The King of Oil: The Secret Lives of Marc Rich Read online

  The BIGGEST DEVIL

  I

  t is one of the coldest mornings of the year in St. Moritz, and I’m walking to my car. The snow crunches under my feet, and my breath hangs before me in a cloud of mist. It is eight degrees below zero Fahrenheit in the world’s oldest and most glamorous ski resort, and I can almost hear the air crackling. I have to scrape away a thick layer of ice from my car windows before I get in. I curse quietly under my breath to hide my nervousness, and I hope the car will start despite the bitter cold. “Please,” I beg, as I turn the key. The man I have arranged to go skiing with in the Swiss Alps hates nothing more than people being late. This much I already know. Speaking of his ex-wife, when I once asked him about his divorce, he said, “She is always late. Always.” 1 There was no irony in his voice.

  Arriving late is not an option. Not here and not now. In half an hour I am going to meet Marc Rich, the twentieth century’s most powerful, most important, and most notorious oil trader. No one before and none since has ever been as successful as Rich, and none has stirred up such strong emotions around the world. Friends and colleagues admire him for his unique genius that virtually revolutionized international trade. Enemies despise him and consider him an unscrupulous profiteer who would sell his own grandmother—if the deal was good enough. It seems as if Marc Rich, now seventy-four years old, can only be seen in terms of black or white. The fact that he was pardoned by Bill Clinton in January 2001 has changed nothing. In fact, it had the opposite effect. The pardon, considered one of the “most notorious” in United States history, is seen by many of Rich’s opponents as proof that he can buy anything, even immunity from the president of a superpower.2

  I want to find out who this man really is beyond all the clichés and simplifications. How did Marcell Reich, a poor Jewish refugee boy from Belgium, become Marc Rich, “one of the wealthiest and most powerful commodities traders ever to have lived,” as the Financial Times put it?3 How did he and a handful of business partners seem to appear out of nowhere and go on to dominate global trade in oil and other commodities? What were the crucial decisions, the milestones in his unlikely career? How far did he have to go in order to reach them? What were his limits? What were his greatest successes and his worst defeats? What drives him on? What can be learned from his entrepreneurial skills?

  I am lucky. My black Opel starts with a turn of the key. Only the speakers seem to have a tough time with the extreme temperatures. Mick Jagger’s voice sounds strangely dull: Please allow me to introduce myself / I’m a man of wealth and taste. It is just before 8:00 A.M., and the streets are full of snow. There is not a person in sight. I drive carefully past the frozen Lake St. Moritz toward the luxurious Suvretta House, the best hotel in town. Within a span of a few days, the hotel will be taken over by the international jet set and European gentry as a fitting location for their Christmas and New Year’s celebrations. Nestled among the snow-covered fir trees, the hotel seems tranquil and serene on this particular morning. A group of snowmen with red carrots for noses stands quietly by the hotel entrance.

  Mick Jagger’s voice echoes from the speakers. Forty years later, the Rolling Stones song “Sympathy for the Devil,” written in the very symbolic year of 1968, can be heard again on nearly every radio station. I turn right and head toward the lower terminus of the Suvretta ski lift, where I am to meet the “biggest devil”—the exact term that Marc Rich used to describe himself. “I was painted as the biggest devil,” he said to me without the least bit of self-pity during our last conversation in his office in the town of Zug. Those who are familiar with Rich’s matter-of-fact style know that he is not prone to exaggeration.

  A. Craig Copetas, who wrote the first and hitherto only biography of Rich nearly twenty-five years ago, called him “the veritable Prince of Darkness.”4 Rich was stylized as the personification of evil, the ruthless villain, and the capitalist monster whose fingers are “sticky with the blood, sweat, and tears of the Third World.”5 Over the years, the name Marc Rich became a symbol for greed and unscrupulousness, a chilling code that stands for everything that is wrong with “real-world capitalism.”

