The legal team’s incomprehensible obstructive strategy—particularly early on—helped to blow the case completely out of proportion. The stonewalling, the steamer trunk affair, and the apparent sale and subsequent renaming of MRI as Clarendon all did nothing to convince either the prosecution or the public. Jack Quinn later summed up the situation. “Mr. Rich’s defense followed a most unfortunate no-communication, no-cooperation, no-negotiation strategy,” he wrote in a letter to one of Giuliani’s successors. It was “an expensive but ill-advised strategy.” 30
There were very few dissident voices among those members of the media who refused to go along with the herd. One of the most prominent journalists who was not afraid to express his opinion was Gordon Crovitz, a graduate of Yale Law School and former publisher of the Wall Street Journal. “It’s worth taking a second look at Mr. Giuliani’s first big RICO case,” Crovitz wrote. “This was the much-celebrated 1984 case against Marc Rich, the wealthy oil trader. A close reading of the allegations shows that these effectively reduce to tax charges. The core of the case is that Mr. Rich wrongly attributed domestic income to a foreign subsidiary. Again, this sounds like a standard civil tax case, not RICO. Mr. Rich has stayed in Switzerland rather than go to court on RICO charges.”31
“Rudy Giuliani is a public relations genius,” Laurence Urgenson told me. Without RICO and Iran, the case would have ostensibly remained a case of tax fraud that would have disappeared relatively quickly from the newspaper headlines. “These charges were highlighted in the press release announcing the indictment, and the press connected the charges to the 1980 hostage crisis,” wrote Leonard Garment.32 The charges surrounding Rich’s dealings with Iran “had only one effect: to whip up the fury of the press and public against the ‘traitor’ Marc Rich,” according to André Wicki. “Iran was added at the last minute, and it became a big deal,” says Robert Fink, who has served as Rich’s lawyer in New York since 1979. “It was so inflammatory,” Fink says over his Caesar salad while waving his hands in the air. “The case went away, you know, totally disproportionate. RICO and Iran were so emotionally charged. The government intended to paint Rich into the corner.”
It would be easy to simply discount such statements as lawyers lobbying on their client’s behalf, but public reaction to the charges against Rich proved the validity of their statements. 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 had 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. “The courts of morality know no rules of procedure,” my political philosophy professor liked to warn.33 They don’t pursue exonerating evidence. The verdict of the public is definite. There is no appeal.
“He fled to Zug to live in luxury, and he dealt with the Iranians while they were torturing and holding our people hostage. This is not a good guy,” said Howard Safir, the associate director of operations for the U.S. Marshals Service who pursued Rich to no avail for seventeen years and who later served as Mayor Giuliani’s police commissioner (see chapter 12).34 “One case that stands out glaringly is Iran,” House Government Reform Committee chairman Dan Burton said. “We had hostages over there at the time that Mr. Rich was trading with them. He violated the embargo. He was working with the Iranians selling their oil, and our hostages—American citizens—were languishing under very difficult circumstances for a long, long time at that time.”35 It is 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 rebels in Nicaragua. President George H. W. Bush later pardoned several people involved in the Iran-Contra affair, among them Secretary of Defense Caspar W. Weinberger.
A Political Case
Rich and his companies sometimes pushed up against the boundaries of what is allowed in order to carry out their business. They used every tax loophole that they could find. He sometimes operated in the darker parts of capitalism’s gray areas. Rich lived according to the motto he quoted to one of his earliest employees the day he was hired: “As a trader you often walk on the blade. Be careful and don’t step off.” Yet I am not convinced that Rich would actually have been found guilty in court. There is simply too much reasonable doubt surrounding his guilt. I have come to this decision after my conversations with members of the judiciary, diplomats, and other individuals directly involved in the case and after having viewed countless documents, some of which were confidential.
As my research has clearly illustrated, there was a political aspect to the case. U.S. Attorney Giuliani knew that the case would serve as a springboard for his political career—a career that would lead him to become the mayor of New York and later to make an unsuccessful bid for the U.S. presidency. One could go as far as to say that Giuliani’s political and very public career actually began with this case. As history has shown, the fact that the case escalated rapidly before virtually exploding as a media event was not exactly to Giuliani’s disadvantage. In all likelihood, this escalation was even desired.
Cardiff University’s Michael Levi, a noted expert on white-collar crime, also sees political motivations in the case against Rich. “Political reasons may underline the decision to prosecute. For example, U.S. commodities trader Marc Rich was prosecuted in 1983–84 for tax evasion and other frauds . . . plus secretly buying Iranian oil after the U.S. trade ban. He did, in the end, plead guilty to some charges, but skeptics might ask themselves whether the prosecution would have occurred had he not traded with the enemy.”36
The temperature in Sandy Weinberg’s Tampa office suddenly seems to fall by a couple of degrees when I want to discuss these issues with him. It is one of the few moments in which the attorney has to struggle with his composure while remaining polite to his guest. This comes as no surprise. The question gets straight to the heart of the fundamental criticism surrounding the case.
