“King of oil” who became a target for US

FTlogoSalmonMarc Rich, who died on Wednesday, aged 78, was one of the most controversial business figures of the late 20th century. He was a gifted, aggressive commodity trader with a global network of business interests and contacts – and an amoral attitude to pursuing them that empire-building 18th century merchants would have both recognised and applauded.

By Andrew Hill

But while his dealings with regimes outlawed by the US – from Iran to Cuba – fed his fortune, they irreversibly tainted his reputation. Rich would have dearly wished it otherwise. But his life – if not his legacy – hinged on two events: his indictment by the US in 1983 on charges that included tax evasion and illegally trading with Iran, and his 2001 pardon, one of Bill Clinton’s last acts as president, which Rich himself hoped would set his record straight.

The reverse turned out to be true. The pardon – for which Rich’s friends, allies and ex-wife had secretly lobbied – not only polluted Mr Clinton’s own legacy, it reignited interest in Rich’s own case, raising his carefully-sheltered profile and obscuring his other achievements as a pioneer in the commodities business. It made it impossible for him to return to the US.

Rich’s resentment at being, in his eyes unjustly, handed the role of fugitive from US justice had deep roots. Born Marcell David Reich in Antwerp, Belgium, in 1934, Rich’s early mentor and employer was his father, who had himself been driven from the family home on the border of what is now Poland and Ukraine by anti-Jewish pogroms after the first world war. As the Nazis advanced on Belgium in 1940, the Reich family fled to the US, via Vichy France. Rich later claimed to have attended 12 different primary and secondary schools in as many years.

But the proving ground for the business skills he acquired while working for his father was Philipp Brothers – Phibro – the oil, grain and metals trader. There, in the 1950s, Rich met his business partner Pincus “Pinky” Green (who was also later pardoned by Mr Clinton). They set out on their own in 1974, forming Zug-based Marc Rich + Co just as the price of oil was surging as a result of the Arab embargo, and then building on the growing appetite of a globalising world for commodities. Rich’s key insight was that oil – and other raw materials – could be traded with less capital, and fewer assets, than the big oil producers thought, if backed by bank finance. It was this highly leveraged business model that became the template for modern traders, including Trafigura, Vitol, and Glencore – which was born from a buyout of his interest in the commodity trading arm of Marc Rich + Co and was this year merged with Xstrata.

In the process, Rich also fostered a generation of highly loyal, highly paid individual traders – many of whom became millionaires in their own right. They included Ivan Glasenberg, GlencoreXstrata’s chief executive, who was once a coal trader for Rich. On Wednesday, Mr Glasenberg paid tribute to him as “a friend and one of the great pioneers of the commodities trading industry”.

Claude Dauphin, chairman and chief executive of Trafigura, said: “I am proud to have worked with Marc, a true pioneer of our industry. He will be remembered fondly by many. Marc brought competitiveness to the global commodity trading business, benefiting producers through to consumers.” While Rich is sometimes credited with having invented the crude oil spot market, traders say it is more accurate to say that – by operating faster, and with greater determination and skill than competitors – he perfected the modern system of trading oil independently of the majors.

But his model would have been merely a bright idea without the highly aggressive, risk-hungry style with which he implemented it. When the Shah of Iran was toppled in 1979 – and with him many of Marc Rich + Co’s oil industry contacts – Rich was able to use the political neutrality of his company’s Swiss base to continue trading through the ensuing US hostage crisis and consequent business sanctions.

Paradoxically, as journalist Daniel Ammann recounted in his 2009 biography The King of Oil, Rich’s willingness to trade with everyone – including apartheid South Africa, Fidel Castro’s Cuba and the Ayatollah Khomeini’s Iran – also made him the obvious intermediary to maintain the supply of oil to Israel. Meanwhile, he was diversifying into other sectors, buying 20th Century Fox in 1981 with industrialist Marvin Davis (a stake later sold to Rupert Murdoch).

In 1983, however, the period that colleagues described as a “golden age” for Marc Rich + Co came to an end, when Rudolph Giuliani, then US attorney in Manhattan, indicted Rich and Mr Green. They fled the US for Switzerland. He avoided arrest by US agents, but at great personal cost: for instance, he reluctantly decided not to join his daughter in the US hospital where she was dying from cancer in 1996 for fear he would be arrested. Rich never returned to the US, even after his pardon, and continued to point out until his death that his Swiss company’s business with Iran was legal under Swiss law. He told his biographer he was an “easy target, one individual, very successful, making a lot of money, and Jewish” and he had not returned to defend himself after 1983, because he was afraid he would not get a fair trial.

Latterly, Rich had devoted an increasing amount of time and money to philanthropy. His family company’s website says four foundations he established have donated more than $150m to various causes over the past two decades. Israel, repaying his long association in business and charitable ventures, granted him a series of honours and he is expected to be buried in Tel Aviv on Thursday. In a later interview in 2011 with the Swiss weekly Die Weltwoche, Rich described himself as a success in business – Forbes reported his net worth in 2012 as $2.5bn – but a failure in his private life, having divorced twice. He is survived by his daughters, Ilona Schachter-Rich and Danielle Kilstock Rich. Although he had renounced his US citizenship, at the time of his death Rich held Belgian, Israeli and Spanish passports – symbols of his contradictory, controversial, multinational career. His official biography concludes, simply: “Marc Rich excels as a skier and patron of the arts.” The reality was far more complex.

Additional reporting by John Aglionby and James Shotter

Source:  http://www.ft.com/cms/s/0/7602780e-de5c-11e2-9b47-00144feab7de.html

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