Metal Men: Marc Rich and the 10-Billion-Dollar Scam

by A. Craig Copetas

  Business was inspired through fear and intimidation. Traders referred to Rich and the other principals who founded the company as the “Inner Circle” and the “Jewish Mafia,” agonizing that they would be caught in an elevator alone with any of them. The office became a synonym for tension. Marriages broke up and traders ran off with their secretaries because, said one trader, they were the only ones who could ever understand. Rich didn’t care what happened as long as the job was done, the trade concluded. “And boy, you better have the answer if Rich asked you a question because they knew everything that was going down in that office. It was scary.”

  The emotional cost of a deal was never taken into account. All that mattered was staying on top of the deal, constantly reappraising the market and remaining on twenty-four-hour call to brief Rich, Green, or the Inner Circle. “Everyone at Marc Rich was greedy,” said John Hughes, who knew many of Rich’s European staff and once briefed Rich on possible real estate investments. “They were so cocky that they thought their next deal would be for the nails that put Christ on the cross.”

  “A lot of their traders became unrecognizable because Rich kept moving them around so fast. Everyone who knew a Rich trader felt abused in some way. They all thought it was a glamorous lifestyle to be hopping on planes to Brazil with twenty minutes’ notice, but they all suffered a loss of trust. You never heard businessmen say ‘fuck’ so much in your life. They were constantly ‘screwing somebody’ or ‘ramming it up somebody’s ass.’ It was a perverse form of business.”

  Rich had moved from the Bankers Trust Building and now observed his world from the penthouse of the Piaget Building, a ritzy Fifth Avenue skyscraper financed in part by his friend the Shah of Iran. Over a million dollars was spent to decorate the reception room — “the place had more mirrors than a New Orleans whorehouse,” said a trader. Internal stairways linked floors together, and Rich filled his office with electronic gadgets that made the place look like “the bridge of the starship Enterprise.” The Piaget offices were run like a supersecret military installation. Nothing was allowed in a trader’s office unless approved by Rich personally. “He didn’t like anyone eating in their office or putting their own pictures on the wall,” said one of his former employees. “I once saw him explode because a trader put his feet on the desk. He said, ‘Would you do that to your own furniture?’ He went nearly berserk.”

  Documents, scraps of paper, and personal belongings were to be swept off desktops whenever an outside visitor or client entered a trader’s office. Rich made spot checks during office hours and haunted the corridors like a banshee after work, making sure that everything was either locked up or destroyed. “There was a constant fear of being caught at something,” muttered a trader, commenting on the paranoia level in the New York headquarters. “Marc would call you into his office for a meeting in progress, and you knew that he wasn’t telling you everything that you should know. He wrote notes in letters so small that you could only read them with a magnifying glass. Once he was done with you, he had no problem in telling you to leave the room. We always walked out scratching our heads, wondering what was really going on.”

  “Very few things made him laugh. He used to have problems working all the electronic stuff. He’d push a wrong button and TV sets would appear, bar doors would swing open, and lights would start flashing all over the room. It made his office look like Studio 54, and people would always ask him if he wanted to dance.”

  Rich’s ability to unnerve the formidable men who made up his trading staff was the inevitable result of the money he paid. “It was business by example,” said a trader who spent six years on his payroll. “Marc wanted everyone to act as he acted. We noticed that Rich never went to the bathroom without a handful of telexes so we started going to the bathroom with telexes. It was an absurd scene, men holding telexes with one hand and directing their piss with the other to impress the boss.”

  But the traders knew that Rich rewarded dedication with cash, and home loans were easier and cheaper here than at the bank. Whenever a trader concluded an impressive deal, he received a congratulatory telex from Zug (where the final contracts were signed) that was read by both Rich and Green. “It was the star on our foreheads,” said one of Rich’s young traders. But like everything in the Rich empire, the Zug telex portended a dark side. “You never knew whether or not Rich was happy with you. He never said anything until the annual review. You could warp your brain waiting for that.”

