March 23, 2023

Marc Rich, 78, Pardoned Financier, Dies in Switzerland

Marc Rich’s connections to the rich and powerful not only made him fabulously wealthy but when he was indicted for fraud, racketeering and tax evasion on a grand scale, they helped secure him a pardon from Bill Clinton, hours before the U.S. president left office.

That triggered a political firestorm from critics who alleged Rich bought his pardon through donations that his ex-wife had made to the Democratic Party.

Rich died Wednesday of a stroke at a hospital in Lucerne, near his home for decades. He was 78, and his Israel-based spokesman Avner Azulay said he would be buried Thursday in a kibbutz in Israel.

Throughout his storied career at the pinnacle of high finance, Rich was known as a man who could deliver the big deals thanks to personal relationships he had forged with powerful figures around the world.

In a rare 1992 interview with NBC, Rich said that in his business, “we’re not political…That’s just the philosophy of our company.”

Yet Rich cultivated contacts with powerful politicians — in the Middle East as well as the United States — and used those ties to make billions, often when it seemed all doors were closed.

During the Arab oil embargo of the 1970s, Rich used his Middle East contacts to purchase crude oil from Iran and Iraq and made a fortune selling it to American companies.

In 1981, Rich and a partner bought 20th Century Fox and three years later he sold his interest to Rupert Murdoch for $250 million.

But in 1983, while he was in Switzerland, Rich was indicted by a U.S. federal grand jury on more than 50 counts of fraud, racketeering, trading with Iran during the U.S. Embassy hostage crisis and evading more than $48 million in income taxes.

At the time it was the largest tax evasion case in U.S. history and could have earned him more than 300 years in prison.

Although the Swiss refused to arrest or extradite Rich, he stayed on the FBI’s Most Wanted List, narrowly escaping capture in Finland, Germany, Britain and Jamaica, until Clinton granted him a pardon on Jan. 20, 2001 — the day he handed over the keys to the White House to George W. Bush.

Last-minute presidential pardons are not uncommon in the United States, but this one raised a furor. Critics believed the case showed that justice means one thing for ordinary people and another for powerful insiders.

Rich had other advocates, however.

For years influential Israelis, including ex-Prime Minister Ehud Barak and the former chief of the Mossad spy agency, Shabtai Shavit, had been urging Clinton to pardon Rich, who over two decades had contributed up to $80 million to Israeli hospitals, museums, symphonies and to the absorption of immigrants.

Moreover, Federal Election Commission records showed that Rich’s ex-wife, songwriter Denise Rich, had donated $201,000 to the Democratic Party in 2000.

At the time, Rich’s lawyers were urging the U.S. to drop the tax evasion case. When the Justice Department refused to negotiate, Rich’s attorneys turned to Clinton.

Federal authorities investigated but found no evidence of wrongdoing. Election officials also dismissed a complaint accusing Denise Rich of donating campaign money and furniture to Hillary Clinton in exchange for the pardon.

Bill Clinton also denied any wrongdoing and said he acted on advice by prominent legal experts not connected to the trader.

Nevertheless, the current U.S. attorney general Eric Holder, who was deputy attorney general under Clinton, told a House committee weeks after the president’s decree that if he had known all the facts of the case, “I would not have recommended to the president that he grant the pardon.”

Rich was born in Antwerp, Belgium, on Dec. 18, 1934. His Jewish family fled from the Nazis to the United States, where he went to school and college in New York.

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DealBook: Robert Diamond, Chief Executive of Barclays, Resigns

1:52 p.m. | Updated

LONDON – Barclays is trying to quickly stem the fallout from a rate-manipulation scandal, as its chief executive, Robert E. Diamond Jr., resigned abruptly on Tuesday.

Less than a week ago, the big bank agreed to pay $450 million to settle accusations that it had tried to influence key interest rates for its own benefit, sparking a political firestorm in Britain.

Now, the scandal has claimed three Barclays executives: Mr. Diamond; Marcus Agius, the chairman; and Jerry del Missier, who was promoted to chief operating officer last month.

The resignations come as regulators in London and Washington are investigating whether big banks manipulated interest rates to their own advantage, aiming to increase profits and fend off questions about their financial health. Such benchmarks, including the London interbank offered rate, or Libor, are essential to setting the lending rates for corporations and consumers. In the Barclays case, regulators accused the bank of lowering its Libor submissions to deflect concerns about its high borrowing costs.

While Mr. Diamond is stepping down, he will face continued scrutiny on Wednesday when he testifies before a British parliamentary committee. Local politicians are expected to question him about the actions within the bank that culminated in multimillion-dollar fines from the Justice Department and the Commodity Futures Trading Commission in the United States and the Financial Services Authority in Britain.

Robert E. Diamond Jr., Barclays' chief, is scheduled to testify before a British parliamentary committee on Wednesday.Jerome Favre/Bloomberg NewsRobert E. Diamond Jr., who has resigned as chief of Barclays, is scheduled to testify before a British parliamentary committee on Wednesday.Jerry del Missier, who was appointed chief operating officer last month, was said to know of the actions and didn't stop them.Brendan McDermid/ReutersJerry del Missier, who was appointed chief operating officer last month, was said to have knowledge of the actions and did not stop them.

On Monday, Prime Minister David Cameron of Britain also announced a wide-ranging inquiry into the British banking sector, with the findings to be published by the end of the year. “We need to take action right across the board,” he told Parliament.

The Serious Fraud Office of Britain also said on Monday that it might pursue criminal prosecutions in connection with the manipulation of Libor. British authorities, who continue to work with their overseas counterparts, will make a decision about the evidence gathered by the country’s Financial Services Authority.

