Ex Olympus, Peter Hargitay mentioned in an old 1986 article.
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MONEY & MARKETS: THE LIFESTYLE OF RICH, THE INFAMOUS Marc Rich, biggest tax fugitive in U.S. history, is in Switzerland happily running a commodities trading firm worth nearly $1 billion.
( Fortune )
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BY STRIKING A DEAL with the SEC and federal prosecutors, Ivan
Boesky avoided the hoary tactic of financiers in legal trouble -- the
quick flight to a country that will not extradite U.S. fugitives.
Commodities trader Marc Rich, 52, fled first and tried to deal later.
Facing a 65-count criminal indictment that could result in a 325-year
prison term -- the biggest tax evasion case in U.S. history -- he may
be abroad for a long time.
His life on the lam is luxurious -- and lucrative. Unlike fugitive
Robert Vesco, who is holed up less than splendidly in Cuba after
years of spending his booty bribing various officials around the
Caribbean, Rich is living grandly in Switzerland. Though he has long
avoided the U.S. press, Rich spent a day talking to FORTUNE in
November, his first interview with a non-European publication since
he skipped out of New York.
Today his slim face is framed by slicked-back hair and bushy
sideburns, and he has an air of dour refinement. In his office he
chain-smokes imported cigars and downs Diet Coke. Rich's Swiss-based
international commodities trading company, Marc Rich & Co. AG, has
become one of the biggest in the world. He says that the company
earned more than $100 million before taxes on trading volume of $12
billion in 1985 and that its capital stands at $950 million.
Rich has a five-bedroom house filled with valuable art in the
picturesque village of Zug, 15 miles south of Zurich, and a ski
chalet in St. Moritz. He is a regular at concerts in Zurich and
Lucerne. His American wife has become a rather famous European
pop-record star. Thanks to an expensive P.R. campaign and expansive
charitable giving, Rich has achieved something resembling respect in
Swiss society.
Living abroad is not a new experience for him. Born in Antwerp,
Rich came to the U.S. with his parents at age 8. As a rising young
commodities trader for New York-based Philipp Brothers, now a
subsidiary of Salomon Inc., he resided in Spain for 14 years. Still,
returning to America has become an obsession. 'I want very badly to
be able to go back,' he says, speaking in a faintly European accent.
'I think about the U.S. every day. My mother is there and my
in-laws. It's a generous country that accepted my parents and me.'
(When his father died in New York last September, Rich was pained not
to attend the funeral. Federal agents would have arrested him.)
To find some way out Rich has assembled an influential legal team
headed by Washington superlawyer Edward Bennett Williams and
including Leonard Garment, former special counsel on the Nixon White
House staff. Robert Gray, the Washington public relations consultant
who was secretary to the Cabinet in the Eisenhower Administration and
co-chairman of Ronald Reagan's first inaugural, is on retainer.
'I've made mistakes,' Rich says, in what starts out sounding
like contrition. 'I guess my reputation will never fully recover.'
Then it becomes clear he is talking about legal strategy. He argues
that what he really has is an image problem. 'I've been portrayed in
a horrible way,' he says, 'as a workaholic, a loner, a money
machine. It's not a true picture. I'm a modest, quiet person who has
never done anything illegal.' Sometimes he portrays himself as
victim: 'What happened to me was an unfortunate chain of events that
hasn't shaken my faith in the U.S.'
The Justice Department isn't buying any of that. In the
prosecutors' view, Rich and partner Pincus 'Pinky' Green, 52, are
simply fugitives. Assistant U.S. Attorney Martin Auerbach says his
office is ready to go to trial if it can get its hands on the
defendants. For U.S. authorities, Rich and Green are Vesco-size
targets. Marshals have designed tantalizing schemes to nab them,
especially Rich, who is the more active of the two. Rich has neared
the bait several times, only to slip away at the last moment.
The case is hideously complicated, and some of it hinges on
violations in 1980 and 1981 of oil price laws long since repealed and
never particularly popular. If Rich and Green were fudging price
controls, they had a lot of company. A number of major oil producers
have long since settled similar cases. The fugitives are also accused
of trading with the enemy, for buying oil from Iran during the
hostage crisis in 1980.
If those issues were all the case involved, Rich and Green might
have come home long ago, or might never have left. The big one is tax
evasion. The government charges that the pair smuggled $105 million
of profits from those illegal oil transactions to Switzerland to
avoid paying $48 million in U.S. taxes. Shortly after fleeing to
Switzerland, they reportedly offered to pay $100 million if the
government would settle the charges -- and were turned down flat.
Says Auerbach: 'They have broached this issue for a long time
through a variety of channels in the Justice Department and anywhere
else in Washington they can get a hearing. They are no closer to
coming back to the U.S. now than when they left. They can't buy their
way out of jail.'
