On his last full day in the White House, President Bill Clinton made several farewell calls to world leaders. After lunch, Clinton spoke with Israeli Prime Minister Ehud Barak. As they prepared to say farewell, Clinton told Barak he was working on the clemency petition of Marc Rich, a Swiss businessman and a fugitive from the biggest tax fraud in U.S. history. “Might it move forward?” Barak inquired. The Israeli prime minister was intensely interested in Rich. During an earlier conversation, portions of which were released to Congress, Barak told Clinton that Rich had helped out the Mossad, the Israeli intelligence service, on more than one occasion. “It’s a bizarre case, and I am working on it,” Clinton said. Apparently realizing others were listening, the president added: “It’s s best we not say much about that.” Barak agreed. Profoundly influenced by Barak and other prominent Israeli leaders, the president signed Rich’s pardon in one of his last official acts in office.
Few outside the business world had ever heard of the Belgium-born billionaire before the pardon, which Clinton’s FBI Director Louis Freeh earlier this year called a “corrupt act.” Rich preferred to remain in the shadows and let his highly-paid lawyers like Lewis “Scooter” Libby do the talking for him. Rich lived like royalty in the Swiss Alps with vacation homes in St. Moritz and Spain’s Marbella coast. Perpetually shrouded in cigar smoke, he spoke English with a German accent, and had powerful friends in the Middle East and Europe. Through Rich, oil flowed from the Soviet Union, Iran, Iraq, and Libya to apartheid South Africa, Spain, and Israel among others. Colleagues called him “El Matador” for always walking the razor’s edge of business, morality and politics. “Marc was a titan, no, more than that. He was our God,” an oil trader who worked for Rich tells journalist Daniel Ammann, the author of the new biography of the rogue trader, The King of Oil: The Secret Lives of Marc Rich.
Rich has picked Ammann, the business editor of the Swiss weekly “Die Weltwoche,” to tell the story of his life as he nears the end of it. Ammann told me that when he asked the 75-year-old Rich why he decided to open up, the response was “age and maturity.” Rich says he doesn’t regret it. “I am grateful that the author Daniel Ammann did a thorough research and wrote a fact-based book,” Rich told me in a statement issued by his Swiss PR agency. “I would have had the chance to correct wrong facts, but there weren’t any. The end result is a sympathetic, at times flattering account, that offers a revealing glimpse at the world as seen by one the wealthiest, powerful, yet little-known figures in business, a man who not only defied the most powerful government on Earth, but convinced its president to absolve his sins.
Israel and Oil
Regarding the pardon, Rich, not surprisingly, denies that he paid for it through his ex-wife, Denise Rich, a major Democratic fundraiser and Clinton library donor. Denise Rich tells Ammann she has nothing to hide, but he never asked why she took the Fifth Amendment when called to testify before Congress. It strains credulity to think that Marc Rich really believes that the outrage over the pardon was a “completely unjustified” response whipped up by unspecified “interested parties” who sought to advance their own partisan agenda. This is something of a theme in the book, for Rich never admits ever doing anything wrong. In any case, what makes The King of Oil rewarding is that the pardon is just one, but by no means the only, intriguing chapter in Rich’s life.
The king of oil was born in Antwerp, Belgium in 1935, as Marcell Reich. Young Mercell and his Jewish parents fled Hitler’s army and found refuge in America. The family was resettled to Kansas City and the Reichs became the Riches. Rich dropped out of college to join the Philipp Brothers commodities house (now Philbro). Philipp Brothers gave its young apprentices enormous responsibility. Rich, at 24, was sent to Cuba after the revolution where he met an “energetic and lively” Che Guevara and convinced Castro’s cash-hungry regime not to cancel his firm’s loan for a pyrite mine.
At Philipp Brothers, Rich met his future partner Pincus “Pinky” Green. A Brooklyn Jew who spoke Farsi, Green helped Rich gain entree to the center of power in Iran, the Shah and the royal family. Through such contacts, Rich learned of a strategic pipeline that funneled Iranian oil across Israel. Iran’s role in the pipeline remained a closely guarded secret. Officially, Iran did not sell oil to Israel. Unofficially, Iran was a secret partner in the Eilat-Ashkelon pipeline, which stretched from the Red Sea to Mediterranean. The pipeline was a milestone in Rich’s career “a very, very important business,” he told Amman. It made him a middleman between two of the biggest players in the Middle East.
