Larger than life: Weighing the legacy of Marc Rich

One of the greatest, if most controversial, of all commodity traders has died.

Marc Rich: the man who amassed billions trading oil and metals; the man who founded Glencore; the man who was reviled by some and admired by others — but whose acumen as a trader could never be doubted — died of a stroke on June 26 at age 78 in Lucerne, Switzerland.

He arrived in the U.S. in 1941, after fleeing the Nazis in Antwerp. His father had been a shoe retailer in the Old World, but after changing the family name from Reich to Rich, started a jewellery store in Kansas City.

A few years later the family moved to Queens, N.Y., where family connections landed Marc Rich a job in the mailroom of the world’s largest commodity trading firm at the time, Philipp Brothers. Rich was just 19 in 1954 when he started at the company, but his dedication and quick mind made him stand out. His mastery of English, French, German, Spanish and Yiddish also helped his cause, and once he showed a profit on his first trade — selling mercury to military battery manufacturers at the beginning of the Korean War — his corporate career was off and running.

By 1967 the company made him head of trading at its Madrid office. It was a watershed period in his life, as it was where he helped establish a spot market for oil but also where he began building the relationships with Iran that would land him in so much hot water years later.

By 1974 Rich, along with his partner Pincus Green, had grown too big for Phillipp Brothers and broke off to form Marc Rich AG, the company that would go on to become Glencore after Rich sold his 51% stake in the early 1990s.

Rich consistently showed an indifference to trading partners: on top of the infamous Iran trades, he also cut deals with Muammar el-Qaddafi in Libya, South Africa’s apartheid regime and communist governments across the globe. Their politics were of little interest to him. They needed a service and so long as they kept up their end of the bargain, he would provide it.

Those oil deals, however, with Iran during a trade embargo, his alleged tax evasion and the curious pardoning by then U.S. president Bill Clinton are the events most people associate with Rich.

But Rich’s character was more complete than these events would lead one to believe. Beyond creating a spot market for oil that released the commodity from the iron-clad grip of the major oil producers in the early 1970s, he was also a major contributor to numerous causes in Israel, and will be buried there despite living in Switzerland since fleeing the U.S. in the early 1980s.

His leaving the U.S. had to do with being indicted on 65 criminal counts including tax fraud and trading with the enemy (i.e., Iran, during the time it held American hostages). It was enough to land him on the FBI’s “most wanted” list, and there were several ploys to try to capture him abroad. None succeeded.

Whatever one thinks of the legality of his career, there is little doubt that Rich made millions by sniffing out loopholes and the boundaries of a given legal system to score big profits. Case in point was a crude oil trade he orchestrated at the beginning of the 1980s. Exploiting complex regulations at the time that offered higher prices for newly discovered oil, Rich is alleged to have taken older oil and transformed it into “new” oil — and selling it at a massive mark-up. The scheme is alleged to have allowed him to avoid paying US$48 million in taxes.

Many years later Clinton was told that the evidence of the tax fraud wasn’t as strong as formerly believed, and that fed into the decision to grant the pardon. Whatever the case, once the pardon was granted Rich’s knack for stirring up controversy extended to Clinton.

Many pointed to the large donations that ex-wife Denise Rich made to the Democratic Party and the Clinton Library. But Rich also benefited from years of hobnobbing in Europe and the Middle East, as people of influence — such as Israeli Prime Minister Ehud Barak and King Juan Carlos I of Spain — also lobbied for the pardon.

Clinton would later admit the pardon was bad politics, saying it wasn’t worth the damage to his reputation. For Rich’s part, he never took advantage of the pardon, as he never did return to the U.S.

While Rich may go down as the greatest commodity trader of the last century, he wasn’t immune to the financial crisis of 2008. He held a massive amount of Spanish real estate and by his own count, lost a bundle on paper.

Still, he had no cause to cry poor, as Forbes estimated his wealth at US$2.5 billion.

Rich divorced his wife of 30
years, Denise, in 1996, five years before she pressed hard for her ex-husband’s pardon. That year was an emotional time for Rich — in 1996 he also lost a daughter to leukemia. She died in an American hospital, her father unable to visit her due to the warrant for his arrest at the time. According to Daniel Ammann’s biography of Rich, “The King of Oil,” Rich was willing to accept being arrested in order to make the visit, but his daughter insisted otherwise.