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Article #646

Rich's Case One of Crude Oil, Iran and RICO

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From: Neil At Hollywood�.Hom
Date: Mon, 26 Feb 2001 01:12
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http://www.latimes.com/print/20010225/t000016946.html

Rich's Case One of Crude Oil, Iran and RICO=20


By THOMAS S. MULLIGAN, Times Staff Writer





    NEW YORK--Defenders of fugitive billionaire Marc Rich for years have =
portrayed his 1983 indictment as the relic of long-discredited =
regulatory policies and of a young federal prosecutor's ruthless =
ambition.=20
     True, the regulations landed on the scrap heap and the prosecutor, =
Rudolph W. Giuliani, vaulted to national prominence as mayor of New =
York.=20
     But the actual case against Rich, on analysis, appeared to have =
lost little of its strength over the years. Indeed, it remained =
formidable enough that, even with the nation's sharpest and =
best-connected lawyers at his disposal, Rich renounced his U.S. =
citizenship and lived palatially on the lam in Switzerland rather than =
return to face the charges in court.=20
     Rich, a Belgian-born commodities wizard, broke his silence Saturday =
but said little that his defenders hadn't already said to justify his =
controversial last-minute pardon by President Clinton.=20
     "The indictment against me in the United States was wrong and was =
meant to hurt me personally," Rich said in a statement issued from his =
business headquarters in Zug, Switzerland. The pardon, he said, =
"remedied this injustice 18 years later."=20
     At its heart, the case came to this: that Rich and his former =
oil-trading partner, Pincus Green, dodged price controls on crude oil, =
contributing to higher gasoline prices for U.S. motorists; that they =
evaded $49 million in taxes on $106 million in illicit oil profits; and =
that they traded with the enemy during the Iran hostage crisis. Rich's =
companies also were charged in some of the counts.=20
     What made the case front-page news in 1983 were the eye-popping =
sums involved, Rich's flight to avoid prosecution and the use of a legal =
weapon that until then mainly had been used to fight organized crime.=20
     Federal prosecutors charged that the complex web of transactions =
involving Rich-controlled entities here and abroad amounted to a =
conspiracy under the Racketeer Influenced and Corrupt Organizations Act, =
or RICO law.=20
     RICO got its teeth from provisions empowering authorities to seize =
the fruits of a criminal enterprise. Just as mobsters' yachts could be =
forfeited in a RICO case, so was Rich's multibillion-dollar global =
trading empire potentially in jeopardy.=20
     The 176 pardons and commutations that Clinton granted on his last =
day in office last month have become embroiled in scandal, but no pardon =
has raised more questions than that of Rich, 66. The Rich case is under =
investigation by Congress and by the U.S. attorney for the Southern =
District of New York, the office that initially prosecuted him.=20
     Clinton, in a commentary published in last Sunday's New York Times, =
defended his decision on grounds identical to those put forward by his =
former White House counsel, Jack Quinn, the Washington lawyer-lobbyist =
who negotiated the pardon.=20
     They, like the A-list lawyers who preceded Quinn in Rich's corner, =
argued that Rich was a victim of overzealous prosecutors, that the tax =
evasion charges didn't hold water, that the dealings with Iran involved =
foreign firms under Rich's control but technically not subject to the =
U.S. trade ban and that Rich was singled out for behavior that was =
commonplace in the oil market at the time.=20
     Rich was socked with felony counts carrying 300 years in potential =
prison sentences. He complained in his statement Saturday that others =
who engaged in the same kind of activity were pursued in civil lawsuits =
or not at all.=20
     Rayburn D. Hanzlik, for one, doesn't buy that argument.=20
     "There are guys in jail today who were peanuts compared to Marc =
Rich," said Hanzlik, a former Department of Energy official who helped =
bring Rich to the attention of federal prosecutors.=20
     Robert B. Sutton, John T. Troland and David W. Ratliff, to name a =
few, all did prison time on similar charges. Troland and Ratliff, in =
fact, allegedly participated in Rich's schemes and might have testified =
against him.=20
     To understand the allegations against Rich, it helps to know a bit =
about the domestic oil-price controls adopted after the 1973 Arab oil =
embargo.=20
     The controls, in effect from 1973 to 1981, were meant to accomplish =
the divergent--if not wholly incompatible--goals of restraining energy =
prices while simultaneously encouraging new oil production and =
protecting the livelihood of "mom and pop" producers.=20