For Israel, the pipeline represented a critical economic lifeline. The bitter conflict between Israel and its Arab neighbors threatened to completely sever the supply of oil to Israel, which had no domestic supplies of petroleum. For the Shah, the pipeline fueled his dreams of transforming Iran into an economic powerhouse. Iranians had long chafed under the British, who controlled Iranian oil for decades. The Shah saw the secret deal with Israel as a way to get around the Brits. The 158-mile long pipeline, built after the Six Day War, eventually carried enough oil to supply Italy. It not only guaranteed an abundant supply of oil for Israel’s rapidly growing economy, but also allowed the Jewish state to become a net exporter of oil.
His timing was nothing short of miraculous. In 1973, when Rich started trading pipeline oil, the world was in the midst of a radical transformation. It was the year of the Arab oil embargo. The price of oil quadrupled. Demand had overtaken supply. The multinational oil giants including Shell and Texaco collectively known as the “seven sisters” lost their control of the world’s oil. The door was opened to independent traders like Rich. Some were initially reluctant to buy oil that had passed through Israel, fearing that the Arabs would boycott them too. With the Suez Canal blockaded, however, Rich’s oil came at a steep discount. Franco’s Spain, which officially didn’t recognize Israel, was a big customer. When it comes to oil, business always trumped politics. “It was a shortage of oil, and we had the oil,” Rich says.
An Unrepentant Capitalist
There’s a deeper moral here, too, one that has something to tell us about our current financial predicament. Philosophically, Rich sprung from the same ideology as many of his Wall Street contemporaries. A major influence on Rich, Ammann tells us, was Ayn Rand, the philosopher and author of The Fountainhead and Atlas Shrugged. Rand was the patron saint of free markets, and her writings are found on many a Wall Street trader’s bookshelf. Her most famous student was former Federal Reserve Chairman Alan Greenspan. Rand elevated the trader to a near diety. For her, selfishness was a virtue, a philosophy that in translates in the world of finance into Gordon Gekko’s famous line in the movie Wall Street, “greed is good.”
Rich is an unrepentant capitalist. He dispenses with the conceit that ethics has any place in his business. “You can’t run a trading company based on sympathies,” he says, revealingly. What Rich calls “sympathies,” others might call humanity. Business, Rich says, is “neutral;” politics and business exist in separate realms. Marc Rich + Co. was apartheid South Africa’s most important oil supplier, yet Rich says he was personally “fundamentally against apartheid.” (So, it should be noted, were the Soviets and others that supplied oil to South Africa.) Rich also traded with Nigeria, yet he was disgusted by the West African nation’s rampant corruption. A businessman who would avoid deals like this for ethical reasons, Rich says, is being naive. In another time and place, a man with Rich’s mores might have been a slave trader who opposed slavery.
It was clear that Marc Rich + Co AG would do whatever it took to get his hands on major sources of oil. A white trader in Rich’s Brussels office passed himself as a “Monsieur Ndolo,” a director of Burundi’s oil company whom Iranian officials only spoke to by phone. Metal Men, a 1984 book on Rich by A. Craig Copetas, quotes an anonymous Rich oil trader who claims to have deposited $125,000 cash into the coded Swiss account of the head of the Iranian national oil company for “services rendered” on an oil shipment to Spain. “To go into places like Iran and do honest business is naive,” the trader told Copetas. “I’d figure 15 percent of your net in payoffs for every deal made.” While he doesn’t go into specifics with Ammann, Rich doesn’t deny that he authorized bribes.
Iran and South Africa
After the Shah fell in the Iranian revolution of 1979, Rich continued to trade Iranian oil with the regime of the Ayatollah Khomeini. The Iranians “respected the contracts,” Rich told Amman. Rich kept Iran’s crude flowing to Israel, and moreover, the inner circle of power in Tehran knew it. “The professionals in the oil business in Iran didn’t care,” Rich says. “They just wanted to sell oil.” And Rich, who was reaping profits of as much as $14 per barrel, just wanted to sell. He kept selling throughout the 444 days that 53 Americans were held hostage in Iran. “It was very unpleasant and tragic for the hostages and humiliating for America, but it didn’t affect the business,” he says. Rich had oil; his competitors did not.
