The King of Oil: The Secret Lives of Marc Rich

stock was deposited with Credit Suisse. Rich was the company’s first president, and Green took up his position on the supervisory board together with three Swiss lawyers. Alec Hackel was chosen as the company’s director.
Swiss Secrecy
     
    Of course, it was no accident that Rich chose Switzerland as the location for the headquarters of Marc Rich + Co. AG. Philipp Brothers’ European headquarters had been located in Zug since 1957. Situated on thebanks of a lake and nestled between rolling hills, Zug is an idyllic small town in central Switzerland at the foot of the Alps. In addition to its natural beauty, Zug had three key advantages. First of all, Switzerland is politically neutral and in the mid-1970s was not even a member of the United Nations. Second, Zug is close to Zurich, one of the world’s best and—thanks to strong banking secrecy regulations—most discreet financial centers, with access to an international airport and top-notch international schools. Finally, Zug is a tax paradise with comparatively low rates of income tax and corporate tax by international standards. In the mid-1970s, a midsized American company had to fork over nearly half of its profit to the IRS. In Zug a company only had to pay around 10 percent in taxes. “The only bad thing about Zug is the fog,” Rich says.
    With its policies of low taxes and simplified bureaucracy—both initiated after World War II—Zug managed to attract international companies and become an international center for trade and services. First came the American companies such as Philipp Brothers in the 1950s and 1960s. These were followed by German and British companies in the 1970s and 1980s, and since the 1990s Zug has attracted an increasing number of Russian companies. Zug seems to be the perfect example of supply-side economics in practice. The inhabitants of the canton of Zug had struggled for centuries to make a living from the dairy industry and livestock breeding, yet the canton is today one of the richest in Switzerland. In March 2009, it had an unemployment rate of only 2.5 percent.
    The founding of Marc Rich + Co. AG was a heavy blow for Philipp Brothers, a trading giant that had survived two world wars. “Few events had as far-reaching consequences in the firm as Rich’s departure,” said Helmut Waszkis, an authority on the company who worked for the commodities giant for over half his life. 3 The commodities trade is a business without brands or trademarks. It is primarily based on personal relationships and trust. “You take your large customers and the little company secrets with you when you leave,” one trader told me. Rich was considered a master of maintaining a network of connections. His black addressbook—in which every name, number, and date is meticulously written in tiny handwriting—is legendary among company employees. He never forgets a birthday, regularly sends flowers on holidays, and keeps in touch with his contacts. “Loyalty is a very important value to him,” according to Ursula Santo Domingo. “He still calls me when he is in Madrid.”
Vendetta
     
    It was an unpretentious beginning. The handful of traders worked in a four-room apartment in Zug’s less than glamorous Riedmatt quarter. The furnishings were simple. “At the beginning we had to use the local post office to send telexes,” Rich remembers. Although the company soon had its own telex, veterans remember that the only space that could be found for it was in the restroom. With nothing but their know-how and their contacts, Rich and his partners set out to snatch deals from Rich’s former employer and tear away Philipp Brothers’ share of the market—a job that Philipp Brothers had trained them for.
    Everyone was talking about a vendetta between Rich’s company and Philipp Brothers (Phibro). Some of the stories sounded as if they had been taken from a spy film. 4 In Buenos Aires, Phibro employees caught one of Rich’s employees paying large sums for Phibro company telexes. “They were beating our bids for metals by a fraction on every one,” a Phibro representative complained. “They knew our bids before we did.” A mole from Marc Rich + Co. was discovered in Phibro’s Tokyo offices with the help of Phibro’s own mole that they had infiltrated into Rich’s company. Some believe that Rich knowingly lost money on deals in order to squeeze out Philipp Brothers. “Nonsense,” says Rich. He attributes these stories to the emotions that