Faced with such an uncompromising position, Rich apparently has
quietly switched legal strategies. His lawyers plan to attack the
evidence in the tax case in hopes of persuading the government to
drop the indictment. Says one: 'We're going back and reviewing
everything. What we're learning gives us some encouragement, but
we're not Pollyannas.'
Until his lawyers cooled on the idea, Rich was thinking of
launching a major P.R. campaign in the U.S. In 1984 Robert Gray
traveled to Zug with his associate Frank Mankiewicz, former head of
National Public Radio, and Meryl Comer, a consultant to Gray who also
co-anchors a business news show on ESPN, the cable-TV network. Gray
advised Rich to go public in the U.S by granting interviews to U.S.
newspaper and TV reporters. Comer even taped a practice interview
with Rich to see how he came across.
Rich did buff up his image in Switzerland with a successful
campaign led by Peter Hargitay, a Zurich P.R. man. Hargitay says he
was paid a monthly retainer that added up to 'the middle six
figures' annually. In 1985 and 1986 Hargitay arranged about 30
interviews with Swiss newspapers, magazines, and TV stations.
Sometimes he looked over the interviewers' questions in advance, then
helped edit the interview. Most of the coverage was favorable, in
part because the Swiss business press is notoriously flattering.
Interviewers asked Rich about the future of OPEC, the commodities
business, and how he liked Switzerland, but rarely broached the legal
case. He told one that he missed New York 'not at all' and wished
he had 'come to live in Switzerland many years ago.'
Though a few Swiss grumble that Rich is trying to buy a good name,
most seem happy to let him try, as long as he is willing to spend so
much cash on the project. This year, among a host of charitable
activities, Marc Rich AG set up a $3-million foundation to make
grants to artists, scientists, and worthy organizations in
Switzerland. In November the foundation sprinkled $150,000 among a
Zurich chamber orchestra, a group that teaches the disabled to work,
and the Catastrophe Dogs, an organization that uses dogs to find
people in the rubble of earthquakes. The foundation's board is headed
by a retired three- star general who runs Switzerland's Red Cross.
Lavish parties have helped Rich make friends. The splashiest was
his 50th birthday bash two years ago in Lucerne's National Hotel.
His wife sang two of her compositions: 'Don't Look Back' and 'The
Years Go By So Quickly.' Marc's partners gave him a ten-foot-long
sailboat made of chocolate, plus the title to a motorboat to be
delivered later. The highlight of the evening was a mock boxing match
pitting a clown wearing the Marc Rich logo against one dressed as a
New York cop. Another clown in judge's robes acted as referee.
THOUGH HE walked away from a ten-room Park Avenue apartment in New
York, Rich has hardly taken a step down. His hilltop house has a
breathtaking view of the misty lake of Zug. Cream-colored carpeting
and sleek modern furniture designed by a California decorator set off
superb works of art. His collection includes two Picassos, as well as
paintings by Georges Braque, Fernand Leger, and Joan Miro, and a
sculpture by Alberto Giacometti. A giant satellite dish captures
programs from France, England, and Germany, as well as Cable News
Network from the U.S. A Spanish couple serve as butler and maid.
Rich and his wife have three daughters: Gabriella, 17, and
Daniella, 11, go to school in Switzerland and Ilona, 19, is an art
student in France. Fluent in German, French, and Spanish, Rich speaks
Spanish to his terrier, Macho, and to his daughters. The two oldest
girls learned the language as very young children in Spain, and he
doesn't want them to forget it.
On ski weekends in St. Moritz, Rich often helicopters with other
expert skiers to remote spots high above the lifts. Each weekday
morning, he takes a dip in his indoor swimming pool, then is
chauffeured in a gray Mercedes to the office ten minutes away.
His headquarters, a six-story cube of blue reflecting glass, is
plushly appointed. Soft jazz and popular music fill the halls and
elevators. The lobby floor is burgundy marble, and the carpeting is
salmon pink. On the walls are a collage by Swiss artist and architect
Le Corbusier and a painting by 20th- century Spanish painter Antonio
Quiros. Rich's office is equipped with an electrically operated door
so that he can buzz visitors in without leaving his desk or getting
off the phone. At lunchtime he strolls across a parking lot to his
private dining room at the Glashof, a restaurant owned by his company
that offers both Swiss and kosher food.
HE CAN wolf down a three-course lunch in 30 minutes to rush back
to the office. Windy discussions irk him. Occasionally he simply
excuses himself, even from his own office, sending an underling back
to finish the conversation. 'He's always stressed and in a hurry,'
says one former associate. 'And he never says thank you.' But
friends assert he is flawlessly considerate to them. He sends long,
handwritten letters to friends and employees on the death of a parent
or the birth of a child, and fetches coffee for business visitors. He
is extremely soft-spoken. 'Sometimes when I fire someone,' he says,
'they don't notice right away.'