  Rich’s annual inquest into a trader’s performance was a horrible experience, even for seasoned metal men. Traders were called without warning by Ida Levitan, Rich’s secretary, and told to appear immediately in her office. There they would sit, squirming like school kids waiting to give testimony to their principal. “You’d wait sometimes an hour for the guy ahead of you to come out of Rich’s office,” a trader explained. “That scene would have made a great commercial for underarm deodorant.”

  Numbed after the long wait and grinning nervously as Rich’s door opened, the trader walked in to meet Rich’s stare grinding coldly into his eyes. Rich’s desk, of course, was bare except for the trader’s personal file, which he opened slowly for dramatic effect. “You wouldn’t be working there if you weren’t good,” said a trader. “There was nothing to get upset about. But you did. Rich intimidated the hell out of you before he ever opened his mouth.”

  Executives were never “fired” from Marc Rich — just ridiculed and disposed of quietly by Green, the corporate hatchet man, to some menial traffic job or paid off to keep their mouth shut once they left the company “under the friendliest of terms.” Like everything else in the Rich empire, the policy of silence at any cost often reached extraordinary proportions. Rich once grew so deliriously mad over a pricing error committed by one of his junior metal traders that he convinced a competitor to hire him, with Rich — unbeknownst to the trader — paying half of the salary. “The guy didn’t know enough to hurt us,” a former shareholder explained, “so the offer tantalized the competition.”

  The inimitable trademark of a Rich man was the ability to rearrange reality for the company’s benefit. The ambience of the Rich trading room was that of a magician’s stage, a place where silhouettes accounted for more than exact images. Like the sorcerer directing his apprentices, Rich expected his traders to disorient audiences, cultivate their trust, hypnotize their instincts. If executed properly, the technique was marvelous. But to some of the men who made up Rich’s trading illuminati, it was like asking clients to be ripped off.

  Jack Wollman did not look like a crook, a distinct advantage in a world where first impressions mean everything. Wollman — a senior traffic manager — was a heavyset suburbanite with a stucco house on Long Island, a head of thinning gray hair and a collection of Corsican briar pipes that he loved to chew while walking around the New York office, giving him the look of a tenured university professor. “It was hard to believe that Jack was an embezzler,” said a Rich trader.

  In early 1981, Rich called Wollman on the carpet and accused him of stealing nearly $3 million since 1978. It was a neat trick. Wollman allegedly palmed the cash by drawing a set of bogus charter parties, the deeds traffic managers write between shipowners and merchants to move material around the world legally. The forged charter party — with a higher freight cost — was shown to Rich for approval. But Wollman executed charter parties with lower freight costs and pocketed the difference. Rich also accused Wollman of skimming cash out of the corporate account by withdrawing money to pay for nonexistent imbalances in freight payments. “Jack had no idea that he had been found out,” said a Rich trader who worked with Wollman for three years. “Marc called him into his office and told him to have his resignation on the desk in fifteen minutes.”

  Another event that threw Rich into a rage occurred in Malaysia in 1981, a time when the state-owned tin company, Malaysian Mining Corporation, was suffering from plummeting tin prices on the world market. The sultans of Malaysia elect one of their num
ber to be king for five years, the most powerful among this group being Sultan Mahmood Iskandar of Johore, an independent-minded butcher who commanded a private militia and was convicted of culpable homicide only to be pardoned by his father. The king was Ahmad Shah, the obstreperous Sultan of Pahang, who under the constitutional monarchy could block legislation and declare a state of emergency. The Islamic nation was politics as sheer confusion, the perfect arena for Rich’s picadors.

  Rich’s man in Malaysia was David Zaidner, a Philipp Brothers trader who had left the company to join Amalgamated Metals Corporation in the late sixties after getting in trouble over the purchase of a huge cargo of Bolivian tin that turned out to be alluvium, a sludgy casserole of sand and rock. A slender Egyptian Jew who bandied a Swiss passport, Zaidner was one of the hottest “tin shooters” in Southeast Asia and South America. It was a crap shoot tailor-made for trouble: While dealing tin for Amalgamated in the early seventies, Zaidner was called on the carpet for allegedly bribing the buffer stock manager of the International Tin Council — a sort of tin-pot OPEC — to release artificially low tin reserve figures in hopes of causing a market scramble. At first, Rich didn’t want to hire Zaidner but was talked into putting him in charge of the firm’s Malaysian operation by Felix Posen and Pinky Green.