“We did this investigation in a very professional way,” Weinberg says with a studied calmness. “We’ve been fair. We didn’t have a good case, we had an overwhelming case. Believe me, I know how to make a case. If Jack Quinn says that we had a legal house of cards, well, it was all aces. Why did the lawyers wait until I was gone? None of these arguments were raised in 1983 or 1984. The lawyers never came in and said: There was no crime, this is just a civil case.” What does Weinberg have to say about the tax analysis carried out by Bernard Wolfman and Martin Ginsburg, considered by many to be two of the nation’s best tax professors? “It’s ridiculous, it’s poppycock, it’s garbage,” Weinberg replies before pausing as if he were completely taken aback by his own rude emotional explosion. He then looks me directly in the eyes and seems to consider which argument would have the greatest effect on me. “And don’t forget,” he says, “don’t forget: Rich’s companies pled guilty; he was a fugitive. If this case was so flawed, why didn’t he come back and face the charges?”
An excellent question—a question that only Rich himself can, and indeed will, answer in the next chapter.
“I NEVER BROKE the LAW”
R
ich’s voice is even quieter than usual. “I don’t think he’s straight,” he says and throws me a stern look. He is dressed in his usual attire for our meetings—dark suit, white shirt, red tie, and a gold Rolex sparkling on his left wrist. At seventy-four, Rich still exhibits the handsome features that made him such a good-looking man in his younger years. One can see a strong resemblance to Rudolph Valentino, the tragic star of the silent film era, in Rich’s earlier photographs. Rich is an acute observer and a man of few words with a soft voice and a barely noticeable lisp. He is always precise and to the point. There is something catlike about him, beyond his apparent nine lives. He cautiously keeps his distance and waits, ready to jump. He might be ready to flee—or attack. I had asked him his opinion of Rudolph W
. Giuliani, his nemesis. “I don’t think he’s straight. I think he’s only interested in himself. That’s it,” Rich says. It is the first time the commodities trader has spoken openly about his case. Rich does not attempt to outmaneuver or avoid my questions. On the contrary—and rather surprisingly for someone who for the last twenty-five years has been labeled one of the greatest tax fraudsters—Rich maintains his innocence. Of course he tried to minimize his taxes, he admits. Of course he funneled his profits to Switzerland, where the tax burden is substantially lower than in the United States. Of course his companies practiced “transfer pricing.” Every international company does. Rich makes an effort not to sound too apologetic when stressing his innocence. “I never crossed the border of legality. Everything I did was perfectly in order. I never broke the law. I did nothing wrong.”
“A Scapegoat Was Needed”
For the first time ever, Marc Rich is willing to discuss his international trading activities. “The trading with the enemy charge was clearly the most inflammatory part of the indictment. The truth is far different,” Rich explains. “I was doing business with Iran for a Swiss company, and it was completely legal. Marc Rich + Co., a Swiss corporation, had historically purchased oil from the National Iranian Oil Company before the overthrow of the shah and the seizure of American hostages. We then resold the oil on the world market. Like all other foreign-based oil companies, including those which were subsidiaries of U.S. companies, Marc Rich + Co. continued to do oil business with the National Iranian Oil Company after the Iranian revolution took place.”
If he was indeed innocent, as he claims, I interject, why was he branded the greatest tax fraudster and an enemy of the state? Rich tilts his head to one side, and the red birthmark on his left cheek seems to glow brighter than usual. “I believe it was a combination of political problems and that a scapegoat was needed at the time,” Rich says. “I was an easy target, one individual, very successful, making a lot of money, and Jewish. I stood outside of the establishment.”
He is convinced that he was “singled out” for precisely these reasons. It was easier for prosecutors, he thinks, to go after him rather than to sift through the hundreds of public companies with their anonymous stockholders that often employed similar practices. After Richard Nixon introduced price regulations for crude oil in 1973, oil resellers seemed to sprout up everywhere. Prior to the Arab oil embargo, there were only twelve oil resellers in the United States. By 1978 there were five hundred companies in the business. “I was singled out by individuals. Individuals with a clear personal interest in self-promotion,” Rich believes. “Mr. Giuliani escalated the case because he saw a chance to achieve more publicity for himself,” he maintains. “Personal interests and feelings on their side got into the way of a fair solution.”
Marc Rich seems almost bashful as he tells me this. I am reminded of how one of his friends once explained that Rich was actually a very reserved person—a virtual introvert—who preferred to sit quietly in the corner at social events. He would just smoke his cigar and observe other people. In all truth, Rich—contrary to his public image as an ice-cold, unscrupulous businessman—is the personification of understatement.