     The federal government's answer was to divide crude oil into three =
categories: "old" oil from pre-1973 wells; "new" oil, either from new =
wells or representing increased production from existing wells; and =
"stripper" oil from wells producing an average of less than 10 barrels a =
day.=20
     Under Department of Energy regulations, old oil was held to a low =
selling price representing a small profit over its original cost of =
production; new oil also was controlled but allowed to sell at a higher =
price; stripper oil was uncontrolled and could be sold at whatever price =
it would fetch.=20
     At times during 1980 and 1981, the price for stripper oil was more =
than $20 per barrel higher than for old oil and $15 higher than for new =
oil, even though all three might be chemically identical. As Quinn noted =
Feb. 8 in testimony to a congressional committee, such price =
discrepancies "created a powerful incentive for U.S. oil companies to =
overcome them."=20
     They also created a job category: oil "resellers"--middlemen who =
exploited the strange new regulatory landscape for profit. These ranged =
from minnows such as Troland and Ratliff to big fish such as flamboyant =
Tulsa oilman Robert Sutton to international whales such as Rich.=20
     Rich "traded bigger dollar amounts and was involved in more =
transactions all over the world than anybody else," Hanzlik said.=20
     Resellers, like speculators in any market, served the useful =
function of dampening huge price swings.=20
     But less scrupulous resellers would dodge price controls through a =
device known as a "daisy chain," in which controlled oil would be =
relabeled as it moved through a bewildering series of transactions, =
emerging miraculously at the end as uncontrolled stripper oil. The =
purported stripper oil then could be sold at a huge profit, to be split =
among those participating in the chain.=20
     To the extent that the price controls were defeated, consumers got =
stuck with the bill, in the form of higher prices at the gas pump.=20
     When Ronald Reagan took office in January 1981, he fulfilled a =
campaign pledge by abolishing oil price controls with his first =
executive order.=20
     But there remained a huge backlog of investigations left over from =
the Jimmy Carter and Gerald R. Ford years, when the Department of Energy =
had accused hundreds of individuals and firms of price control =
violations. It was Hanzlik's job, as an incoming Energy official, to =
clear up that backlog.=20
     The bulk of the cases, if they had merit, were dispatched with =
civil penalties. Oil giants Exxon and Arco, for example, paid fines of =
$2.1 billion and $315 million, respectively, in price-control cases. =
Arco's case actually involved trades with Rich.=20
     Hanzlik and other free-market partisans of the Reagan Revolution =
regarded the multinationals in some respects as victims of the byzantine =
regulations. In fact, then-Sen. Al Gore (D-Tenn.) once accused Hanzlik =
of being too soft on price-control scofflaws.=20
     "But when the violations are done deliberately, it becomes a =
criminal offense," Hanzlik said, adding that that was the case with =
Rich. "We had enough evidence that we tossed the whole thing to [the =
Department of] Justice."=20
     The investigator who caught the ball at Justice was Morris "Sandy" =
Weinberg Jr., then an assistant U.S. attorney in Manhattan, now a =
criminal defense lawyer in private practice in Tampa, Fla.=20
     Weinberg, in recent telephone interviews, recalled flying to the =
Texas Panhandle to get Troland and Ratliff out of jail--where they were =
serving time in an unrelated case--so they could show him documents =
outlining their Abilene oil firm's dealings with Rich.=20
     The final 65-count indictment against Rich charged him and Green =
with conspiring with the Texans to launder illicit oil profits--and =
evade taxes--by moving them through a series of sham transactions among =
the Abilene firm, called West Texas Marketing, or WTM; Rich's New York =
and Swiss firms; and two Rich-controlled Panamanian shell companies.=20
     "They would make up fictitious transactions to make it look like =
they [the Texans] were buying foreign oil from Marc Rich in Switzerland =
and reselling it to a Panamanian company," Weinberg said.=20
     Weinberg said the Texans showed investigators phony invoices and =
handwritten ledgers tracking what the alleged conspirators called "the =
pot": their secret fund of illicit profits.=20
     One basic scheme worked this way, according to the indictment: =
Rich's New York firm would sell a shipload of controlled oil to WTM, =
which would route it through a daisy chain so it emerged as stripper =
oil. The stripper oil then would be sold to Rich, ostensibly at the much =
higher world price but in fact at a huge discount. Rich then would =
resell the oil for a big profit.=20