Mr. Diamond’s resignation, which was effective immediately, came after mounting criticism of the bank’s actions from politicians and shareholders. Mr. Diamond’s decision to leave was made on Monday afternoon in response to this pressure, according to a person with direct knowledge of the matter, who spoke on the condition of anonymity because the discussions were private. Mr. Diamond had wanted to avoid prolonging the public focus on the bank’s past activities, the person added.

“My motivation has always been to do what I believed to be in the best interests of Barclays,” Mr. Diamond said in a statement. “No decision over that period was as hard as the one that I make now to stand down as chief executive. The external pressure placed on Barclays has reached a level that risks damaging the franchise. I cannot let that happen.”

Mr. del Missier resigned as chief operating officer on Tuesday with immediate effect. He was the co-president of Barclays Capital, the firm’s investment banking unit, from 2005 to 2008, and become co-chief executive of corporate and investment banking at Barclays in 2009.

Mr. Agius, who resigned as chairman on Monday, will stay at the bank until a new chief executive has been found, and he will then step down, Barclays said in a statement. While the search is under way, he will head the executive committee, and will be supported by Michael Rake, the bank’s deputy chairman.

Further resignations could be in the works.

Fresh details about the case show how Mr. Diamond and other senior executives played a role in the questionable actions and failed to prevent them, according to several people familiar with the details of the case.

Mr. Diamond’s top deputies told employees in 2007 and 2008 to report artificially low rates in line with those of rivals in an effort to deflect scrutiny about the bank’s health at the height of the financial crisis, according to the people, who spoke on condition of anonymity because they were not authorized to speak publicly.

Barclays declined to comment about the involvement of senior executives.

Mr. Diamond’s resignation comes after the settlement that Barclays reached last week with American and British authorities. The deal is one result of a wide-ranging inquiry into how big banks set certain benchmarks, including the London interbank offered rate, or Libor.

Those rates are used to determine the costs of $350 trillion in financial products, including credit cards, mortgages and home loans. American and international regulators are still investigating several other banks, including HSBC, JPMorgan Chase and Citigroup.

In a letter to Barclays employees on Monday, Mr. Diamond said he was “disappointed and angry” about the bank’s past attempts to manipulate key interest rates.

“I am disappointed because many of these behaviors happened on my watch,” he wrote.

The leadership changes at Barclays come after Mr. Diamond helped transform the firm’s investment bank into a major player on Wall Street.

The American-born Mr. Diamond joined the British bank in the late 1990s, expanding the investment banking unit into new areas like derivatives and commodities trading.

Mr. Diamond, then the head of Barclays Capital, also extended the firm’s presence in the United States in 2008 by acquiring the North American operations of Lehman Brothers at the height of the financial crisis.

Shares in Barclays rose as much as 4.8 percent during the day in London, but eventually finished down 0.8 percent by the end of trading on Tuesday.

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U.S. Inquiry Said to Focus on S.&P. Ratings

The investigation began before Standard Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.

In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S. P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S. P.’s longstanding claim that its analysts act independently from business concerns.

It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S. P.

During the boom years, S. P. and other ratings agencies reaped record profits as they bestowed their highest ratings on bundles of troubled mortgage loans, which made the mortgages appear less risky and thus more valuable. They failed to anticipate the deterioration that would come in the housing market and devastate the financial system.

Since the crisis, the agencies’ business practices and models have been criticized from many corners, including in Congressional hearings and reports that have raised questions about whether independent analysis was corrupted by the drive for profits.

The Securities and Exchange Commission has also been investigating possible wrongdoing at S. P., according to a person interviewed on that matter, and may be looking at the other two major agencies, Moody’s and Fitch Ratings.

Ed Sweeney, a spokesman for S. P., said in an e-mail: “S. P. has received several requests from different government agencies over the last few years. We continue to cooperate with these requests. We do not prevent such agencies from speaking with current or former employees.” S. P. is a unit of the McGraw-Hill Companies, which is under pressure from some investors and has been considering whether to spin off businesses or make other strategic changes this summer.

The people with knowledge of the investigation said it had picked up steam early this summer, well before the debt rating issue reached a high pitch in Washington. Now members of Congress are investigating why S. P. removed the nation’s AAA rating, which is highly important to financial markets.

Representatives of the Justice Department and the S.E.C. declined to comment, as is customary for those departments, on whether they are investigating the ratings agencies.

Even though the Justice Department has the power to bring criminal charges, witnesses who have been interviewed have been told by investigators that they are pursuing a civil case.

The government has brought relatively few cases against large financial concerns for their roles in the housing blowup, and it has closed investigations into Washington Mutual and Countrywide, among others, without taking action.

The cases that have been brought are mainly civil matters. In the spring, the Justice Department filed a civil suit against Deutsche Bank and one of its units, which the government said had misrepresented the quality of mortgage loans to obtain government insurance on them. Another common thread — in that case and several others — is that no bank executives were named.

Despite the public scrutiny and outcry over the ratings agencies’ failures in the financial crisis, many investors still rely heavily on ratings from the three main agencies for their purchases of sovereign and corporate debt, as well as other complex financial products.

Companies and some countries — but not the United States — pay the agencies to receive a rating, the financial market’s version of a seal of approval. For decades, the government issued rules that banks, mutual funds and others could rely on a AAA stamp for investing decisions — which bolstered the agencies’ power.

A successful case or settlement against a giant like S. P. could accelerate the shift away from the traditional ratings system. The financial reform overhaul known as Dodd-Frank sought to decrease the emphasis on ratings in the way banks and mutual funds invest their assets. But bank regulators have been slow to spell out how that would work. A government case that showed problems beyond ineptitude might spur greater reforms, financial historians said.

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