NS business profile: Marc Rich, Glencore's fugitive founder

Glencore's worst kept secret.

Glencore’s worst kept secret – the company’s former name was that of America’s once wealthiest fugitive. When Marc Rich & Co AG was renamed Glencore after a management buyout in 1993, its founder and namesake was already on the FBI’s Ten Most Wanted List.

Ironically, Marc Rich was not born in the US. He immigrated there in 1941 when his parents fled the war in Belgium. Instead of studying – he enrolled at New York University but dropped out – Rich started his commodities career early at Philipp Brothers (now Phibro LLC).

At Philipp Brothers, Rich pulled off his first Middle Eastern corporate coup. It was 1973, the spring before OAPEC countries imposed the oil export embargo that would wreck havoc on the world’s economies. How he predicted the embargo, and the threefold price increase that accompanied it, is uncertain, but that spring, Rich more or less pioneered a new form of commodities trading. Future trading was the norm in the crude oil market, but realising a price hike was imminent, Rich started buying and selling on the spot (immediate) market. This allowed him to sell on demand as the embargo took effect and, of course, demand and price rose catastrophically.  

Philipp Brothers were appalled, and sold most of the oil before the embargo took effect. Rich resigned and, together with partners Pincus Green and Alec Hackel, founded Marc Rich & Co AG in the laid back rural town of Zug, Switzerland. It was 1974, 20 years before Marc Rich + Co AG would be renamed Glencore, and 37 before its giant IPO.

Trading from his own company, Rich quietly ignored international sanctions. From 1979 to 1993, his company imported 50,000 tons of oil to the heavily sanctioned South African apartheid government according to the Shipping Research Bureau. Then there was Iran.

In the midst of the 1979 hostage crises, the United States banned all oil trading with Iran. Rich, however, ignored these and purchased crude through a maze of front and shell companies.

It was a crime that was only picked up in 1983 by Rudoph Giuliani, then a US Federal Prosecutor. Amid more than 51 counts of tax fraud, $48 m in tax evasion and a 300 year prison sentence, Rich fled to the hills of Zug, not to return to his Fifth Avenue apartment for many years.

Glencore, or Marc Rich + Co AG as it was then, was to remain in Rich’s hands for another 10 years. In 1990, Marc Rich & Co AG became a majority shareholder of another Swiss commodities company called Xstrata.

It was only after nearly bankrupting the company in 1993 through zinc trades that Rich was forced to sell his entire stake of the company to its management. Only then did the company drop the founder’s name, along with his notoriety, to rename itself Glencore.

Bitter at being forced out of his company, where there were already rumours of a Glencore-Xstrata merger, Rich founded another trading company called MRI Trading AG. In 2003, with a $7.5 billion turnover and 240 employees, MRI was sold to Russian Crown Resources.

Rich’s controversy reached its pinnacle when he was pardoned by the US President in 2001. President Clinton made a total of 396 pardons, but the one made to Marc Rich during his last day in office was his most notorious. It emerged only afterwards that Rich’s ex-wife, Denise, was a close friend of the Clintons. The pair had made sizable donations to the Clinton Presidential Library and the Clinton Foundation. 

Although a free man, Rich lives in Switzerland where he enjoys dabbling in the commodities market from time to time. His family office, The Marc Rich Group, guards his estimated $2.5 bn fortune, according to the global wealth consultancy, WealthInsight. This figure includes the superyacht, Lady Joy; a notorious art collection and property in St Moritz, Lucerne, Marbella, Lisbon and Moscow. Through his ‘The Rich Foundation’, he has donated large amounts to Israeli causes and, as a result, been bestowed with honorary doctorates from Bar-Ilan and Ben-Gurion Universities.

No longer a thorn in Glencore’s side, Rich still maintains opinions in the deal that set last week’s headlines: "It is not necessary, because Glencore dominates Xstrata anyway thanks to a large minority stake....The larger a company is, the more market power, it has controlled and thus easier to pricing. In the end, this means higher profits." Rich told the Swiss magazine, Bilanz.

Not that Rich’s opinion counts anymore. No longer a shareholder in either Glencore or Xstrata, he is rarely credited with paving the way for what could be the largest corporate merger in history. As each company comes under scrutiny ahead of the deal, they probably want to forget their match made in lawlessness.

House Hearing on President Clinton's Pardon of Marc Rich. Photograph: Getty Images

Oliver Williams is an analyst at WealthInsight and writes for VRL Financial News

Photo: Getty
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Commons Confidential: Herod in the House

Your weekly dose of gossip from around Westminster.

The spell cast over Theresa May by the youthful Gavin Williamson and Cronus, his pet tarantula, leaves envious Tory rivals accusing him of plotting to succeed the Stand-In Prime Minister. The wily Chief Whip is eyed suspiciously as a baby-faced assassin waiting to pounce.

My tearoom snout whispers that May is more dependent on the fresh-faced schemer (he also served as David Cameron’s PPS) who signed a survival deal bunging the DUP £1bn protection money than she is on David Davis, Philip Hammond, Amber Rudd or Boris Johnson. She delegated the reshuffle’s middle and lower ranks to Williamson, but his nous is questioned after he appointed Pudsey’s Stuart Andrew (majority: 331) and Calder Valley’s Craig Whittaker (609) as henchmen. Vulnerable seats are dangerously unprotected when whips don’t speak in the House of Commons.

Left-wing Labour MPs mutter that Jeremy Corbyn is implementing a “King Herod strategy” to prevent the birth of rival messiahs. A former shadow cabinet member insisted that any display of ambition would be fatal. The punishment snubbings of Yvette Cooper and Chuka Umunna, who had expressed a willingness to serve, were intended to intimidate others into obedience. The assertion was reinforced by an influential apparatchik musing: “John [McDonnell] is looking for a bag carrier, so Chuka could apply for that.” The election has laced the boot tightly on the left foot.

The military career of Barnsley’s Major Dan Jarvis included service in Northern Ireland. Perhaps old acquaintances will be renewed with the allocation to Sinn Fein’s seven MPs of a meeting room next to the Labour squaddie’s office.

Ian Lavery, the burly ex-miner appointed as Labour’s new chair by Jeremy Corbyn, disclosed that he was bombarded with messages urging him to “nut” – that is, headbutt – Boris Johnson when he faced down the Foreign Secretary on TV during the election. I suspect that even Trembling BoJo’s money would be on the Ashington lad in a class war with the Old Etonian.

Campaign tales continue to be swapped. Labour’s victorious Sharon Hodgson helped a family put up a tent. The defeated Lib Dem Sarah Olney was heckled through a letter box by a senior Labour adviser’s five-year-old son: “What’s that silly woman saying? Vote Labour!” Oddest of all was the Tory minister James Wharton informing his opponent Paul Williams that he’d put in a good word for him with Labour HQ. There was no need – Williams won.

The Tory injustice minister Dominic Raab is advertising for an unpaid Westminster “volunteer”, covering only “commuting expenses”. Does he expect them to eat at food banks?

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 29 June 2017 issue of the New Statesman, The Brexit plague

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