     On its official set of books, it looked like WTM was racking up =
huge profits from these trades, but in fact, prosecutors alleged, WTM =
had secretly agreed with Rich that the lion's share of profits in "the =
pot" belonged to Rich. WTM would collect a relatively small per-barrel =
fee for its role.=20
     To clear the millions of dollars of paper profits off its official =
books, WTM periodically would draw up documents making it look like it =
was buying a cargo of foreign crude oil from Rich's Swiss company and =
selling it the same day to one of the Panamanian shells for $3 per =
barrel less, the indictment states.=20
     "Great international businessmen that they were, they always sold =
at a loss on these deals," Weinberg observed dryly.=20
     By making it appear that WTM, rather than Rich's company, was =
reaping the profits from the daisy chains, Rich reduced his U.S. income =
tax liability, prosecutors alleged.=20
     They said he also engaged in complex deals linking profitable =
domestic trades by the New York business unit to money-losing deals by =
the Swiss unit. The Swiss unit would then "bill" the U.S. unit for the =
difference, effectively wiping out the domestic profits for income tax =
purposes, prosecutors said.=20
     Rich's lawyers in 1990 paid $100,000 to two prominent tax experts, =
Bernard Wolfman of Harvard Law School and Martin Ginsburg of Georgetown =
University Law Center, to obtain their opinion of the tax evasion =
charges. Their scholarly, 28-page memorandum concludes that Rich's =
companies handled all the transactions correctly from a tax standpoint.=20
     The only problem with the report--but a fatal problem, according to =
Weinberg--is that it accepts at face value the fiction that all of the =
third parties who dealt with Rich in the suspect transactions were =
acting at arm's length as independent, profit-minded businessmen, when =
in fact many were secret partners in a conspiracy orchestrated by Rich.=20
     The professors acknowledged in their report that they made "no =
independent verification of the facts" but accepted the version supplied =
by Rich's former lawyer, Leonard Garment, and others in his law firm.=20
     Rich's defenders have had less to say about the Iran trades, =
conducted during the spring of 1980 while Iran was holding 52 Americans =
hostage at the U.S. Embassy in Tehran. In a series of executive orders =
earlier in the 14-month crisis, President Carter had outlawed virtually =
all financial dealings with Iran.=20
     Quinn, in the 2-inch-thick pardon application he submitted to =
Clinton, wrote: "The Iranian counts were added to the indictment to =
incite public opinion against the defendants. In essence, the =
prosecutors accuse Mr. Rich and Mr. Green of causing the companies to =
trade with Iran when, under the applicable regulations, the companies =
were permitted to trade with Iran. The prosecutors quietly dropped the =
Iranian claims against the companies but never dealt with the claims =
against the individuals."=20
     According to the indictment, Rich's Swiss company made a contract =
with the National Iranian Oil Co. to purchase Iranian crude and fuel =
oil. Then Rich and Green, working from their New York offices, =
negotiated a deal with a Bermudan oil company for it to buy 6.25 million =
barrels of the Iranian oil for $202 million, and they arranged payment =
for Iran through credit arrangements with New York branches of foreign =
banks, the indictment states.=20
     Rich's defenders point to the fact that the companies involved all =
were based overseas and were technically exempt from Carter's executive =
orders.=20
     Weinberg acknowledged that prosecutors revised their original =
indictment and dropped the trading-with-the-enemy charges against the =
Rich companies in the final version. But it was always their intention =
to charge Rich and Green--both U.S. citizens at the time--with those =
counts.=20
     "Marc Rich did this from New York City. We had telexes that would =
have demonstrated it," Weinberg said.=20
     Gary G. Sick, currently director of the Middle East Institute at =
Columbia University, worked with the U.S. hostage negotiators as a =
member of the National Security Council in the late 1970s and early =
1980s.=20
     "We would have been distressed to find that an American was trading =
oil behind our backs," Sick said last week. "He certainly deserved to be =
prosecuted if indeed he was trading Iranian oil at that time."=20
     Sick noted, on the other hand, that the oil blockade never was very =
effective in pressuring Iran because the ban was widely ignored by other =
nations.=20
     "Iran was always able to sell its oil," he said.=20
     Thus, according to Sick, it would be incorrect to say that Rich's =
alleged trades in themselves had any real effect on the hostage =
negotiations.=20