  There is a precise date for the day on which Marc Rich lost control over his own name. On September 19, 1983, a Monday, a young and ambitious United States attorney for the Southern District of New York appeared before the media. Trying hard to hide his glee, Rudolph W. “Rudy” Giuliani feverishly announced “the biggest tax fraud indictment in history.” He read aloud from the indictment to the bewildered journalists and camera teams. The New York Times saw the need to describe the situation as an “unusual public display.”6

  Giuliani accused Rich, then forty-eight, of a total of fifty-one crimes.7 In addition to tax evasion to the tune of at least 48 million, Rich was accused of racketeering, conspiracy, and trading with the enemy—the gravest crimes of which an upstanding citizen can be accused. It was alleged that Rich had been trading in Iranian crude oil and had ignored the U.S. embargo against Iran at a time when Americans were held hostage in Tehran. In the law library of the U.S. attorney’s office, Giuliani announced that Rich and his business partner Pincus Green could spend the rest of their lives in prison for their crimes. The two businessmen had already absconded with their families to Switzerland, where the headquarters of Marc Rich + Co. AG, founded ten years prior, was located.

  Since then, investigators have frequently referred to the affair as “the biggest tax fraud in American history,” politicians have often described Rich as a “billionaire fugitive,” and journalists have written articles about “the most wanted white-collar criminal in U.S. history”—a Google search for this wording places Marc Rich right at the top of the list.8 Understandably, the accusation of trading with the enemy weighs most heavily in public opinion. As the Republican Congressman Chris Shays stated when he summarized the public’s mood, “A traitor to [his] country, to our country.”9 For many, Marc Rich is quite simply an enemy of the state.

  The biggest devil. I was amazed to hear these words from Marc Rich himself. He may have his strengths, but volubility is not one of them. He speaks quite deliberately and succinctly, usually in only two or three sentences. I had been warned of this. If I could manage to get anything more than a “no,” “yes,” or “why,” I could be happy with the results. He speaks English with a barely noticeable German accent, his father’s language, and with an unexpectedly soft voice. While talking he looks you straight in the eyes and scrutinizes your reaction. His handshake is as firm as his conviction that reporters mean trouble.

  Meeting Marc Rich

  I first met Marc Rich some months before our St. Moritz ski date. We were sitting in his office on the top floor of a run-of-the-mill steel-and-glass building next to the Zug railway station. To get up here, where you can enjoy the view from the large windows over the town’s commercial center and the gently rolling hills of the surrounding countryside, you have to pass through a highly sophisticated security system. In the building’s foyer, next to a popular gym, cameras keep track of visitors taking the elevator. Lawyers and asset managers have their offices here. On the fifth floor the visitor is confronted with an opaque door of frosted glass; the plaque reads MARC RICH GROUP. When you ring the bell you are aware another camera is scrutinizing you. The automatic door opens. Now you are trapped in a kind of glass cubicle, where the receptionist on the other side of a glass door inspects you. It would come as no surprise to discover the glass doors were bulletproof. Only after the first door has closed does the second door open, and you enter the company offices.

  In the waiting room, there is a small glass table and two black leather LC2 chairs designed by the Swiss artist and architect Le Corbusier. “Marc Rich Group, good morning,” an assistant says on her telephone, although German is usually spoken in Zug, and it is actually already late afternoon. I remember one of his most loyal traders once said to me that “the sun never sets in Marc Rich’s empire,” a reference to King Charles V of Spain (1500–1558), Holy Roman Emperor, w
ho ruled over a world empire thanks to the discovery of America in 1492 by Christopher Columbus. “Marc was the undisputed King of Oil.”

  An assistant leads me through labyrinthine corridors decorated completely in white to Rich’s office. There are paintings by Miquel Barceló and Antony Tapies on the walls. A sand-colored carpet muffles the sound of footsteps. Just before I reach the director’s office, I notice two burly men behind a room divider sitting at their computers and looking rather bored. “Drivers,” the assistant says in answer to my question. “Security,” Marc Rich later confirms. The two bodyguards, who never leave his side, even when he goes across the street for lunch, remind me of the time when the American government had set a bounty on his head. It was the time when Rich was hunted the whole world over by agents and adventurers, and he only rode in an armored Mercedes.

