The King of Oil: The Secret Lives of Marc Rich

by Daniel Ammann

  He did not want to ask for the highest possible price, as that would have contradicted his long-term strategy. “To sell a product at the highest possible price to a client in need is like taking candy from a baby,” one of Rich’s experienced traders explained the company’s philosophy. “We just wanted to make something on top of it all. We knew the customers would be grateful and would someday make it up to us. We were investing in the future. The highest price was not the most important factor. What was important was to build up a stable position and a stable business relationship.”

  This did not mean the company had to go without making a tidy profit, however. A former employee told me that in the wake of the Iranian revolution, Marc Rich + Co. was at times making a profit of up to 14 per barrel.

  Israel’s Salvation

  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. “The Little Satan” and “the enemy of Islam,” as Khomeini referred to the Jewish state, was hit harder by the fall of the shah than any other country—except perhaps for South Africa. The new regime added a clause to all contracts that explicitly prohibited the further sale of Iranian oil to Israel or South Africa. During the reign of Mohammad Reza Pahlavi, Israel imported between 60 and 90 percent of its oil from the shah, making the country almost completely dependent on Iran for its energy needs.16The Iranian revolution thus placed Israel in an extremely precarious situation.

  Israel’s salvation came from none other than Marc Rich—a fact that has remained largely unknown to this day. “Israel owes a great debt to Marc. He provided Israel with all its energy needs in its most difficult times,” Avner Azulay told me. Azulay, a former colonel in the Israeli Defense Forces and a high-ranking Mossad agent with a solid network of political contacts, today directs Rich’s philanthropic foundation.

  Beginning in 1973, Rich would serve as Israel’s most important supplier of oil for twenty years. Israel’s very survival was dependent on the trader. Rich remembers selling Israel 1 million to 2 million metric tons per year, approximately 7 million to 15 million barrels. The country’s oil needs were between 100,000 and 200,000 barrels a day in the 1970s.17 In other words, Rich provided at least one out of every five barrels.

  It was perhaps the ideal trade for Rich. He earned a lot of money while at the same time helping guarantee Israel’s survival. “Being Jewish, I didn’t mind helping Israel. On the contrary,” Rich told me with just the right amount of understatement. “It was a business, but he felt that Israel needed his help,” one of Rich’s few close friends told me. The Iranian government’s official line was that Israel had no right to exist, but Iranian inner circles were well aware of Rich’s dealings with Israel. They knew exactly where their oil was flowing, yet no one at NIOC seemed to mind. “They didn’t care,” Rich told me. “The professionals in the oil business in Iran didn’t care. They just wanted to sell oil.” This business relationship, which continued up until the mid-1990s, exposed the hypocrisy of the Iranian fundamentalists. 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. Moreover, the deal was further proof of Rich’s ability to retain his contracts despite radical regime change and against all odds.

  Rich’s services to Israel granted him access to the highest levels of the Israeli government. He was personally acquainted with Prime Ministers Yitzhak Rabin, Menachem Begin, Yitzhak Shamir, and Shimon Peres. “I met them particularly because of the business, and also because of Israel in general,” Rich explains. His dealings with Israel also strengthened his contacts to the Mossad. The Israeli foreign intelligence service always had a role to play when it came to strategically important energy matters. It took great interest in Rich’s many business contacts, as will be shown in chapter 12.

  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 1979 you had to know Marc Rich to be able to figure out if you could or couldn’t get oil on the spot market,” according to Amy Myers Jaffe from the James Baker Institute.18 “Rich became so big in oil that he seemed to appear like a Saudi sheik wherever there was an oil deal to be made—often to the embarrassment of the American oil companies,” wrote A. Craig Copetas.19

  In 1980 Rich’s company had a turnover of 15 billion—more than the gross domestic product of many of the countries with which Rich traded.20 A look at the tax records in Zug shows that Rich declared a fortune worth 292,784,000 Swiss francs (then around 175 million) in Switzerland alone. His company in Switzerland declared a net profit of 406,400,000 Swiss francs (then approximately 260 million) in the same year.21 The period between 1974 and 1983, a period that spans the founding of the company and the Iranian revolution, was referred to by Rich’s employees as “the golden age.” “It was a wonderful feeling,” a trader who was with the company at the time enthusiastically explained. “We can take on everybody. We can win the world.”

