Elusive Target

Where is Marc Rich ?

In a milieu that abounds in shadowy figures, Marc Rich is one of the most elusive of all. Probably the world's biggest independent dealer in crude oil, Rich, 49, leads an intensely private life, is rarely photographed and gives no interviews. His money, however, talks. He was the secret partner in the $722 million purchase of 20th Century-Fox in 1981. He is believed to be the "mystery buyer" who the same year tried to corner the global market for tin. The Belgian-born Rich, whose family fled to New York during World War II, found his calling 30 years ago as a metals trader after dropping out of New York University. The Swiss-based commodities firm he founded in 1974, Marc Rich & Co. AG, is now one of the largest in the world, trading an annual volume of $10 billion worth of oil, gold, aluminum, sulfur and sugar, among other things. Rich's personal fortune is estimated at more than $100 million. "Everybody is amazed at his commercial success," says Oil-Industry Consultant Walter Levy, "without quite knowing how he did it."

The U.S. Government, for one, is determined to find out. The Justice Department believes the company carried out a "massive tax-fraud scheme" in 1980 by diverting some $20 million in profits from its subsidiary in New York City to its headquarters in Switzerland. The department's probe has resulted in a prolonged legal face-off with the firm. The latest crisis came last week, when Federal Judge Leonard Sand threatened to freeze up to $55 million in Marc Rich & Co. assets at some 20 domestic banks and companies, a move which would have paralyzed the company's U.S. operations.

The confrontation began in April 1982, when a federal grand jury started looking into charges that during the 1970s the Rich firm had sold price-controlled oil through a complicated series of trades that resulted in illegally inflated profit margins. In addition, federal prosecutors accused the Swiss company of covering up the profits by selling oil to its U.S. subsidiary at an artificially high rate. Since the subsidiary then resold the oil at lower market rates, it incurred a sizable loss in the U.S., thus escaping income taxes.

To evaluate the charges, the grand jury demanded to see some of Marc Rich & Co.'s files. The firm refused, contending that a Swiss company need not honor a U.S. subpoena and that, in any case, the transactions among its divisions were made according to fair-market prices. Last fall Judge Sand issued a contempt citation against the company. He ordered a $50,000 fine for each day that it failed to release the documents, a penalty that could total $27.5 million by the time the grand jury disbands. In June, Marc Rich & Co. secretly sold its U.S. division to a group of the parent company's officers, all foreign nationals. U.S. Attorney Morris Weinberg called the maneuver an "egregious deception" designed to bolster the firm's claim of foreign immunity.

Rich started his career with Manhattan-based Philipp Brothers, then a quiet company (now Philbro-Salomon) of metals traders. He became something of a protege of Ludwig Jesselson, the company's head. After assignments in Bolivia and Spain, he returned to New York and built the company's lucrative oil-trading department. He made a killing during the 1973 Arab oil embargo, but the company declined to pay the seven-figure commission he demanded and he left in a huff. With partner Pincus ("Pinky") Green, a fellow Wunderkind trader from Philbro, he established his own firm with headquarters in Zug, an Alpine town 14 miles south of the financial center of Zurich.

As his company's troubles have become public, some customers say they are shying away. The firm has changed its name in the U.S. to Clarendon Ltd. and has taken down the Marc Rich signs around its Fifth Avenue offices. Rich himself has moved out of his Park Avenue apartment, and is believed to be working out of the Zug offices. Two weeks ago, Clarendon sent out notices telling its customers it would conduct business as usual during the freeze, but since then Judge Sand has prohibited those reassurances on pain of further contempt citations.

The increasing pressure finally compelled lawyers for Marc Rich & Co. to agree late last week to deliver the contested documents within two weeks. But Rich, who was once described by a former colleague as being "like granite," may find new ways to go on stonewalling his accusers. This file is automatically generated by a robot program, so viewer discretion is required.