     Still, during his 18-year exile, Rich's business dealings seem to =
have been little influenced by U.S. foreign policy. Said Rep. Dan Burton =
(R-Ind.), chairman of the panel investigating the pardon: "Mr. Rich was =
publicly reported to have traded with just about every enemy the U.S. =
has had over the last 20 years."=20
     In his testimony to Burton's committee, Quinn said that then-U.S. =
Atty. Giuliani improperly wielded "the RICO sledgehammer" against Rich. =
The threat of losing his entire organization to a RICO forfeiture was so =
overwhelming, Quinn said, that Rich was coerced into a 1984 settlement =
of the charges against his companies, for $200 million in fines and =
penalties.=20
     Rich, Quinn went on, "had been wrongly labeled a fugitive for not =
returning from his headquarters in Switzerland to be subjected to what =
he believed would be a patently unfair and grossly overhyped =
racketeering trial."=20
     The Israeli public relations firm that released Rich's statement =
Saturday added that Rich feared he'd have little chance of a fair trial =
"in the wake of the negative antagonistic public opinion carefully =
created and orchestrated by the prosecution."=20
     Giuliani indeed became known as one of the earliest and most =
aggressive proponents of using RICO laws against white-collar crime =
suspects.=20
     But when Rich was indicted in September 1983, Giuliani had just =
returned from the Justice Department in Washington to take over as U.S. =
attorney for the Southern District of New York. The Rich investigation =
in fact had been underway for nearly two years by then.=20
     Nor has Giuliani been a key figure in the prosecutors' continued =
refusal to reduce or dismiss the charges against the fugitives.=20
     Rich's efforts to negotiate a return to the United States began =
almost from the moment he fled. A former senior State Department =
official recalled being approached as early as 1985 by representatives =
of the trader, trying to learn whether a deal was possible.=20
     Rich intensified his quest in later years, enlisting Israeli =
statesmen and other notables to lobby on his behalf.=20
     Several times during the 1990s, Rich lawyers approached the U.S. =
attorney's office in Manhattan, offering the Wolfman-Ginsburg analysis =
and other arguments for why the case should be dropped.=20
     Mary Jo White, the current U.S. attorney, replied to one such =
overture this way: "If your clients genuinely believe that they have =
done nothing wrong, they should board the next plane to New York and =
subject themselves to the jurisdiction of the court."=20
     But finally, Clinton made that unnecessary.=20
     "I do not consider the pardon granted by President Clinton as an =
eradication of past deeds," Rich said in his statement Saturday, "but as =
closing a cycle of justice and as a humanitarian act."=20




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<DIV><FONT size=3D2><A=20
href=3D"http://www.latimes.com/print/20010225/t000016946.html">http://www=
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<DIV>
<P><SPAN class=3DcHeadline1><B>Rich's Case One of Crude Oil, Iran and =
RICO=20
<BR></B></SPAN><!-- end main headline --><!-- start author & byline -->
<P><SPAN class=3Dcauthor>By THOMAS S. MULLIGAN, Times Staff =
Writer<BR><BR></SPAN>
<P><!-- end author & byline --><!--STORY BEGINS--></P><SPAN =
class=3DcLocation><!-- dateline --></SPAN><SPAN class=3DcontentFirst>
<P><BR><A onclick=3D"return photowin490(this, 'photowin490')"=20
href=3D"http://www.latimes.com/print/20010225/p000016946_g8i80yke.html"><=
/A>&nbsp;&nbsp;&nbsp;&nbsp;NEW=20
YORK<WBR>--<WBR>Defenders of fugitive billionaire Marc Rich for years =
have=20
portrayed his 1983 indictment as the relic of long-discredited =
regulatory=20
policies and of a young federal prosecutor's ruthless ambition.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;True, the regulations landed on the =
scrap heap=20
and the prosecutor, Rudolph W. Giuliani, vaulted to national prominence =
as mayor=20
of New York. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;But the actual case =
against Rich,=20
on analysis, appeared to have lost little of its strength over the =
years.=20
Indeed, it remained formidable enough that, even with the nation's =
sharpest and=20
best-connected lawyers at his disposal, Rich renounced his U.S. =
citizenship and=20
lived palatially on the lam in Switzerland rather than return to face =
the=20
charges in court. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rich, a Belgian-born =

commodities wizard, broke his silence Saturday but said little that his=20
defenders hadn't already said to justify his controversial last-minute =
pardon by=20
President Clinton. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"The indictment =
against me=20
in the United States was wrong and was meant to hurt me personally," =
Rich said=20