  What ultimately convinced Rich to hire Zaidner as a senior executive in the corporation was his expertise in the Singapore-Thailand-Malaysia tin concentrate scam, a kind of shell game in which Thai and Malay tin concentrates were smuggled into Singapore without the knowledge of the International Tin Council. Once the concentrate arrived in Singapore, a group of highly sophisticated tin dealers, many working out of crumbling shanties, purified the tin by running the concentrate through crushing machines. The dealers would then package the tin in steel drums and find a shipping company willing to supply false documentation, an easy task in Singapore, according to metal traders.

  World trade in illicit tin concentrate is enormous, accounting for some ten thousand tons of material a year with an estimated market value of over $40 million. Although the trade is conducted frequently in Malaysia and Thailand, the end product is always shipped out of Singapore because the city-state does not consider tin concentrate a controlled or dutiable item. Since the Lee Kuan Yew government collects no revenue on the material, dock inspectors always look the other way when it comes to tin concentrate. Though no law is being broken, the tin concentrate scam creates an artificial imbalance in world supply — a perfect situation for Rich’s daredevilry.

  Zaidner was close to the Malaysian finance minister Tengku Tan Sri Datuk Razaleigh Hamzah, and Dr. Mahathir bin Mohamad, the country’s prime minister. Without Rich’s knowledge at first, the trio embarked on a bold plan to purchase every pound of tin they could get their hands on, stockpile it in Singapore and elsewhere and hope to push up the world price. The Malaysians were extremely eager to go along with the scheme because the country was the world’s largest producer of tin and in serious financial trouble over low prices and unable to convince consuming nations or the International Tin Council to provide price supports.

  The tin-hoarding operation began in July 1981, roiling world tin markets overnight. The cost of tin on the London Metal Exchange ballooned from a low of $4.33 a pound to nearly $7.50. Tin consumers were in shock. Between March 1980 and July 1981, the price of tin had tumbled from a high of $8.65 a pound to the $4.33 figure. Prices were expected to continue sagging because of a poor economic outlook in the housing industry, which, along with cans, was the major use for tin. But now a strange new force had entered the marketplace, prompting consumers and producers of tin to hastily schedule a meeting in Geneva. The Malaysian government, now on a roller-coaster ride, refused to discuss their involvement in the spiraling prices.

  The cost of tin continued to zoom upward until January 1982, when it was shot down by the United States government’s selling tin from the federal stockpile for a lower price. Prices collapsed by March, falling 22 percent in the last two weeks of February. Rich took a $60 million bath because he had believed Zaidner’s tales of even higher tin prices. The Malaysians lost $150 million and were stuck with sixty thousand tons of unwanted tin.

  Zaidner left Rich soon after that fiasco to start his own company in Zug. He was due for a bonus and cash on liquidated share capital reportedly totaling some $50 million. Rich gave Zaidner only $10 million, teaching him a valuable $40-million lesson in how not to manage a market. “Rich’s feeble attempt to corner the world tin market was a dumb move but not a real disaster because he eventually traded himself out of the position at a profit,” a veteran Southeast Asian metal trader explained. “People in this business are stuck with tons of unwanted material every day. Rich made a deal, like a lot of us do, that didn’t work. What’s important is that he made a deal, and a rather large one.”

  In Rich’s world, trading was an obsessive process unable to be contained. Once the details of his deals, true or apocryphal, were removed, the froth of indictments and accusations leveled against him by his friends and colleagues blown away, what remained was a man who needed to trade in the same way that a soldier needs war or a child needs toys. The hunt meant everything to Rich. Not to have it was to have nothing at all.

