…) During the reign of Mohammad Reza Pahlavi, Israel imported between 60 and 90 percent of it oil from the shah, making the country almost completely dependent on Iran for its energy needs. The Iranian revolution thus placed Israel in an extremely precarious situation (…) Beginning in 1973, Rich would serve as Israel’s most important supplier of oil for twenty years (…) Rich provided at least one out of every five barrels (…) Iranian inner circles were well aware of Rich’s dealings with Israel (…) « They didn’t care », Rich told me. « The professionals in the oil business in Iran didn’t care. They just wanted to sell oil. » (…) When it came to money, profit seemed to be of more importance than radical rhetoric. It was proof of the triumph of the free market over ideology.
By the beginning of the 1980s, Rich had reached his zenith in terms of power and influence. He was the world’s largest independent oil trader and bought and sold more oil every day than Kuwait.
In the late fall of 1981, Rich was almost completely unknown to the public at large, although he was already the world’s largest independent oil trader and one of the richest men in America. Outside the close-knit community of commodity traders, almost no one knew his name.
(…) the film studio 20th Century Fox, half of which Rich secretly owned.
The law designed to combat organized crime was intentionally named the Racketeer Influenced and Corrupt Organizations Act in order to obtain the acronym RICO, after the ambitious gangster played by Edward G. Robinson in the 1931 film Little Caesar. The act was intended to make it easier to prosecute organized crime figures and strike a devastating blow against their economic structures. Under RICO the defendant’s assets can be seized before the case comes to trial or even before an indictment. It is the heaviest pice of artillery in a federal prosecutor’s arsenal. John W. Dean, former counsel to President Richard Nixon, dubbed RICO « the prosecutor’s equivalent of nuclear weaponry. » (…) In Marc Rich’s case, Giuliani used RICO for the first time ever in a case that did not explicitly deal with more archetypal examples of organized crime, such as the Mafia or drug trafficking. After Rich’s indictment, U.S. authorities blocked all of the bank accounts belonging either to Rich personally or to his companies on American oil (…) « It was phenomenal », Sandy Weinberg told me with glee. « We tied up all U.S. assets, including 20th Century Fox. We shut’em down completely. We shut the company down for a year. They couldn’t operate in the U.S. It cost them dearly. I assume it cost them probably a billion dollars ». (…) Altogether the settlement was worth more than 200 $ million. In return the government lifted the yearlong freeze on Rich’s U.S. assets.
Switzerland is unique when it comes to differentiating between taw evasion and tax fraud. In Switzerland the intentional failure to report income or assets or assets on a tax return is not considered a crime but a case of tax evasion, which is dealt with using only administrative sanctions. Tax fraud, involving criminal sanctions, takes place when income is fraudulently identified using a falsified document, such as a bank statement, an invoice, or a balance sheet.
« Within the frame of this agreement, a telephone call would have been enough, » recounted Leutert. « The Americans only needed to tell us that they had a huge case of fraud or forgery on their hands, involving a certain Mar Rich living in Switzerland. They only needed to ask us: Could you please arrest him pending receipt of an extradition request? It would have happened fairly quickly after that, and Swiss police would have taken Mar Rich into provisional custody. » (…) In fact, the U.S. attorney later chose a different strategy - a strategy that was much more likely to get the case in the headlines (…) The internationally respected weekly Die Weltwoche, which is usually rather pro-American in tone, commented, « It is not entirely clear why the United States is balking at the due process of law. It is possible that the New York prosecutor Giuliani is seeking the loudest possible fanfare for his dream trial that involves « the biggest tax fraud in the history of the United States. » » (…) Why were Giuliani and Weinberg so uncooperative in their dealings with Swiss authorities? Why did they fail to take advantage of so many opportunities?
The charge of trading with the enemy changed everything. All of the anger and sadness unleashed by the Iranian hostage crisis rained down upon Rich. After these accusations have been made, it would no longer be possible to consider the case solely from a legal point of view. It was no longer a matter of legality and illegality. It was now an issue of morality.
It was one of the ironies of the case against Marc Rich that at about the same time, the Reagan administration secretly sold weapons to Iran and used the funds to support the anti-Communist Contra in Nicaragua.
One could go as far as to say that Giuliani’s political and very public career actually began with this case.
There was one decisive that Sandy Weinberg did not hesitate to ask me: « If the case was so flawed, why didn’t he come back and face the charges? » On hearing the question, Rich looks at me as if he has trouble believing that I still do not understand. He continues in a low voice. « I saw no hope of getting a fair trial because of the unstable and inflamed environment. My case was very bad - unjustifiably so. » He once more points out his belief that this was a case in which the prosecution had overstepped the limits of acceptable conduct. « The situation was so negative. I didn’t trust the situation, it wasn’t a normal situation. » In this, Rich, receives support from unexpected quarters. The former Swiss minister of justice Elisabeth Kopp-Iklé is of a similar opinion.