in a statement issued from his business headquarters in Zug, =
Switzerland. The=20
pardon, he said, "remedied this injustice 18 years later."=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At its heart, the case came to this: =
that Rich=20
and his former oil-trading partner, Pincus Green, dodged price controls =
on crude=20
oil, contributing to higher gasoline prices for U.S. motorists; that =
they evaded=20
$49 million in taxes on $106 million in illicit oil profits; and that =
they=20
traded with the enemy during the Iran hostage crisis. Rich's companies =
also were=20
charged in some of the counts. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;What =
made the=20
case front-page news in 1983 were the eye-popping sums involved, Rich's =
flight=20
to avoid prosecution and the use of a legal weapon that until then =
mainly had=20
been used to fight organized crime. =
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal=20
prosecutors charged that the complex web of transactions involving=20
Rich-controlled entities here and abroad amounted to a conspiracy under =
the=20
Racketeer Influenced and Corrupt Organizations Act, or RICO law.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RICO got its teeth from provisions =
empowering=20
authorities to seize the fruits of a criminal enterprise. Just as =
mobsters'=20
yachts could be forfeited in a RICO case, so was Rich's =
multibillion-dollar=20
global trading empire potentially in jeopardy.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 176 pardons and commutations that =
Clinton=20
granted on his last day in office last month have become embroiled in =
scandal,=20
but no pardon has raised more questions than that of Rich, 66. The Rich =
case is=20
under investigation by Congress and by the U.S. attorney for the =
Southern=20
District of New York, the office that initially prosecuted him.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinton, in a commentary published in =
last=20
Sunday's New York Times, defended his decision on grounds identical to =
those put=20
forward by his former White House counsel, Jack Quinn, the Washington=20
lawyer-lobbyist who negotiated the pardon.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;They, like the A-list lawyers who =
preceded=20
Quinn in Rich's corner, argued that Rich was a victim of overzealous=20
prosecutors, that the tax evasion charges didn't hold water, that the =
dealings=20
with Iran involved foreign firms under Rich's control but technically =
not=20
subject to the U.S. trade ban and that Rich was singled out for behavior =
that=20
was commonplace in the oil market at the time.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rich was socked with felony counts =
carrying=20
300 years in potential prison sentences. He complained in his statement =
Saturday=20
that others who engaged in the same kind of activity were pursued in =
civil=20
lawsuits or not at all. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rayburn D. =
Hanzlik,=20
for one, doesn't buy that argument. =
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"There are=20
guys in jail today who were peanuts compared to Marc Rich," said =
Hanzlik, a=20
former Department of Energy official who helped bring Rich to the =
attention of=20
federal prosecutors. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Robert B. Sutton, =
John T.=20
Troland and David W. Ratliff, to name a few, all did prison time on =
similar=20
charges. Troland and Ratliff, in fact, allegedly participated in Rich's =
schemes=20
and might have testified against him. =
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To=20
understand the allegations against Rich, it helps to know a bit about =
the=20
domestic oil-price controls adopted after the 1973 Arab oil embargo.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The controls, in effect from 1973 to =
1981,=20
were meant to accomplish the divergent--if not wholly =
incompatible--goals of=20
restraining energy prices while simultaneously encouraging new oil =
production=20
and protecting the livelihood of "mom and pop" producers.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The federal government's answer was to =
divide=20
crude oil into three categories: "old" oil from pre-1973 wells; "new" =
oil,=20
either from new wells or representing increased production from existing =
wells;=20
and "stripper" oil from wells producing an average of less than 10 =
barrels a=20
day. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Department of Energy =
regulations,=20
old oil was held to a low selling price representing a small profit over =
its=20
original cost of production; new oil also was controlled but allowed to =
sell at=20
a higher price; stripper oil was uncontrolled and could be sold at =
whatever=20
price it would fetch. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At times during =
1980 and=20
