Houston Chronicle

Feb. 23, 2001, 9:53PM

Point-by-point rebuttal on the Rich pardon

By MORRIS WEINBERG JR.

First, Bill Clinton asked us to accept the unacceptable. Now he asks us to believe the unbelievable.

Last Sunday, the former president took to the op-ed page of The New York Times "to explain what I did and why" in pardoning two fugitive oil executives, Marc Rich and Pincus Green. He concluded his 1,635-word article with the following statement: "I want every American to know that, while you may disagree with this decision, I made it on the merits as I saw them, and I take full responsibility for it."

If Clinton judged this case "on the merits," then his understanding of those words is certainly different from mine. He arrived at his decision by a curious process that is antithetical to our system of justice. He listened to only one side of the story -- Rich's side. He sought no input or guidance from anyone at the Justice Department who was familiar with the facts of the case. Instead, his article parrots the principal arguments in the pardon application submitted by Rich's lawyer, former White House counsel Jack Quinn.

Clinton doesn't just offer a rationale for his actions in his article. He issues an indictment of the U.S. judicial system and the federal courts' ability to reach a verdict that is fair and honorable. He pronounces himself "troubled about the criminalization of the charges," asserts that the case should have been brought in a civil suit and suggests Rich was wrongly indicted. If that were true, Rich would have had a powerful defense and should have brought that defense to court like every other criminal defendant.

In his explanation, Clinton suggests that Rich could not receive justice in a U.S. court and that a pardon was Rich's only hope for salvation. Does the former president -- a law school graduate who chose dozens of men and women for the federal bench -- truly believe that there isn't one federal judge in New York who could fairly determine the merits of the prosecution's case against that of the defense? That message is more alarming than the pardons themselves.

As the lead prosecutor in the Rich case, I have more than a casual interest in Clinton's rationale. The Constitution does not require the president to state any legal reason for a pardon. Now that he has written an op-ed article listing eight of them, I would like to offer the rebuttal that no one from the prosecutorial side ever had a chance to make.

For those of us who spent almost three years prosecuting the case, Clinton's suggestion that it was without merit is particularly difficult to accept. In my view, the government's proof of the charges was overwhelming. If Rich had appeared for trial, we would have called dozens of witnesses -- including insiders at Rich's companies who were prepared to give firsthand accounts of Rich's involvement in a scheme to hide almost $100 million in illegal domestic oil profits from the Department of Energy and the IRS.

Those insiders included the principal financial officer in Rich's New York company and various oil traders who kept handwritten journals regarding these secret profits, which were kept off the books in what Rich referred to as the "pot." One Rich trader provided us with a handwritten notebook that he had created to track the millions of dollars that went into and out of the "pot." The trader said he had kept the journal as insurance, in case the scheme was discovered. Other witnesses included executives at two Texas oil resellers who said they had participated in the deals and helped Rich launder more than $70 million in illegal profits through a series of sham transactions offshore.

Like any fraud case, the evidence was rife with inflated invoices, phony documents and false reports. In 1980, Rich's New York company declared $1,091,431 in taxable income and $413,374 in taxes; our calculations showed the taxable income was $53,650,947 and the taxes due amounted to $24,590,751. In 1981, Rich's New York company declared $2,424,172 in taxable income with $235,525 in taxes. We alleged that the true taxable income was $55,043,714 and the true tax was $24,440,514. I find it hard to believe that Clinton thought these allegations were not worth hearing.

The indictment followed a tumultuous investigation in which Rich and his associates flouted the system through a series of acts that drew international attention. Rich and his companies paid $21 million in contempt-of-court fines for failing to produce subpoenaed documents from Switzerland. In July 1983, as part of an effort to frustrate the contempt order, Rich orchestrated the sale of his Swiss company's only American asset. A federal judge found the sale a "ploy," and an appellate court determined that it was a fraud. In August 1983, Rich operatives were caught attempting to spirit subpoenaed documents out of the country in steamer trunks on a Swiss Air flight during what became known as the "steamer trunk affair."