  At the high point of Rich’s career came the fall from grace. It began one day with a telephone call to a Manhattan office at 1 St. Andrews Plaza.

  The CASE

  O

  ne morning in the late fall of 1981, the phone rang in Morris “Sandy” Weinberg’s office at 1 St. Andrews Plaza. Weinberg was an ambitious young assistant U.S. attorney for the Southern District of New York. On the other end of the line was a staffer at the Fraud Section of the Department of Justice’s Criminal Division. The Justice Department had received a lead involving a crude oil trader named Marc Rich, who maintained an office on New York’s Park Avenue. “Marc who?” Weinberg asked. “I’ve never heard of a Marc Rich.”

  The former assistant U.S. attorney—today partner in a successful law firm—looks a lot younger than his fifty-seven years of age. He is wearing a blue shirt and a yellow tie and is sipping at a bottle of Perrier. We are sitting at a huge oval table in soft office chairs of artificial leather. On this cool spring morning the visitor can see all the way to St. Petersburg from Weinberg’s office on the twelfth floor of the Bank of America Building in downtown Tampa. A pelican flies past the window.1

  We break the ice by chatting a bit about Roger Federer, the Swiss tennis player who is undisputedly the world’s number one player at the time. Weinberg, a fervid wrestler in his youth who once won the Mid-South Championships, considers Federer to be the best tennis player the world has ever seen.

  Weinberg speaks with the singing drawl of a Tennessean born in Chattanooga. He is a classic southern liberal who was heavily influenced by the civil rights movement. His mother was a Southern Baptist, his father a Jew from Brooklyn who knew about discrimination from personal experience. Speaking of himself, Weinberg claims he had a “very progressive upbringing.” Like both his brothers, he studied at Princeton, where he graduated magna cum laude. He then attended Vanderbilt University Law School. Weinberg became a federal prosecutor at the age of twenty-nine. At the age of thirty he got the phone call from the Justice Department and was assigned to the Marc Rich case.

  Marc Who?

  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. Up until 1981 not a single article on either Rich or his company had ever been published outside of the trade journals. He had never given an interview, and Rich was quite happy with the fact that the press did not have a single photograph of him. “We are happiest when nothing is written about us,” a Jewish trader in Zurich once told me. “If I was Catholic I would say commodity traders fear publicity like the devil fears holy water.”

  After the call from the Justice Department, it would not be long until the whole world knew the name Marc Rich. The FBI had already begun looking into deals made by Marc Rich I
nternational, a subsidiary of Marc Rich + Co. AG that had a New York office.2 The Feds had received tips from two Texas oil traders who accused Rich of hiding profits from the Internal Revenue Service by funneling the money to offshore companies and foreign bank accounts. In December 1981, just a few weeks after the call from the Justice Department, Weinberg and an FBI agent flew to Texas to meet with these oil traders.

  The tip came from David Ratliff and John Troland, who together had directed West Texas Marketing (WTM) in Abilene. They were serving fourteen months in a federal penitentiary in Big Spring, Texas, at the time, having been convicted in an unrelated case concerning illegal oil transactions, and were hoping to cut a deal with the government in order to avoid serving their entire sentence.3 Weinberg immediately got them out of prison on furlough, whereupon the two took Weinberg to their office in Abilene. “So there I was in Abilene on a weekend in a godforsaken place,” Weinberg told me, “and they pulled out what they called the ‘pot file’ and explained the scheme. They showed me that over seventy million dollars were in this ‘pot.’ Marc Rich had in 1980 and 1981 earned more than seventy million in illegal reseller profits and funneled those funds offshore to his Swiss company in order to evade federal income tax and federal energy oil control regulations.”