1981, the price for stripper oil was more than $20 per barrel higher =
than for=20
old oil and $15 higher than for new oil, even though all three might be=20
chemically identical. As Quinn noted Feb. 8 in testimony to a =
congressional=20
committee, such price discrepancies "created a powerful incentive for =
U.S. oil=20
companies to overcome them." <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;They also =
created=20
a job category: oil "resellers"--middlemen who exploited the strange new =

regulatory landscape for profit. These ranged from minnows such as =
Troland and=20
Ratliff to big fish such as flamboyant Tulsa oilman Robert Sutton to=20
international whales such as Rich. =
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rich=20
"traded bigger dollar amounts and was involved in more transactions all =
over the=20
world than anybody else," Hanzlik said.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resellers, like speculators in any =
market,=20
served the useful function of dampening huge price swings.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;But less scrupulous resellers would =
dodge=20
price controls through a device known as a "daisy chain," in which =
controlled=20
oil would be relabeled as it moved through a bewildering series of =
transactions,=20
emerging miraculously at the end as uncontrolled stripper oil. The =
purported=20
stripper oil then could be sold at a huge profit, to be split among =
those=20
participating in the chain. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the =
extent that=20
the price controls were defeated, consumers got stuck with the bill, in =
the form=20
of higher prices at the gas pump. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When =
Ronald=20
Reagan took office in January 1981, he fulfilled a campaign pledge by =
abolishing=20
oil price controls with his first executive order.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;But there remained a huge backlog of=20
investigations left over from the Jimmy Carter and Gerald R. Ford years, =
when=20
the Department of Energy had accused hundreds of individuals and firms =
of price=20
control violations. It was Hanzlik's job, as an incoming Energy =
official, to=20
clear up that backlog. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The bulk of the =
cases,=20
if they had merit, were dispatched with civil penalties. Oil giants =
Exxon and=20
Arco, for example, paid fines of $2.1 billion and $315 million, =
respectively, in=20
price-control cases. Arco's case actually involved trades with Rich.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hanzlik and other free-market =
partisans of the=20
Reagan Revolution regarded the multinationals in some respects as =
victims of the=20
byzantine regulations. In fact, then-Sen. Al Gore (D-Tenn.) once accused =
Hanzlik=20
of being too soft on price-control scofflaws.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"But when the violations are done=20
deliberately, it becomes a criminal offense," Hanzlik said, adding that =
that was=20
the case with Rich. "We had enough evidence that we tossed the whole =
thing to=20
[the Department of] Justice." <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The =
investigator=20
who caught the ball at Justice was Morris "Sandy" Weinberg Jr., then an=20
assistant U.S. attorney in Manhattan, now a criminal defense lawyer in =
private=20
practice in Tampa, Fla. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Weinberg, in =
recent=20
telephone interviews, recalled flying to the Texas Panhandle to get =
Troland and=20
Ratliff out of jail--where they were serving time in an unrelated =
case--so they=20
could show him documents outlining their Abilene oil firm's dealings =
with Rich.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The final 65-count indictment against =
Rich=20
charged him and Green with conspiring with the Texans to launder illicit =
oil=20
profits--and evade taxes--by moving them through a series of sham =
transactions=20
among the Abilene firm, called West Texas Marketing, or WTM; Rich's New =
York and=20
Swiss firms; and two Rich-controlled Panamanian shell companies.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"They would make up fictitious =
transactions to=20
make it look like they [the Texans] were buying foreign oil from Marc =
Rich in=20
Switzerland and reselling it to a Panamanian company," Weinberg said.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Weinberg said the Texans showed =
investigators=20
phony invoices and handwritten ledgers tracking what the alleged =
conspirators=20
called "the pot": their secret fund of illicit profits.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One basic scheme worked this way, =
according to=20
the indictment: Rich's New York firm would sell a shipload of controlled =
oil to=20
WTM, which would route it through a daisy chain so it emerged as =
