The U.S. corruption and money-laundering probe into Glencore Plc represents the sum of all fears for the world’s largest commodity trader. The possibility that the Justice Department would add to the dizzying array of regulatory and legal headaches the Swiss company is facing around the globe -- from Russia to Africa and South America -- has been a major worry for both executives and shareholders for a while now.
The most obvious risk from the U.S. investigation is a hefty fine or settlement, but the stock plunge, which erased $5 billion of market value, far exceeded the largest penalty ever imposed under the Foreign Corrupt Practices Act. That suggests investors have deeper apprehensions, which makes it interesting.
But something else the name Glencore still triggers in mind of many: his founder was Marc Rich, born in Antwerp to a Jewish family, but raised in the United States. He dropped out of New York University to go to work for Philip Brothers, now known as PhiBro LLC, where he became a dealer in metals. He helped to run operations of the company in Cuba, Bolivia and Spain, securing citizenships in the process, always a useful thing for a person leaving on the edge, in more than one sense of the word.
Rich has expanded the spot market for crude oil in the early 1970s, drawing business away from the larger established oil companies that had relied on traditional long-term contracts for future purchases. This was a key insight and claim to fame. One of his biggest market coups came during the 1973-1974 Arab Embargo when he used his Middle Eastern contacts to circumvent the embargo and buy crude oil from Iran and Iraq.
He was always thought to be a Mossad asset, who helped Israel to get contacts in Iran.
In 1983 Rich and partner Pincus Green were indicted in the US on 65 criminal counts, including income tax evasion, wire fraud, racketeering and trading with Iran during the oil embargo (at a time when Iranian revolutionaries were still holding American citizens hostage). The charges would have led to a sentence of more than 300 years in prison had Rich been convicted on all counts. At the time it was the biggest tax evasion case in U.S. history
Conveniently Rich was in Switzerland when this all went down. He never went back to the United States, even when his daughter was dying of cancer in California.
On January 20, 2001, hours before leaving office, U.S. President Bill Clinton granted Rich a highly controversial presidential pardon. Some allege that Rich's pardon had been bought, as his ex-wife, Denise Rich had given more than $1 million to Clinton's political party, including more than $100,000 to the Senate campaign of the president's wife, Hillary Rodham Clinton, and $450,000 to the Clinton Library foundation during Clinton's time in office.
Rich moved to Meggen, a city in the Canton of Lucerne Switzerland, residing in a house called "La villa rose" (the pink villa) on the shores of Swiss Lake Lucerne, where he zealously guarded his privacy. Rich owned property in the ski resort of St. Moritz. Switzerland, and in Marbella, Spain. He was an art collector and friends said he lived surrounded by Renoirs, Monets and Picassos. He died there of stroke in 2013 and was buried in Israel.
But there is a kind of ending to the story. It happened just yesterday.
Glencore Plc’s announcement of a $1 billion stock buyback on Thursday was short on both wit and color. So allow me to hazard a rough translation: “Don’t worry, we’re rich and our share price should be much higher.”
Faced with the unwelcome attention of the U.S. Department of Justice, most companies would be inclined to batten down the hatches. But just a couple of days after being ordered to hand over a decades’s worth of documents related to its activities in the Democratic Republic of Congo, Venezuela and Nigeria, the world’s top commodities trader is splashing its cash.
That shows guts, the spirit of Rich lives on. A tough man who made it his way, and he left an organization modelled after him.