The conduct for which Rich was indicted was a crime then, and it is a crime today. There is nothing civil about the nature of the charges against him. The final indictment in September 1983 contained 65 counts, including tax evasion charges and two racketeering counts. The Justice Department approved the charges only after giving Rich's counsel an opportunity to present legal and factual arguments against an indictment. Rather than answer the allegations in court, Rich fled to Switzerland, obtained citizenship from other countries and attempted to renounce his U.S. citizenship to block efforts to extradite him. These dishonorable acts underscored the strength of the government's case.

It is instructive to go through the reasons that Clinton put forth as the basis for his pardon. The first -- that other oil companies were "sued civilly" for the same kind of transactions -- is not true. I was aware of no other oil companies at that time that concocted a scheme to evade taxes by placing millions of dollars in illegal profits off their books and laundering them offshore through fictitious deals.

His second reason also doesn't square with the facts. The Department of Energy never "found" that the manner in which Rich's companies hid domestic profits on the books of other companies was "proper." The department was fully supportive of the prosecution, and Rich's companies ultimately pleaded guilty in 1984 to filing 15 false documents with the department.

For his third reason, Clinton cites the work of two "highly regarded tax experts" who "reviewed their transactions" and concluded that there was no "unreported federal income." Clinton leaves the impression that the experts, Bernard Wolfman of Harvard University and Martin Ginsburg of Georgetown University, had rendered an impartial judgment. He failed to state that: 1) they were hired by Rich's legal team some seven years after the indictment; 2) they based their opinion on facts provided by Rich and his lawyers; and 3) their analysis was presented in 1990 to Gerard Lynch, who was chief of the criminal division for the U.S. attorney's office in Manhattan at the time and is now a federal judge. He rejected their argument as legally flawed and based on a set of facts that were not the same as those underlying the indictment. Wouldn't the president want to know why Lynch found the analysis unpersuasive?

Clinton's fourth reason is, in some ways, the most puzzling. He states that "in order to settle the government's case against them, the two men's companies had paid approximately $200 million in fines, penalties and taxes, most of which might not ever have been warranted under the Wolfman/Ginsburg analysis. ..." His choice of words is misleading. Settlements generally refer to the resolution of a civil case. But Clinton is referring to guilty pleas by Marc Rich & Co., AG, and Marc Rich International, Ltd. to a combined total of 78 felony counts on Oct. 11, 1984.

Those guilty pleas should have laid to rest any question about the criminality of Rich's conduct. In a prepared statement, Rich's attorneys told U.S. District Judge Shirley Wohl Kram that Rich's New York company had indeed hidden millions of dollars in income from the government, filed false documents with the Energy Department, transferred the hidden money to Switzerland and evaded millions in taxes. Moreover, Rich's attorneys told Judge Kram that the pleas were voluntary and not the result of threats or force.

As a fifth reason, Clinton cites a 1989 directive from the Department of Justice that "rejected the use of racketeering statutes in tax cases . ..." Since the racketeering counts were just two of the 65, this should hardly have been reason for a pardon. Moreover, if I had been asked, I would have argued that the racketeering charges could have withstood legal challenge. This wasn't just a tax case; it also included an alleged scheme to make millions of dollars in illegal crude oil profits.

In his remaining reasons, Clinton offers the names of people who did not specifically oppose a pardon (Deputy Attorney General Eric Holder) or who actively supported one ("many present and former high-ranking Israeli leaders"). Because these reasons don't deal with the merits of the legal case, I have not addressed them.

Rather than clarifying his thinking, Clinton's statement raises more questions than it answers. Why, for example, did he feel compelled to exercise his pardon power to exonerate two men who were international fugitives, had never gone through the judicial process, had traded with the Iranians while Americans were being held hostage in that country and had generally thumbed their noses at the American legal system? Until we have the answers to these questions, there will continue to be doubt about the pardons.

Whatever Clinton's reasons for his decision, they surely do not include a fair analysis of the case. By suggesting that he acted "on the merits," the former president has only served to underscore how indefensible these pardons truly are.

-- Anonymous, February 25, 2001