  “Friday was Marc’s day to sulk,” one of his senior oil traders said sadly. “There was never any business to be done after five o’clock, and Pinky had gone home for the Sabbath. Marc would just sit there in his office, drinking his whiskey and phoning around the world looking for someone to do business with. He looked so lonely sitting there. It was only when you saw Marc like that that you felt sorry for him. He didn’t have anybody to play with.”

  | Go to Contents |

  Chapter 13

  “When imaginations begin to skid out of control, so do events.”

  — General Alexander M. Haig, Jr.

  “BLOOD … everywhere you looked there was blood,” the concierge muttered, annoyed that the gendarmes had sealed the apartment for too long, causing the Mediterranean heat to bake the blood into the walls he had to clean. “They left him tied up like a sausage, you know.”

  Until the morning of April 27, 1983, no one in the trading fraternity knew the exact whereabouts of E. O. H. “Edmond” Mantell — Marc Rich’s chief operative in Thailand. Mantell had been missing in action since January. Vanished. The questions about what became of the Prussian trader with a whiskey-red face, stork legs, and a nasty disposition were answered at seven A.M. that spring morning: He was discovered dead in the lime-colored bathroom of an unfurnished apartment in Eze, a medieval village carved out of the French corniche, a few dangerous curves west along the coastal road from Monte Carlo.

  The only other thing that everybody who knew Edmond Mantell agreed upon was that he had been tortured to death.

  Mantell was a virtuoso China hand who went to work for Rich after nearly twenty years as the representative for Thyssen Steel and, later, Associated Metals in Bangkok. He was a permanent fixture on the Bangkok trading scene, having been transfixed by the delta city from the moment he first set eyes upon the banks of the Chao Phraya River as a young German trader in the early sixties. He was never great as a trader, say those who knew him well, but he stayed in the business because he never complained about being a “lost son.” Fluent in Thai and a few Chinese dialects, Mantell worked Southeast Asia like a veteran prospector panning constantly for gold, working far upstream, a wilderness man trying to find the ultimate outcropping. In the process, he became an expert on conducting business in Southeast Asia, the Pacific Basin, and China. On the day President Richard Nixon announced normalized relations with China in 1972, Mantell was the first corporate American representative to arrive in Beijing to do business, a city whose eccentricities he knew well from the days he spent there as a trader for Germany’s Thyssen Steel. Within hours of his arrival, he had purchased a load of tungsten and made arrangements to secure a long-term tungsten contract for Associated’s American consumers.

  Mantell’s
strong point was his wizardry at countertrade — a popular Third World procedure in which a merchant helps his customers increase exports of other products to offset the money spent on purchasing weapons. Southeast Asian customers were often treacherous mountain warlords who exported anything from antimony to opium in order to secure arms. There was nothing irregular about metal men dealing in arms, particularly since the materials that make a good antiaircraft gun often make a superior golf putter. Since the day Andrew Carnegie and Alfred Krupp first converted their steelworks into armament factories to produce armor plating and gun barrels instead of steam engines and railway ties, men such as Mantell, who supplied the raw materials necessary to manufacture destruction, had a vested interest in ensuring that the armorer’s wares reached market.

  Southeast Asia’s major arms off-ramp was Bangkok, a mysteriously opaque city where nagas and garudas — mythical serpent deities and bird-man progenitors — displaced the Western notions of reality. Business in Bangkok was conducted on streets and in brightly colored rooms guarded by eerie-looking sentinels chiseled from magical stones. Interspersed in every arms deal was a rogues’ gallery of Western expatriates, Shan mountain opium generals, and assassins said to be trained to swallow their tongue in suicide if captured by the competition. Bangkok was a city of ghosts, of supernatural agencies with inexorable appetites for dragging people to their doom. But Mantell relished the desquamative existence Bangkok offered — a man infected with the fury of its backwater climate, addicted to nights rummaging through cheaply bought thrills offered by the 250,000 prostitutes who decided that flat-backing and round-heeling in the musky sex hotels was more profitable than stoop-laboring in the rice paddies.