It was also a felony. Iran was now an enemy of the United States and its citizens were not allowed to trade with it. Morris “Sandy” Weinberg, the man who prosecuted Rich, told me that weapons were part of the deal. As part of a “quid pro quo,” Marc Rich + Co. arranged for the Islamic Republic of Iran to get weapons through a German firm. Iran, at war with Iraq, was desperate for small arms, automatic rifles, and hand-held rockets. Rich was never charged with arms trading, but the allegations never went away. After Clinton approved the pardon, the whole effort was nearly derailed when a last-minute check of a national criminal database showed Rich was wanted for arms trading. Rich says he was approached to trade arms, but says neither he nor his companies ever traded, sold or trafficked weapons for any country.
If Iran opened the door of the world of oil to Rich, South Africa was where the money poured in. The fall of the Shah provoked a crisis in apartheid South Africa, which had been getting almost all its oil from the Shah’s wellheads. Desperate for oil, the Afrikaaners turned to the man they knew could get it for them at a price. A close associate of Rich with access to the company’s books tells Ammann that Marc Rich + Co. made a profit of more than $2 billion in South Africa over the course of 15 years. Rich will only say South Africa was his “most important and most profitable” business. The deals were so profitable that he reportedly scuttled oil tankers at the conclusion of the deal and flew the crew home. According to the U.S. House of Representatives investigation of the pardon, Rich delivered Soviet and Iranian oil to the apartheid regime in South Africa in exchange for Namibian uranium, which was sold back to the Soviet Union. By 1981, so much cash from outlaw regimes was flowing through Rich’s empire that he bought half of 20th Century Fox movie studios as a tax shelter.
What else but hubris could explain how Rich landed on the Justice Department’s Most Wanted list? Instead of taking his knocks for what began as investigation into violations of Department of Energy oil regulations, Rich locked horns with prosecutors. In September 1983, the new U.S. Attorney in Manhattan, Rudolph Giuliani, announced that Rich and Pinky Green had been indicted on charges of fraud, racketeering, evading taxes on more than $100 million, and trading with the enemy. Authorities froze all of Rich’s personal assets and, more damagingly, those of his companies. A year later, two of Rich’s companies were forced to settle with the government, which extracted more than $200 million in fines and penalties, including a $21 million contempt fine. By then, Rich had renounced his U.S. citizenship and fled to Switzerland. He saw himself as a victim of overzealous prosecutors — a view for which President Clinton likely had some sympathy.
Ensconced in the Alps, he was beyond the reach of U.S. law. The Swiss government refused to extradite him; Rich after all was generating enormous tax revenue. He settled into a life of quiet luxury, with his money easing a path into what passed for respectability. Outside Switzerland, the Americans were hunting for him. “I was very careful,” he says. A high-ranking former Mossad agent oversaw his security. Bodyguards accompanied Rich whenever he ventured out from his secure steel-and-glass headquarters in the low-tax haven of Zug, Switzerland. If he flew to South America, his private jet avoided U.S. airspace. “It was like tackling a country,” says former U.S. Marshal Ken Hill, who told Ammann he believed the Israeli Mossad was looking out for Rich. A plan to nab Rich in an “extraordinary rendition” — the same state-sanctioned kidnapping the Bush administration used to round up suspected terrorists — went awry when the Swiss police received a quiet tip off. Were other governments protecting him? “Maybe,” is all the trader will say on the subject.
While U.S. Marshals hunted him down, Rich’s company was quietly doing business with the U.S. government. Rich traded mainly oil, but his bewildering network of 200 private companies served up the bounty of the Earth’s crust if there was money to be made. In the early 1990s, Rich’s company delivered $45 million worth of copper and nickel to the U.S. Mint. “Every time I reach into my pocket for some change, I have to wonder if there’s a bit of Marc Rich in there,” quipped U.S. Rep. Robert Wise, D-W.Va. There was also the matter of $95 million of surplus American grain that Richco Grain sold to China, the Soviet Union and Saudi Arabia. The King of Oil reveals that Rich was supplying the U.S. government with intelligence on people in power in countries where he did business, especially Syria, Iran and Russia. Small wonder then that Howard Safir, the U.S. Marshal who had helped lure ex-CIA officer Edwin P. Wilson out of Libya and headed up the hunt for Rich, told Congress in frustration that his hunt for Rich lacked support at the highest levels of the U.S. government.
