Metal Men Metal Men Marc Rich and the $10 Billion Scam A
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Metal Men Metal Men Marc Rich and the $10 Billion Scam A. Craig Copetas No part of this publication may be reproduced or transmitted in any form or by any means, electronic, or mechanical, including photocopy, recording, scanning or any information storage retrieval system, without explicit permission in writing from the Author. © Copyright 1985 by A. Craig Copetas First e-reads publication 1999 www.e-reads.com ISBN 0-7592-3859-6 for B.D. Don Erickson & Margaret Sagan Acknowledgments [ e - reads] Acknowledgments o those individual traders around the world who allowed me to con- duct deals under their supervision so that I could better grasp the trader’s life, I thank you for trusting me to handle your business Tactivities with discretion. Many of those traders who helped me most have no desire to be thanked. They were usually the most helpful. So thank you anyway. You know who you are. Among those both inside and outside the international commodity trad- ing profession who did help, my sincere gratitude goes to Robert Karl Manoff, Lee Mason, James Horwitz, Grainne James, Constance Sayre, Gerry Joe Goldstein, Christine Goldstein, David Noonan, Susan Faiola, Gary Redmore, Ellen Hume, Terry O’Neil, Calliope, Alan Flacks, Hank Fisher, Ernie Torriero, Gordon “Mr. Rhodium” Davidson, Steve Bronis, Jan Bronis, Steve Shipman, Henry Rothschild, David Tendler, John Leese, Dan Baum, Bert Rubin, Ernie Byle, Steven English and the Cobalt Cartel, Michael Buchter, Peter Marshall, Herve Kelecom, Misha, Mark Heutlinger, Bonnie Cutler, John and Galina Mariani, Bennie (Bollag) and his Jets, Fredy Haemmerli, Wil Oosterhout, Christopher Dark, Eddie de Werk, Hubert Hutton, Fred Schwartz, Ira Sloan, Frank Wolstencroft, Congressman James Santini, John Culkin, Urs Aeby, Lynn Grebstad, Intertech Resources, the Kaypro Corporation, Harper’s magazine, Cambridge Metals, Redco v Acknowledgments [ e - reads] Resources, the Swire Group, ITR International, Philipp Brothers, the Heavy Metal Kids, and . Lynne Murphy, Ludwig Jesselson, Joan Sanger, Esther Newberg. Particularly Robbie Lichtenstern—who did not live to see this book completed. Especially W. Douglass Lee Jr., who, by making me his lehrling, spent hun- dreds of hours patiently teaching me how to trade. Most of all, Jayne Gould. vi Table of Contents New Introduction to Metal Men viii Prologue xvii Part One Mineral Rites 1 Part Two Rags to Riches 20 Part Three Strategic Deals and Dangerous Curves 63 Part Four There was a Crooked Man 121 Epilogue 147 New Introduction to Metal Men [ e - reads] New Introduction to Metal Men arc Rich had it all. A commodity trader with a Midas touch, Mr. Rich from the late 1970s until the present ran a multibillion-dollar empire that Mstretched from Russian nickel mines through Malaysian tin deposits and into trading rooms in London, Hong Kong and New York. He owned a fleet of oil tankers, counted Henry Kissinger and Placido Domingo as his friends, and married the heiress to the Florsheim shoe fortune. He had a $9.5 million home along Spain’s Costa Brava and maintained equally lavish residences in Switzerland and Israel. Mr. Rich purchased Picassos and grain silos, scooped up Hollywood studio 20th Century Fox at one point and helped bankroll everything from the Jamaican Olympic team to the Rhodes prep school in Manhattan. Although his personal wealth is a closely guarded secret, Mr. Rich is routinely estimated to have a net worth in excess of $1 billion. At the same time, his friend and colleagues joked, those who compile lists of the world’s richest men have failed to include Mr. Rich because they have been unable to calculate an algorithm from which to accurately gauge the true value of his wealth. But despite his wealth and power, there was one thing Mr. Rich could not do for the past 17 years: set foot on U.S. soil. For Mr. Rich, until Bill Clinton granted him a presidential pardon, was the most wanted white-collar fugitive in American history. viii New Introduction to Metal Men [ e - reads] This was a man who fled to a safe haven in Switzerland just before being indicted in 1983 on more than 50 counts of wire fraud, racketeering, trading with Iran despite a trade embargo and evading more than $48 million in U.S. income taxes. Today, he is free to return to America, his past record forever cleansed of legal stain by the pardon Mr. Clinton issued in his last day as president. The pardon has drawn sharp criticism. Former U.S. Justice Department officials have characterized it as “outrageous” and “disgusting.” New York Mayor Rudolph Giuliani, who was a federal prosecutor at the time Mr. Rich fled, said he was “shocked” by the pardon and has called for a congressional