  A small effective team of specialists led by a former Mossad officer provided for Rich’s security. They were clearly very successful, as the American agents who wanted to kidnap him in Switzerland and spirit him out of the country were never able to detain him. “He paid very well for security. He had the money to buy what he needed. It was like tackling a country,” Ken Hill told me in Florida. As a U.S. marshal, Hill had tried for fourteen years to capture Rich. (We’ll hear his story in chapter 12.)

  “Which reproach hurts you most?” I ask in Rich’s office to get the interview rolling.

  “Which reproach are you referring to?” Rich asks in response.

  Whenever he thinks a question is imprecise, he likes to answer it with a question of his own. He’s sitting behind a long wooden desk and writing a note on a white leather desk mat. As always, he’s wearing a dark blue suit with a white shirt and a red tie. He has a cold and is drinking a cup of chicken broth. There is cigar smoke in the air, as there was during almost all of our meetings. A half-smoked Cuban Cohiba lies in a crystal ashtray. This is one of the few pleasures that Rich could never have enjoyed in the United States. Since February 7, 1962, Cuban cigars—and all other Cuban products—have been forbidden there. That was the day John F. Kennedy imposed a trade embargo against Cuba by executive order—and, as a passionate cigar smoker, he had press secretary Pierre Salinger buy up all available stocks of his favorite type of cigar in Washington, D.C., beforehand.10

  Rich’s desk is dominated by a large computer screen, and real-time currency exchange charts and stock indexes flash across it. The two books next to the screen grab my attention—the newest edition of the compendium Metal Traders of the World and My Life, Bill Clinton’s autobiography. Photographs of moments in Rich’s life are closely bunched together on a sideboard, mostly photographs of his daughters Ilona and Danielle and of his grandchildren. At the front of the collection there is a photograph of his second daughter, Gabrielle, together with Bill Clinton and Al Gore. Gabrielle died of leukemia in 1996 at the age of twenty-seven. Another photograph shows Israeli prime minister Ehud Olmert embracing Rich. On the wall, in simple wooden frames, there are two certificates for honorary doctorates that Israeli universities awarded to Rich in 2007. As we’ll see, it was mainly due to the intercession of Israeli politicians on Rich’s behalf that Bill Clinton finally agreed to grant him a pardon. Israel owes Rich a debt of gratitude for many reasons, including the provision of crucial clandestine service, as I will show later.

  “You bought Iranian oil from the Ayatollah Khomeini while the mullahs were holding American embassy employees hostage,” I answer his question. “You did business with Fidel Castro’s Cuba despite the U.S. trade embargo. You delivered racist South Africa oil while the black population suffered under the laws of apartheid. You are considered the greatest tax fraudster in the history of the United States.”

  He looks at me and says in a soft voice, “I heard it so often that I became immune to it.”

  “To be painted as the biggest devil, as you put it, must hurt,” I insist.

  “No,” Marc Rich says.

  The last curt answer came only after a long, telltale pause. It was one of the few times in our conversations that his answer did not sound convincing. Several friends had assured me that the accusations had hurt him deeply.

  As if he sensed my skepticism, he gave me a sphinxlike smile and suddenly asked me, “Do you ski?”

  I nodded, surprised. “Every Swiss knows how to ski. I first stood on skis at the age of three.” I might have sounded a bit too self-confident.

  “Show me how good you ski,” he said and proposed we go skiing together just before Christmas.

  Charming and Cunning

  I’m the first one to arrive at that empty parking lot at the bottom of a ski lift, where I wait for Rich on an icy-cold December morning. I had come to know him over the previous few months—monosyllabic, yet outspoken; charming, yet cunning; highly focused despite his seventy-four years of age. Perhaps most astonishing, the man who thinks as highly of publicity and journalists as a vegetarian does of a pork sausage, a man who gave his last previous interview of significant length while the Berlin Wall was still standing—this man answered nearly every question I had for him, even the most delicate ones.