Still, a life on the run had a price. In 1996, when his 27-year-old daughter Gabrielle lay dying in a Seattle hospital from Hodgkin’s disease, Rich could only listen over the phone as she drew her last breaths. That same year, Rich concluded a nasty divorce from his wife, Denise, a socialite-turned-songwriter by paying more than $365 million, Ammann reports. But his ex-wife proved useful. She used her fortune to become a major Democratic donor and friend of President Clinton and Rich enlisted her support for his pardon application. She did so only after Marc Rich and Pincus Green agreed to put $1 million a year in a charitable foundation named on her daughter’s behalf.
Whether or not Rich bought his pardon remains an open question, but there’s no question he bought influence. Some of Washington’s most influential and connected lawyers and image consultants were on Rich’s payroll. Despite the efforts of former Nixon White House Special Counsel Leonard Garment and Lewis “Scooter” Libby, the future chief of staff to Vice President Dick Cheney, federal prosecutors stubbornly refused to negotiate with a fugitive. His emissaries finally realized that the case required a political solution, not a legal one, and turned their attention in 2000 to securing a pardon from the outgoing president. A key addition to the legal team was attorney Jack Quinn, a former Clinton White House counsel. Quinn was recommended by Eric Holder, then a top Justice official and the current U.S. attorney general.
It was the outpouring of support from top Israeli leaders and Jewish Americans that played a critical role in swaying Clinton, who was desperately trying to work out a Middle East peace treaty. In addition to Ehud Barak, former Prime Minister Shimon Peres also lobbied the president on Rich’s behalf. Israel owed a debt to Rich. His assistance to the Jewish state went beyond oil, important as that was. Rich had been helping the Mossad since the 1970s and was part of an unofficial network of helpers or “sayanim.” Rich helped the Mossad evacuate Jews from Ethiopia, Yemen and unidentified “enemy” countries. He reportedly allowed Israeli intelligence to use his offices as cover and used his influence with senior officials in Iran and Syria in the search for Israeli soldiers captured by Shiite militias. As a Jew, Rich said he was eager to help. “It’s a natural thing for me to help Israel,” he said.
Rich still trades (he lost huge amounts in the financial crisis), but no longer dominates the commodities world as he once did. His spirit, however, is very much alive. Traders who learned at the foot of the master took control of the company Rich founded and turned it into Glencore International AG, the world’s biggest commodities firm with $152 billion in sales. Trafigura, a Dutch company founded by Rich alumni, is the world’s third-largest independent oil trader. Trafigura and Glencore and other former Rich traders have been implicated in the U.N. oil-for-food scandal in Iraq. Trafigura paid Ivory Coast nearly $200 million to free three executives and settle claims that it dumped toxic sludge that killed 10 people.
But it won’t be oil, commodities, or trading that most will associate with the name Marc Rich. He will be forever linked with one of the most controversial pardons ever. And the great irony of Rich’s life is that the pardon from Clinton may not have been worth the cost. Rich, ever suspicious, won’t set foot on American soil. “Never,” he tells Ammann. “They would look for some excuse to apprehend me. I don’t want to be exposed to that.” Rich wouldn’t answer questions about his reticence. It may be that he fears that a federal grand jury in Manhattan returned a sealed indictment after hearing testimony from Eric Holder and others relating to Clinton’s pardon. Whatever the case, it’s clear that even with his billions, there are still some things that even Marc Rich can’t buy.
- Bialer, Uri, Fuel Bridge Across the Middle East — Israel, Iran and the Eilat-Ashkelon Pipeline (Israel Studies), 2007.
- Copetas, Craig, Metal Men: How Marc Rich Defrauded the Country, Evaded the Law and Became the World’s Most Sought After Criminal, 1984.
- U.S. House Committee on Government Reform, Justice Undone: Clemency Decisions in the Clinton White House, 2002.
- U.S. House Committee on Government Operations, The Strange Case of Marc Rich: Contracting with Tax Fugitivies at Large in the Alps, 1992.