  Weinberg realized immediately that he was dealing with a very big case. “It was a big deal. I was very fortunate. It defined me as a young lawyer.” What is more, it was the case that put Weinberg’s name in the headlines and lent him the national stardom that ultimately launched him on his lucrative career as a lawyer in Tampa. Upon reviewing Troland and Ratliff’s dealings with Marc Rich, Weinberg came to the personal conclusion that he had uncovered “the biggest tax fraud of all times,” as he proudly tells me. “The case was simple,” he says while sizing me up with his glacial blue eyes. “The man made a whole bunch of money that was illegal. He couldn’t recognize it. He didn’t want to give it up, so he had to get it out of the country some way. He devised a scheme to launder the money outside of the United States by creating these phony oil transactions.”

  On the flight back to New York, Weinberg began putting his prosecution team together in his mind—the FBI had to be a part of it, the Treasury Department, the Internal Revenue Service, the Customs Service, the State Department. Weinberg was thrilled. “I felt passionately about the case,” he says. This was no run-of-the-mill case. This case would set a precedent.

  “With Our Shotguns Blazing”

  Edward Bennett Williams had seen it all. Nothing could shake the legendary Washington trial lawyer, who had defended high-profile clients such as the singer Frank Sinatra, U.S. Senator Joseph McCarthy, Playboy owner Hugh Hefner, financier Robert Vesco, Soviet spy Igor Melekh, and reputed Mafioso Frank Costello. He was a “superlawyer,” considered “the ultimate insider,” the man to see if you had really big legal trouble. He had a stellar reputation as a “miracle worker who could make the guilty go free.”4

  Marc Rich knew Williams. The lawyer sat on the board of the film studio 20th Century Fox, half of which Rich secretly owned. When it soon became apparent that the Southern District of New York meant business, Rich hired Williams to represent him. Williams had comforting words for Rich. The matter at hand appeared to be an ordinary energy case parading as a tax case—the type of proceedings the government routinely settled without pressing criminal charges. He assured Rich that he could settle the case without an indictment if Rich agreed to pay a fine and a portion of the taxes he allegedly owed. He gave the same advice to Rich that he gave to all of his clients: Keep quiet and stonewall. “The worst you can do is talk to the prosecutors. I can get rid of it for thirty million,” he told Rich and then offered him the following words of encouragement: “We shall go to the U.S. Attorney with our shotguns blazing.”5

  Williams adopted this attitude when he visited Assistant U.S. Attorney Sandy Weinberg in his office in New York in May 1983. He threw himself onto a chair, leaned back, put his feet on the table, and asked Weinberg how much money the government wanted to settle the case. “You don’t have to worry,” Williams added patronizingly, “my clients don’t flee.”6 He proposed to dispose of the case by having Rich pay the taxes owed plus a substantial fine.

  Was Williams putting too much stock in his reputation? Did he think he could easily put one over on the young assistant U.S. attorney? Whatever the case, this tactic did not work on Sandy Weinberg.

  Weinberg looked the celebrity superlawyer straight in the eye, shook his head, and said with no more respect than necessary that he was not interested in a plea deal. Puzzled, Williams asked Weinberg what he had in mind. Weinberg spelled it out for him: “J-A-I-L.”7 The government, he continued, would not accept a plea agreement unless it included both “a huge fine and substantial jail time.” Weinberg would not change his mind, even after Williams raised his offer to 100 million (see chapter 13). According to Rich’s Swiss lawyer André A. Wicki, Weinberg was seeking a twenty-five-year prison sentence. He threatened to indict Rich, his partner Pinky Green, and the Rich companies on racketeering charges if no such settlement could be reached.

  Weinberg clearly looks back on his former brazenness with delight. “I took Ed Williams’s breath away a bit,” he says. The attorney, who—ironically—now defends white-collar criminals, believes his refusal to deal with Williams was a matter of principle. “If we allowed people to buy their way out of it, if you don’t go to jail for [what in his mind was] the biggest tax fraud, we could never bring another tax case.”