  Marc Rich’s story is both typically American and typically Jewish. Parts of the saga can be seen as the embodiment of the American dream, a classic dishwasher-to-millionaire fantasy. Marcell Reich, the Jewish boy-refugee from Antwerp, barely escaped certain death in the Holocaust. In the spring of 1940, he fled from Belgium with his family, the day the Nazis marched into the country. Penniless and unable to speak a word of English, the young Reich fled to Morocco by freighter and, with a great deal of luck, finally reached the United States. Under the name of Marc Rich, he entered the world of trade—one of the few lines of business that Jews have been allowed to pursue over the centuries. People soon began to speak of a wunderkind. With remarkable skill, talent, determination, and endurance, he made himself into the most successful commodities trader of his time. He then ran so afoul of the law that he landed on the FBI’s Most Wanted list. The United States government offered a high reward for his capture and chased him all over the world.

  Rich’s is one of the most amazing careers of the twentieth century, a career that is tightly woven with great events in world history: Fidel Castro’s revolution in 1959; the decolonization of Africa in the 1960s; the Yom Kippur War and the oil shock of 1974; the fall of the shah of Persia and the seizure of power by the Ayatollah Khomeini in Iran in 1979; apartheid South Africa in the 1980s; and the crumbling of the Soviet Union in the 1990s. Marc Rich and his business partners were on the scene when these events happened. Thanks to their know-how, their hard work, and their considerable aggression, they were able to react to these events to their benefit more than their competitors ever could. Most important, however, Marc Rich is an epochal pioneer of globalization and an architect of the modern system of commodities trading. His name will be forever connected with an economic revolution—he is the inventor of the spot market, without which modern oil trading would be unthinkable. Whenever you fill your tank with gasoline, you make a trade “on the spot.” The driver needs gasoline, accepts the price on offer, and can fill up the tank, pay, and drive away with no further obligations. This was the great exception to what was standard procedure in the international oil-trading business right up until the beginning of the 1970s. Only around 5 percent of the world’s oil was freely traded according to the law of supply and demand, whereas the other 95 percent changed hands according to long-term contracts and at fixed prices. Since World War II, the global oil market had been dominated by the “Seven Sisters,” the leading international oil companies.11

  This cartel of multinational oil companies took its strongest beating from Marc Rich + Co. AG, a small company founded in the Swiss town of Zug in 1974. It is as if a small software company were to suddenly wrestle away Microsoft’s market position. In next to no time, Marc Rich and his four business partners managed to achieve what all commodities traders admire and strive for:12 They created a new market for products that until th
en either had been traded in very small amounts or had not been traded at all. They managed to create an independent distribution system that bypassed the Seven Sisters. Rising demand leads to higher prices for consumers, and Rich can be found at the very beginning of the oil boom that followed. He began trading modest amounts of Tunisian crude oil at the end of the 1960s. Then a barrel of crude oil cost 2 (the price hit a record 147 in July 2008 but fell back as far as 35 in February 2009), the Club of Rome’s Limits to Growth had not yet been written, and hardly anyone had ever heard of peak oil, a term that describes the worldwide decline in oil production.13

  Rich also sparked the emancipation of the oil-producing countries. Increased competition among the multinational oil companies meant that producers could now demand more for their natural resources than ever before. Isaac Querub, Rich’s longtime colleague and confidant, went so far as to compare him with the father of Communism: “You can say in a way that Marc Rich was the Karl Marx of the oil-producing countries. In the same way that Karl Marx made all the workers become aware of their class and their interests, Marc made all of the oil countries aware of their interests in a way. It was a revolution, no doubt about it.”

  “He Was Our God”

  Less than ten years after it was founded, Marc Rich + Co. AG was the largest and most profitable independent oil-trading company in the world, even though the company’s two most important partners—Marc Rich and Pincus Green—were being pursued by the most powerful nation on earth. No one could avoid dealing with Marc Rich + Co. “By the mid-1980s, we were already trading one million barrels of crude per day,” says Rich. Marc Rich + Co. soon became the largest commodities trading company in the world, trading not only oil but also all types of metals and minerals from aluminum to zinc. “In metals, it’s now Marc Rich and the forty dwarfs,” a competitor said, reflecting a sentiment somewhere between respect and resignation.14 An oil trader in England, who had worked for Rich for many years before successfully going into business for himself, once told me without any hint of irony, “Marc was a titan, no, more than that. He was our God. When he called to congratulate you on a profitable trade, it was like God called you.”