Interview with Morris "Sandy" Weinberg, Esq.
Assistant U.S. Attorney, Southern District of New York, 1980-85;
lead prosecutor in United States v. Marc Rich et al.
Zuckerman, Spaeder, Taylor & Evans, LLP, Tampa

March 7, 2001; by e-mail
© JURIST, 2001

JURIST [Professor Bernard Hibbitts, University of Pittsburgh School of Law]: What were the statutory and regulatory grounds for your prosecution of Marc Rich? What, to your mind, were the strong and weak points of that prosecution?

Sandy Weinberg: The prosecution of Marc Rich and Pincus Green individually focused on three fraud schemes involving the Internal Revenue Service, the Department of Energy, and the Department of Treasury and its Office of Foreign Assets Control. Those schemes were prosecuted as mail and wire frauds (18 U.S.C. ァァ 1341 and 1343) and/or the predicates for a racketeering/conspiracy and racketeering/substantive count (18 U.S.C. ァ 1962(c) and (d)). The indictment charged Marc Rich with evading corporate taxes on $100,000,000 worth of domestic crude oil income, which income was illegal in violation of Department of Energy price control regulations. Specifically, Marc Rich violated the "permissible average markup" regulations which, as of September 1, 1980, established a permissible average markup of $.20 per barrel for a reseller such as Marc Rich. Between September 1, 1980 and February 1, 1981, Marc Rich made in excess of $70,000,000 in illegal crude oil profits in the United States which he hid from the Department of Energy and from the Internal Revenue Service and which he funneled out of the United States through a series of phony crude oil deals. In all, Marc Rich was charged with evading $48,000,000 in taxes on approximately $100,000,000 worth of income which he failed to disclose. The indictment included tax evasion counts for 1980 and 1981 (26 U.S.C. ァ 7201). The indictment also included charges against Marc Rich and Pincus Green for conducting crude oil trades with the government of Iran during the American hostage crisis. Marc Rich and Pincus Green were charged with violation of a series of regulations which were implemented during the hostage crisis, as well as with trading with the enemy (Title 50, U.S.C. ァ 1705).

In my mind, our case was overwhelming. We had numerous witnesses, both from Marc Rich's New York company and from third party companies who were prepared to testify in detail about the fraud. The witnesses would have testified that Marc Rich created what he referred to as the "pots" on the books of several third party companies to hold the illegal domestic crude oil profits. If Marc Rich had disclosed the profits to the Department of Energy, he would have had to disgorge them, as they were illegal. Instead, he orchestrated a scheme where it was made to appear that his New York company did not make any profits. Rather, it was made to appear that the profits were actually being made by two third party companies Listo and West Texas Marketing. Marc Rich and his New York employees kept detailed records of the actual profits that were kept in the pot in what amounted to be a second set of books. We obtained a handwritten ledger in which the "pot" deals were tracked by one of Marc Rich's traders. We also had handwritten ledgers from the third party companies that kept track of the pot profits. Like any fraud case, the evidence was rife with indicia of fraud, such as, inflated invoices, false filings and phony documents. Almost $100,000,000 were laundered offshore through a series of fictitious transactions that were orchestrated by Marc Rich to remove the pot profits from the third party companies.

At the time, the RICO counts were the most difficult because RICO had not been used with any regularity in white-collar cases prior to the early 80's. Since Marc Rich became a fugitive and his corporations ultimately entered into plea agreements, the RICO counts were never litigated. The trading with the enemy counts were unique but we believed very strong as they related to the individuals. Our proof would have shown that the trades in question were initiated by Marc Rich and Pincus Green from New York and, in violation of various regulations, American dollars ended up in Iran in exchange for Iranian oil. Again, these counts were never litigated because Mr. Rich and Mr. Green became fugitives and the corporations entered into plea agreements on other counts.

JURIST: How, if at all, would the case against Rich be prosecuted today, especially given the post-1989 Department of Justice policy of not applying racketeering statutes to tax evasion?

Weinberg: If prosecuted today, the charges against Marc Rich would be even more serious than in the early 80's. The racketeering count would be much stronger because the predicate offenses would be money laundering offenses rather than mail and wire fraud. In my opinion, the Department of Justice policy regarding tax evasion and racketeering would not apply to this case where Marc Rich made a $100,000,000 in illegal income in violation of the energy regulations which were subsequently laundered out of the country through a series of fictitious deals. The Marc Rich prosecution was not a straight tax evasion case since the underlying income was for the most part alleged to be illegal.

JURIST: What were the legal consequences of Rich fleeing the country?

Weinberg: By fleeing the country, Marc Rich made it impossible for the government to try him without extraditing him to the United States and/or apprehending him. However, his fugitive status would have been an important piece of evidence which we alleged in the first paragraph of the superseding indictment and would have proven at trial to demonstrate his consciousness of guilt. In many ways, Mr. Rich forfeited his right to attack the merits of the case when he chose to become a fugitive. Any defense that he would have ever put on would have been a hollow defense in light of his decision to flee in 1983.

JURIST: Did Rich's renunciation of his U.S. citizenship affect the case against him?