  Rich’s Flight to Switzerland

  The Rich family was then staying at their weekend house on Long Island’s Lido Beach, as was usually the case at that time of year. “We were at the beach for the weekend, and Marc said we may have to leave the country,” Denise Rich remembers with a shudder. We are sitting in her penthouse at 785 Fifth Avenue. Above the photographs of her daughters’ weddings hangs a still life of flowers by Marc Chagall.

  Denise Rich knows how to give a convincing performance. She shakes her head in wide-eyed disbelief as if Rich himself had just given her the devastating news. “I had no clue, believe me. I didn’t know anything about what was going on. ‘Why?’ I asked Marc. ‘There may be a few problems,’ he answered. ‘Why?’ ‘The lawyer will talk to you.’ The lawyer, Bob Thomajan, walked me around the block three times in New York and I still didn’t know why. If we were going to have to leave, what was I going to do? As a wife, you know, I love my husband. I love my children. I consulted my father, who was a very smart man; he was my rock. What should I do? Papa said, ‘You go with your husband, of course.’ ”

  Denise did just as her father, Emil Eisenberg, advised. In the first week of June 1983, the Rich family hastily relocated to Switzerland, where Rich had based his company nine years earlier. Rich was rattled by the fact that Williams had lost control of the case—and with that lost the opportunity to settle the case out of court. Rich, who stresses his innocence to this day, was alarmed by the prosecutor’s aggressive posture. The threat of racketeering charges was a dramatic escalation. A RICO indictment, Williams explained, would mean all of Rich’s assets could be frozen before the case even came to trial. The statute, about which I will write more later in the chapter, also provided for draconian jail sentences.

  Rich was deeply shocked. The man who was used to settling so much with money had simply not expected events to turn against him. He took it as a sign that he should flee the country, but the few weeks of absence that Denise Rich had initially expected soon became an eternity. In Rich’s mind, his flight to Switzerland represented a second escape (the first being from Antwerp) and a journey of no return. Rich had renounced his U.S. citizenship and became a naturalized Spaniard in September 1982. “I was naturalized under the laws of Spain, swore an oath of allegiance to the King of Spain, and formally stated that I thereby renounced U.S. nationality,” he claims.8 However, the State Department takes the view that it never approved Rich’s Certificate of Loss of Nationality and thus he had faile
d to renounce his U.S. citizenship.9 Rich also took on Israeli citizenship in July 1983.

  Ed Williams’s biographer describes how the lawyer was standing in Marvin Davis’s office in Los Angeles when he heard the news that his client was on the lam. Williams screamed into the telephone, “You know something, Marc? You spit on the American flag. You spit on the jury system. Whatever you get, you deserve. We could have gotten the minimum. Now you’re going to sink.”10 Rich claims there is not a shred of truth in this version of events. On the contrary, Rich maintains that neither Williams nor any of his other lawyers had ever asked him to return to the United States.

  Regardless, Williams’s overconfident performance caused quite a bit of damage. His misinterpretation of the situation led his client down a dead-end street—and into the headlines. “It was a scorched earth policy,” said Michael Green, who joined Rich’s legal team in 1985. “Ed was known as a tough litigator. Sometimes it works. In Rich’s case it did not.”

  Rudolph W. Giuliani Takes Over

  The case was exactly the type the media loves. It was a case of “historic” significance, as the prosecuting attorneys never tired of stating: a virtually unknown millionaire with a beautiful wife who lived in a Park Avenue penthouse. Journalists soon discovered that Rich owned half of 20th Century Fox, as a silent partner. His name had not surfaced publicly when Denver oilman Marvin Davis negotiated the 722 million purchase in June 1981.11 The film studio was riding on a wave of success at the time. George Lucas’s Return of the Jedi, the third part of the Star Wars saga, had just opened; at the time it was the greatest box-office success in cinematic history. Several prominent Americans sat on 20th Century Fox’s board of directors, including former president Gerald R. Ford and former secretary of state Henry A. Kissinger.