For Rich, once an inveterate globetrotter, the world has shrunk
drastically. Tax evasion as defined by U.S. law is not included in
Switzerland's extradition treaty with the U.S. Rich also can
safely visit Spain. Several years ago he became a Spanish citizen,
though neither he nor his lawyers will say how or why he arranged it.
But many countries in Western Europe will extradite U.S. fugitives
indicted for tax fraud.
In contrast to her cosmopolitan husband, Denise Rich is
overwhelmingly American, a self-described 'junk-food addict, pizza
lover, and fan of deli corned-beef sandwiches.' Daughter of a
wealthy New England shoe manufacturer, she is a sunny optimist who
gushes, 'I'm surrounded by positive energy.' Raven-black hair and
almond eyes give her an exotic look. She and Marc met on a blind date
in New York around Christmas 1965.
After years of trying, Denise hit the big time last year with her
song 'Frankie,' sung by the American female rock group Sister
Sledge and released on Atlantic Records. 'Frankie' was the No. 1
hit in Britain for six weeks and sold more than 750,000 copies,
winning a gold record. Meanwhile, Denise has sung on TV in
Switzerland and Germany, and recently made a music video in London.
Her new album for MCA Records, Sweet Pain of Love, is now on sale in
Switzerland and will be distributed in the rest of Europe in
February. She says that some of the songs are about Marc.
If Marc and Denise are an odd couple, Rich and Pinky Green are an
equally unlikely twosome. Green is as playful as Rich is intense.
'Pinky reminds me of Groucho Marx,' says a former Rich associate.
Tall and crew-cut, Green is a confirmed quipster. Asked about the oil
business, he shoots back, 'Oil? Isn't that the stuff you pack
sardines in?' Devoutly religious, Green has a home in Zug and
another in the Enge Jewish quarter of Zurich, within walking distance
of a synagogue. He rushes out of the office on Friday afternoon so he
can start celebrating the Sabbath by sundown, in accordance with
Orthodox Jewish tradition. He eats kosher food and keeps it simple --
lox and tomatoes are a favorite lunch.
Rich and Green were able to flee the U.S. without skipping a
business beat. Though they operated out of New York, their company
had always been headquartered in Switzerland. In the early 1970s both
had become star Philipp Brothers traders, Rich in Spain and Green in
the company's office in Zug. Angered because they considered their
bonuses for 1973 inadequate, the two bolted and started Marc Rich AG.
Zug, a center of European commodities trading, seemed as good place
as any to set up shop.
Shortly after the two fled New York in 1983, Marc Rich AG sold its
U.S. affiliate to Alec Hackel, 58, a wiry, loquacious German who is a
partner in the Zug operation. Authorities in the U.S. said it wasn't
a real sale and froze the assets of the company, which had been
renamed Clarendon Ltd. Unable to do business in the U.S., Marc Rich
AG's trading volume dropped. In 1984 Clarendon paid the U.S.
government $150 million to settle tax charges against the company --
a separate issue from the criminal tax case against Rich. After that,
Rich's business surged.
MARC RICH AG is run by a triumvirate of Rich, Green, and Hackel,
who hold the majority of the company's stock. About 100 employees
also own shares. Rich looks after oil, Hackel runs the metals and
minerals division, and Green, nicknamed 'the Admiral,' handles
shipping, along with finance and administration. Rich says he and the
other top partners each earn $1 million or more a year.
Whatever U.S. prosecutors think about Rich, competitors and
clients have respect for his abilities as a trader. They say he
combines excellent judgment with a vast network of contacts around
the world. 'He has survived because he has the most talent,' says
Slimane Bouguerra, a competitor in Geneva. Adds Richard Perkins, head
oil trader at Chevron International: 'We do deals with him. Marc
Rich has always performed on his contracts and has good standing with
the majors.' Rich estimates that Marc Rich AG trades 900,000 barrels
a day in crude oil, and another 400,000 barrels of naphtha and other
oil products.
According to Rich, the company has weathered the commodities
recession better than other traders by carefully minimizing risks. It
seldom buys a cargo, he says, without first lining up a customer --
at a price that includes a slim trading margin. 'We see the trading
as a service business,' he says. 'We put producers and buyers
together in exchange for a service charge. We hope not to be too
dependent on price cycles. We're not sexy or speculative. It's insane
to try for a killing in today's market.' Some caution a few years
ago might have saved Rich and Green a lot of lawyers' fees -- not to
mention one- way tickets to Zug.
Copyright 1986 Time Inc.
Shawn Tully REPORTER ASSOCIATE Nancy J. Perry, MONEY & MARKETS: THE LIFESTYLE OF RICH, THE INFAMOUS Marc Rich, biggest tax fugitive in U.S. history, is in Switzerland happily running a commodities trading firm worth nearly $1 billion.. , Fortune, 12-22-1986, pp 38. |