investigation into the matter. On Capital Hill in Washington, the House Government Reform Committee is now preparing a formal request for documents related to the pardon — the first step in possible congressional hearings on the matter. Sandy Weinberg, the U.S. prosecutor who spent years investigating the exploits of Mr. Rich’s empire, is dumbfounded. “It’s astonishing,” he says “The act of trading with the enemy is so egregious in itself, and indicative of the kind of attitide Rich and Green and his companies had in relation to being good citizens of the U.S.,” Mr. Weinberg adds. What Clinton did is incomprehensible. It demeans the whole system.” Many aspects of the pardon remain muddy. Why, for instance, would Mr. Clinton intercede on the behalf of Mr. Rich? But one thing seems clear: According to a seminal Supreme Court ruling, acceptance of a pardon generally implies a concession of guilt. Thus, Mr. Clinton has granted a pardon to a man who is tacitly acknowledging, among other things, that — as the 1983 indictment put it — he “traded with the enemy,” a crime classified as “a treasonable offense.” In the past, Mr. Rich has steadfastly maintained that his innocence. Seventeen years is a long time. Mr. Rich, who has always declined to be interviewed by me, has been lying low most of that time, quietly running his trading kingdom out of a residence called “Villa Rosa” on the shores of Lake Lucerne in Switzerland. He has stayed out of the public eye, and many people have forgotten why he has been on the lam all this time. This is his story The son of a poor Jewish scrap-metal trader in Antwerp, Belgium, Mr. Rich was born as Marc Reich on Dec. 18, 1934. Hitler was in power across the border and Germany was rearming. Shortly before the blitzkrieg rolled across Belgium in May 1940, the Reich family emigrated to the U.S. They made their home in Kansas City, where they opened a costume-jewelry shop and changed the family name to Rich. The new surname became something of a self-fulfilling prophecy. Mr. Rich would wind up speaking five languages — German, Spanish and Hebrew as well as English and his native French. But school records indicate ix New Introduction to Metal Men [ e - reads] he was a mediocre student at best. After his family moved to New York in 1950, he attended New York University but he soon dropped out and, in 1954, sought work at Philipp Brothers, an Uptown commodity broker that eventually became part of Salomon Brothers. During the job interview, legendary metal trader Ludwig “Jes” Jesselson tested Mr. Rich to see if he could calculate sums quickly and without the aid of a pencil. He performed so phenomenally that Mr. Jesselson hired him on the spot. So began an odyssey that would take Mr. Rich from a nervous young $60-a-week commodity trader, or lehrling, to a titan in the commodity world. “Rich had the best memory of anyone at the company,” recalled one Philipp Brothers trader, Herbert Hutton, who worked with Mr. Rich during those years. “He had the nature of a true gambler and never stumbled on anything in his life. Every risk he took was calculated.” Mr. Rich’s first big deal was in mercury. Quicksilver had been in high demand during the 1950-53 Korean War, sending governments around the world scrambling to purchase and warehouse the material for use in future military conflicts. Mr. Rich managed to acquire the rights to most of the production of the world’s two biggest producers, allowing Philipp Brothers to buy low and sell high. Impressed, Mr. Jesselson put Mr. Rich on the fast track and began referring to him as his son. In 1958, Mr. Jesselson dispatched Mr. Rich to Cuba to begin dealing with the collapse of the Batista government and make friends within the new Castro regime. Undeterred by the political upheaval, Mr. Rich cut a deal that allowed Philipp Brothers to keep shipping nickel and copper off the island. “Marc always saw Cuba as a place where the rules didn’t apply,” said Bill Spier, a trader who worked with Mr. Rich during the Cuban crisis. “He came back to New York with what he learned.” From Havana, Mr. Rich moved on to South America, hopscotching around the continent from a Philipp Brothers’ office in La Paz, Bolivia. During one of his many trips back to headquarters in New York each year, he met Denise Joy Eisenberg, the heir to the Florsheim fortune. They were married in 1966, but there was no question of settling down. In 1967, Phillip Brothers transferred Mr. Rich to Madrid along with a fellow trader, Pincus “Pinky” Green, an orthodox Jew whose dirty shirts and sneakers contrasted with Mr. Rich’s elegant suits and trademark flashy neckties. Together, they developed a system that allowed Philipp Brothers to bypass the major oil companies, the “Seven Sisters” who then controlled the world’s oil supplies.