stripper oil.=20
The stripper oil then would be sold to Rich, ostensibly at the much =
higher world=20
price but in fact at a huge discount. Rich then would resell the oil for =
a big=20
profit. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On its official set of books, =
it=20
looked like WTM was racking up huge profits from these trades, but in =
fact,=20
prosecutors alleged, WTM had secretly agreed with Rich that the lion's =
share of=20
profits in "the pot" belonged to Rich. WTM would collect a relatively =
small=20
per-barrel fee for its role. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To clear =
the=20
millions of dollars of paper profits off its official books, WTM =
periodically=20
would draw up documents making it look like it was buying a cargo of =
foreign=20
crude oil from Rich's Swiss company and selling it the same day to one =
of the=20
Panamanian shells for $3 per barrel less, the indictment states.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"Great international businessmen that =
they=20
were, they always sold at a loss on these deals," Weinberg observed =
dryly.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By making it appear that WTM, rather =
than=20
Rich's company, was reaping the profits from the daisy chains, Rich =
reduced his=20
U.S. income tax liability, prosecutors alleged.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;They said he also engaged in complex =
deals=20
linking profitable domestic trades by the New York business unit to =
money-losing=20
deals by the Swiss unit. The Swiss unit would then "bill" the U.S. unit =
for the=20
difference, effectively wiping out the domestic profits for income tax =
purposes,=20
prosecutors said. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rich's lawyers in =
1990 paid=20
$100,000 to two prominent tax experts, Bernard Wolfman of Harvard Law =
School and=20
Martin Ginsburg of Georgetown University Law Center, to obtain their =
opinion of=20
the tax evasion charges. Their scholarly, 28-page memorandum concludes =
that=20
Rich's companies handled all the transactions correctly from a tax =
standpoint.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The only problem with the report--but =
a fatal=20
problem, according to Weinberg--is that it accepts at face value the =
fiction=20
that all of the third parties who dealt with Rich in the suspect =
transactions=20
were acting at arm's length as independent, profit-minded businessmen, =
when in=20
fact many were secret partners in a conspiracy orchestrated by Rich.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The professors acknowledged in their =
report=20
that they made "no independent verification of the facts" but accepted =
the=20
version supplied by Rich's former lawyer, Leonard Garment, and others in =
his law=20
firm. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rich's defenders have had less =
to say=20
about the Iran trades, conducted during the spring of 1980 while Iran =
was=20
holding 52 Americans hostage at the U.S. Embassy in Tehran. In a series =
of=20
executive orders earlier in the 14-month crisis, President Carter had =
outlawed=20
virtually all financial dealings with Iran.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Quinn, in the 2-inch-thick pardon =
application=20
he submitted to Clinton, wrote: "The Iranian counts were added to the =
indictment=20
to incite public opinion against the defendants. In essence, the =
prosecutors=20
accuse Mr. Rich and Mr. Green of causing the companies to trade with =
Iran when,=20
under the applicable regulations, the companies were permitted to trade =
with=20
Iran. The prosecutors quietly dropped the Iranian claims against the =
companies=20
but never dealt with the claims against the individuals."=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to the indictment, Rich's =
Swiss=20
company made a contract with the National Iranian Oil Co. to purchase =
Iranian=20
crude and fuel oil. Then Rich and Green, working from their New York =
offices,=20
negotiated a deal with a Bermudan oil company for it to buy 6.25 million =
barrels=20
of the Iranian oil for $202 million, and they arranged payment for Iran =
through=20
credit arrangements with New York branches of foreign banks, the =
indictment=20
states. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rich's defenders point to the =
fact=20
that the companies involved all were based overseas and were technically =
exempt=20
from Carter's executive orders. =
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Weinberg=20
acknowledged that prosecutors revised their original indictment and =
dropped the=20
trading-with-the-enemy charges against the Rich companies in the final =
version.=20
But it was always their intention to charge Rich and Green--both U.S. =
citizens=20
at the time--with those counts. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"Marc =
