The King of Oil: The Secret Lives of Marc Rich

witnessed a rarity: a prosecutor reading aloud from a bill of indictment. When Giuliani began performing
United States of America v. Marc Rich, Pincus Green, et. al.,
he evoked an atmosphere of Chicago in the old days. Fifty-one counts of fraud, racketeering, tax evasion, and other charges were contained in the indictment. 19
    It was “the largest tax evasion indictment ever,” Giuliani said. 20 He continued to read from the indictment. “The defendants engaged in this scheme as a part of a pattern of racketeering activity in which they concealed in excess of100 million in taxable income of the defendant
Marc Rich International
, most of which income was illegally generated through the defendants’ violations of federal energy laws and regulations. This scheme, and pattern of racketeering activity, enabled the defendant
Marc Rich International
to evade in excess of48 million in United States taxes for the 1980 and 1981 tax years.” 21
    Giuliani, however, held back the most serious charge until the end of the press conference. It was a charge that would follow Rich for the rest of his life. “On November 4, 1979, Iranian nationals invaded the U.S. Embassy in Teheran, Iran. Thereafter, 53 American citizens were held hostage for over 14 months until their release on January 19, 1981.” Despite the trade embargo and further regulations that President Jimmy Carterimposed after the hostage-taking incident, the indictment stated, Marc Rich + Co. AG “entered into contracts with the National Iranian Oil Company (NIOC) to purchase Iranian crude and fuel oil.” Marc Rich and Pincus Green had personally “negotiated from the offices of
Marc Rich International
in New York . . . the sale of approximately 6,250,000 barrels of Iranian crude oil for approximately202,806,291.00.” 22
    Trading with the enemy—the gravest of accusations. Congressman Chris Shays (R–Connecticut) summarized the public mood toward Marc Rich and Pincus Green, “saying they were two traitors to their country and our country.” 23 Sandy Weinberg told me it was an accidental discovery, as they had only come across the dealings with Iran in the course of the investigation. “These Iranian transactions were outrageous,” he told me.
The Oil Price Control
     
    To fully understand the criminal case against Rich, we must begin with a highly simplified explanation of the extraordinary complex federal price control regulations that governed the sale of crude oil in the United States after the first oil crisis in 1973. As we’ve seen, the Arab oil embargo of October 1973 that followed in the aftermath of the Yom Kippur War unleashed an oil shock throughout the United States. President Richard Nixon signed the Emergency Petroleum Allocation Act only a few weeks after the embargo had gone into effect. 24
    From November 1973 to February 1981, the United States regulated the price of American crude oil to encourage domestic production. Different prices were allowed for three categories of oil. These three types of oil were chemically indistinguishable but were categorized on the basis of their source. Crude oil from a well operating at or below its 1972 production levels was known as “old oil,” the cheapest of the three. Then came “new oil,” which included oil discovered after 1973 or oil obtained from existing wells in excess of 1972 production levels. Themost expensive category of oil was known as “stripper oil,” oil obtained by squeezing the last drops of oil from wells that were nearly exhausted and whose average daily production was less than ten barrels.
    Only American stripper oil could be sold openly for whatever price the world market would bear—a price that far exceeded the regulated prices for old and new oil. In 1980 a barrel of stripper oil could generally be sold for over20 more than a barrel of old oil and15 more than a barrel of new oil. 25 These regulations had no effect on the price of oil in other parts of the world.
    This Byzantine pricing system was in fact a regulatory nightmare that completely flouted free-market principles. Different regulations applied to different types of oil producers, oil refiners, and resellers, as well as to oil produced from different types of wells according to the amount of oil these wells had produced in the past. It was a political farce that distorted the international and domestic crude oil markets. President Ronald Reagan abolished the act by executive order on his first day in