Safir’s failed mission was a small part of a huge, top-secret project known as the Otford Project, the goal of which was to apprehend Marc Rich and Pinky Green at almost any price. A multiagency team was put together consisting of personnel from the FBI, the IRS, the Office of International Affairs at the Department of Justice, the U.S. attorney for the Southern District of New York, Interpol, and the U.S. Marshals Service (…)
The U.S. marshal who was assigned by Safir to hunt down Rich was Ken Hill. Ever since Rich had fled to Switzerland in 1983, Hill had been devoted « solely and exlusively » to the case - and remained so in the role of case agent for fourteen years.
The average tax evasion suspect, the U.S. government once calculated, remains at large for three years and eight months. Rich and Green, however, were at large for more than seventeen years before they were pardoned by Bill President Clinton in January 2001.
Rich’s ability to evade the agents of the most powerful nation in the nation for nearly twenty years was largely due to Azulay’s good instincts and experience. Azulay was the perfect candidate, a former colonel in the Israeli Defense Forces and a high-ranking Mossad agent who has worked undercover in Spain during the 1970s, a time when Spain had no diplomatic ties with Israel. He was later assigned to one of the most difficult regions in the intelligence world: Lebanon.
(…) between the years of 1984 and 1990, in order to apprehend Rich (…) the equivalent of three people worked full-time on the hunt for the fugitive trader.
Rich could nevertheless continue to do business all over the world. He traveled « extensively », as the police documents stated - Spain, Portugal, Belgium, Bolivia, Great Britain, Eastern Europe, Israel, Scandinavia, and the former Soviet Union.
(…) Marc Rich was able to continually expand his company, until it became the world’s largest and most successful independent oil and metals trading company. In 1990, seven years after he was indicted in New York, he was active in 128 countries, had forty-eight offices around the globe, and employed twelve hundred people.
« The key to success - and to real wealth - is long-term thinking, » Rich says (…) « We didn’t get into a new country to make a million dollars and then go home. We went to stay there, » said a trader who has opened African markets while working for Rich in the 1970s.
Rosenberg and his partners bought a long position on zinc on the London Metal Exchange (LME) (…) This meant that the three parties had obligated themselves to purchase zinc at a predetermined time and at a predetermined price (…) They simultaneously began buying huge amounts of zinc in an attempt to drive up the market price in the hope of obtaining a higher price for the zinc that hey had purchased (…) The insane attempt to manipulate the global zinc market ended up costing Marc Rich + C0. 172 million $ (…) « This is artificial. There is no physical demand. It’ a bubble that will burst », they told him. He refused to listen to them and made no attempt to rein in Rosenberg.
Competitors and rivals soon realized that they only had to mention Mar Rich’s name in order to provoke a public debate that could damage his business - and aid theirs. They knew that Rich cherished discretion above all else and that any publicity would have a negative effect on his business.
(…) for years Rich’s company Clarendon ha been supplying the US.S Mint with copper and nickel for the production of coins. These government contracts were worth 45.5 million $ to Clarendon. Politicians and media had a field day over the fact that an indicted tax evader on the run from U.S. prosecutors was doing business with the federal government.
By the end of 1992, eleven years after the Southern District of New York began its investigation, Rich’s image had taken a serious beating. His name had become a symbol for greedy and unscrupulous dealmakers.
The value of Marc Rich + Co. at that time was estimated at 1 billion $ to 1.15 billion $. The company was active in 128 countries, had an annual turnover of 30 billion $, and brought in an estimated profit of 200 million $ to 400 million $ each year. It was the market leader in the oil, metals, and minerals trade.
(…) the new owners renamed the company Glencore. Today, the company is still the world’s largest commodities trader, and in terms of annual turnover, it is the largest firm in Switzerland.
Rich now invests in the financial markets and builds commercial centers and residential buildings mainly in Russia and the Czech Republic as well as in Spain, France , and Switzerland.
Denis involvement in Marc Rich’s pardon was particularly scandalous as she was one of the biggest ans most loyal supporters of the Democratic Party, to which she had donated more than 1.1 million $ since 1992 (…) She was particularly close to Bill and Hillary Clinton, whose election campaigns she helped finance, and she donated 450 000 $ to Bill Clinton’s president library in Little Rock, Arkansas.
« Without the support of Barak and Peres, Clinton would not have granted the pardon - no doubt about it », Azulay told me (…) Clinton seemed to confirm their opinions in his autobiography : « Ehud Barak asked me three times to pardon Rich because of Rich’s services to Israel and his hep with the Palestinians »… (…) Rich’s oil deliveries and assistance to the Mossad had contributed greatly to Israel national security.
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