Weinberg: Rich's renunciation of his United States citizenship did not specifically affect the case against him. He renounced his citizenship in 1983 in an effort to avoid extradition. While we could have put on evidence of his fugitive status at trial, I do not believe that we would have been permitted to put on evidence in our direct case that he had renounced his citizenship. If Marc Rich had chosen to testify, we may well have been able to cross-examine him as to the renunciation of his citizenship as it related to his effort to avoid extradition. As it relates to the pardon, it is inconceivable that any President would have considered a pardon for any individual that renounced his American citizenship and became a fugitive.

JURIST: Might Rich still be subject to suit if he chooses to return to the United States, even after having been pardoned?

Weinberg: Rich is still subject to suit in the United States if he ever chooses to return to the United States. This is particularly so in this case given President Clinton's condition that Rich waive the statute of limitations as it related to any tax and/or energy questions. Having said that, I do not believe that there are any remaining civil federal tax issues, and I have some doubt as to whether there are any viable energy issues. I have been contacted by some former Department of Energy counsel who believe that there are viable energy cases that could still be brought against Marc Rich for violations of the energy regulations in the 70's and early 80's. Also, the State of New York has recently sued Rich for in excess of $100,000,000 in taxes and penalties for violations in New York State taxes.

JURIST: Was a Presidential pardon appropriate in this case?

Weinberg: I cannot imagine two people that were less suited for a presidential pardon than Marc Rich and Pincus Green. It is inconceivable that President Clinton chose to pardon the two biggest tax cheats in the history of the United States who had renounced their citizenship, been fugitives for seventeen years, and who had traded with the Iranians during the hostage crisis. While I do not know what motivated President Clinton to pardon Rich and Green, I can state that it is implausible that those pardons were based on his evaluation of the merits of the case. President Clinton employed a curious process in determining the merits by only speaking with Rich's lawyers and by scrupulously avoiding any contact with the prosecutors or anyone that had any knowledge about the prosecution. If President Clinton had asked, he would have learned that the government's proof was overwhelming and that Marc Rich's own lawyers in October 1984, during the guilty pleas of his two companies, told Federal Judge Shirley Kram that Marc Rich had hidden millions of dollars in illegal crude oil profits from the Department of Energy and the IRS, had filed various false statements with the Department of Energy about those transactions and had evaded millions of dollars in United States income tax on those transactions. Given those statements by Marc Rich's own lawyers to a federal judge, it is absurd that some 17 years later his lawyers would make submissions to the President that Marc Rich did not even owe civil taxes and the case was without merit.

JURIST: Do you think the President should have consulted the U.S. Attorney's office before taking any action on Rich's pardon application?

Weinberg: There is no doubt that President Clinton should have consulted the United States Attorney for the Southern District of New York before taking any action on Rich's pardon application. How could the President of the United States only listen to one side of the story and reach a determination on the merits? It appears that the President deliberately avoided the United States Attorney's Office and the Department of Justice, as well as the advice of his top advisors who have now testified that they lobbied against the pardon. It is unbelievable that the President would have accepted, without any reservation, the arguments from Rich's attorney, Jack Quinn, about the case without asking the United States Attorney's Office and/or the Department of Justice for their input.

JURIST: In the abstract, do you believe that a pardon retroactively delegitimizes the prosecution of an individual such as Rich by suggesting that he was wrongly indicted, or do you think that the prosecution of the case was appropriate, the pardon notwithstanding?

Weinberg: Notwithstanding the pardon in this case, I believe that the prosecution of the case was appropriate. I am gratified that there has been a universal reaction in Congress amongst Democrats and Republicans, the national press and the American people that the pardon was horribly misguided. In the typical case, I do not believe that a pardon retroactively delegitimizes the prosecution of an individual but is simply the ultimate act of mercy extended by the President to individuals who have, under a variety of circumstances, repaid their debt to society. In a case involving a fugitive like Marc Rich, a pardon does send the undeniable message that the President believes that the individual was wrongly indicted. The pardon of a fugitive is particularly inappropriate because it suggests that the President does not believe that the American judicial system is capable of giving that fugitive a fair trial. In my opinion, President Clinton has shown an utter disrespect for the American judicial system by his pardon of Marc Rich, who was able to evade prosecution for over 17 years and never was willing to test his legal defense before a judge and/or a jury.

JURIST: In light of the Marc Rich pardon, do you think that the pardon process should be changed? If so, how, especially given the President's unlimited authority to grant pardons under Article II, Section 2 of the Constitution?

Weinberg: I strongly believe that the President's constitutional authority to grant pardons should not in any way be restricted. I am confident that the firestorm that has been created by President Clinton's pardon of Marc Rich will ensure that no President in the foreseeable future will so abuse the pardon power. The pardon grant is a very important power which when exercised correctly is the ultimate act of mercy reserved to the President by our founders. There are many people in this country that have been abused by the judicial process who are candidates for pardons. Unfortunately in recent years, pardons have been reserved for the powerful and the wealthy. While it is important that we expose President Clinton's abuse of the pardon power for what it is, we cannot allow his transgressions to lead to any tampering with that power.

JURIST: Thanks very much for answering our questions.


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