Rich did=20
this from New York City. We had telexes that would have demonstrated =
it,"=20
Weinberg said. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gary G. Sick, currently =

director of the Middle East Institute at Columbia University, worked =
with the=20
U.S. hostage negotiators as a member of the National Security Council in =
the=20
late 1970s and early 1980s. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"We would =
have=20
been distressed to find that an American was trading oil behind our =
backs," Sick=20
said last week. "He certainly deserved to be prosecuted if indeed he was =
trading=20
Iranian oil at that time." <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sick noted, =
on the=20
other hand, that the oil blockade never was very effective in pressuring =
Iran=20
because the ban was widely ignored by other nations.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"Iran was always able to sell its =
oil," he=20
said. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Thus, according to Sick, it =
would be=20
incorrect to say that Rich's alleged trades in themselves had any real =
effect on=20
the hostage negotiations. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Still, =
during his=20
18-year exile, Rich's business dealings seem to have been little =
influenced by=20
U.S. foreign policy. Said Rep. Dan Burton (R-Ind.), chairman of the =
panel=20
investigating the pardon: "Mr. Rich was publicly reported to have traded =
with=20
just about every enemy the U.S. has had over the last 20 years."=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In his testimony to Burton's =
committee, Quinn=20
said that then-U.S. Atty. Giuliani improperly wielded "the RICO =
sledgehammer"=20
against Rich. The threat of losing his entire organization to a RICO =
forfeiture=20
was so overwhelming, Quinn said, that Rich was coerced into a 1984 =
settlement of=20
the charges against his companies, for $200 million in fines and =
penalties.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rich, Quinn went on, "had been wrongly =
labeled=20
a fugitive for not returning from his headquarters in Switzerland to be=20
subjected to what he believed would be a patently unfair and grossly =
overhyped=20
racketeering trial." <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Israeli =
public=20
relations firm that released Rich's statement Saturday added that Rich =
feared=20
he'd have little chance of a fair trial "in the wake of the negative=20
antagonistic public opinion carefully created and orchestrated by the=20
prosecution." <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Giuliani indeed became =
known as=20
one of the earliest and most aggressive proponents of using RICO laws =
against=20
white-collar crime suspects. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;But when =
Rich was=20
indicted in September 1983, Giuliani had just returned from the Justice=20
Department in Washington to take over as U.S. attorney for the Southern =
District=20
of New York. The Rich investigation in fact had been underway for nearly =
two=20
years by then. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nor has Giuliani been a =
key=20
figure in the prosecutors' continued refusal to reduce or dismiss the =
charges=20
against the fugitives. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rich's efforts =
to=20
negotiate a return to the United States began almost from the moment he =
fled. A=20
former senior State Department official recalled being approached as =
early as=20
1985 by representatives of the trader, trying to learn whether a deal =
was=20
possible. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rich intensified his quest =
in later=20
years, enlisting Israeli statesmen and other notables to lobby on his =
behalf.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Several times during the 1990s, Rich =
lawyers=20
approached the U.S. attorney's office in Manhattan, offering the=20
Wolfman-Ginsburg analysis and other arguments for why the case should be =

dropped. <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mary Jo White, the current =
U.S.=20
attorney, replied to one such overture this way: "If your clients =
genuinely=20
believe that they have done nothing wrong, they should board the next =
plane to=20
New York and subject themselves to the jurisdiction of the court."=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;But finally, Clinton made that =
unnecessary.=20
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"I do not consider the pardon granted =
by=20
President Clinton as an eradication of past deeds," Rich said in his =
statement=20
Saturday, "but as closing a cycle of justice and as a humanitarian act." =
</P>
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Subject: Rich's Case One of Crude Oil, Iran and RICO
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