Gross Overreaction
Our discussion of Rich’s own case developed into a conversation on the tendency of the United States to put its own laws above the laws of other nations. Europeans have a humorous expression: The United States has three main exports—rock ’n’ roll, blue jeans, and its view of the world. “The United States wants to apply its own peculiar laws to the whole world,” Rich claims. “I was and am satisfied that Switzerland lived up to its historic image and did not allow itself to be bullied by a big nation.” He adds in German, “Die Schweiz verbeugte sich nicht.” Switzerland did not bow.
“The U.S. political and legal system has a long and very well known history of grossly overreacting,” Rich continues. “They often shoot with big cannons at small birds. Well-known recent examples include the cases against Martha Stewart or Arthur Andersen, [the latter of] which was one of the five biggest auditing companies before the U.S. destroyed it. It was destroyed because of the actions of a handful of its executives, and all eighty-five thousand innocent employees had to bear the dire consequences along with the shareholders.”
When I ask him if he doubts the American justice system, Rich answers, “I do believe in the rule of law. Unfortunately, like everything created and applied by man, it is not always perfect. Winston Churchill once said, ‘You can always count on the Americans to do the right thing—after they have tried everything else.’ ”
Rich’s Biggest Mistake
“My biggest mistake?” Rich repeats my question. “I clearly underestimated the zealots on the U.S. side, and I chose the wrong lawyers. In the past, whenever I had an issue with the police, I talked to them and settled it. I even proposed to do the same thing with the prosecutors, but my lawyer at that time, Ed Williams, said, ‘The worst you could do is to talk to them. We will confront them head-on.’ That was a huge mistake that greatly aggravated the problem. I regret it.”
Rich suddenly switches languages in order to use a very German word: die Ohnmacht, which translates as “powerlessness” or “impotence.” I had asked him what he felt was the worst aspect of the entire affair. For a man who had pulled himself up by his own bootstraps, the fact that he was powerless despite all of his money, his contacts, and his iron will must have been unbearable. “He likes to be in control,” Denise Rich told me when we spoke of the effect the case had had on the family. “At that time he was out of control because he couldn’t do what he wanted to do. He couldn’t travel. He was depressed.” In my career as an investigative journalist, I have often spoken with people who were utterly convinced that they had been the victim of an overly zealous media and judiciary. Each and every one of them was deeply affected by the feeling of helplessness, the inability to make themselves heard, and a public perception of the events that was the complete opposite of their own views. Rich is no different. “I always had a good reputation. This case unjustifiably harmed my reputation,” he says.
“Die Ohnmacht,” Rich repeats before continuing again in English, “and the feeling of not getting a fair trial. We had the experience of how [the prosecutors] proceeded in the past, how they blocked all our accounts, and how they blocked all our relationships. It was, you know, a total attack. It had a very negative effect. Our companies were collapsing.” His trading empire would have been much larger had it not been for the case, he claims. According to Rich, persecution by U.S. authorities was one of the primary factors that forced him to sell his company years later (see chapter 17).
After the indictment in September 1983, Rich’s competitors were sure that his companies were dead in the water. The racketeering charge combined with the freezing of millions of dollars in assets would have ruined most companies, but Rich’s managed to carry on. They may have been severely crippled, but they had survived. “My family, my friends, and my business partners always supported me because they knew better. Our business partners knew us as an honest, reliable, and competitive company, so they continued to do business with us,” Rich explains.
Why He Didn’t Come Back
There was one decisive question 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. She is a highly intelligent, reserved, and seri
ous woman who harbors great sympathy for the United States, stemming from the years she spent in there in her youth. “Marc Rich was prejudged by the media. The public was agitated and Rudolph Giuliani was pursuing his own goals,” Kopp-Iklé said. “I realized that Rich had no chance of receiving justice in the United States. He could not be sure of a fair trial,” she told me.
“Everybody was inflamed,” Rich’s longtime lawyer Robert Fink confirmed. He made a gesture with the flat of his hand as if he were running it over a wooden slat. “It was a train on a track that could not be stopped. The atmosphere was very polluted. There was so much anger, pressure, and threats. Marc was thoroughly demonized.”
“Marc was characterized as a villain,” Wall Street financier Michael Steinhardt told me. “We all got the impression that if he came back, they would lock him up and throw away the key.”
“Nonsense,” Sandy Weinberg said when I confronted him with this criticism. “Rich would have gotten a fair trial. He created the publicity, not us. It was self-inflicted.” However, the prosecution’s threat of 325 years in prison was “shocking to the entire defense team,” Laurence Urgenson told me. Urgenson has served as Rich’s lawyer since 1994 and also represented him during the postpardon hearings. He offered a piece of wisdom in parting, gained from his thirty years’ experience as a lawyer, prosecutor, and deputy assistant attorney general in the Reagan and George H. W. Bush administrations. “When cases become symbols, the defendant is in trouble,” Urgenson said at the end of our discussion. “For the Southern District of New York, Marc Rich had become a symbol. For them he was a wealthy guy—the rogue billionaire who thinks he’s above the law. They thought, ‘We don’t let this rich guy get away with it.’ ”
The King of Oil: The Secret Lives of Marc Rich Page 16