-Caveat Lector-
A Pardon Deserved
By Jack Quinn
Friday, January 26, 2001 ; Page A23
The rhetoric, inaccuracies and media frenzy in the wake of the
announcement of a pardon for Marc Rich demonstrate why that
pardon by President Clinton had become the only solution to
resolve a nearly 20-year-old but fundamentally flawed indictment.
This pardon was granted strictly on its legal merits.
First, one must understand that Clinton insisted that Marc Rich
agree to drop procedural defenses against civil actions that
might be brought against him by the United States upon his
return. Rich has not escaped potential liability for his actions
-- only the overreaching criminal prosecution to which he should
never have been subject.
This is the heart of the matter. Based on a review of the
merits, Rich should not have been subject to criminal charges.
This is among the precise situations for which the presidential
pardon was intended.
Here are the facts. The case grew out of the 1970s Arab oil
embargo and energy regulation designed to keep prices on existing
oil production at 1973 levels, but there were many exceptions.
As a result, major U.S. oil producers had a powerful incentive to
avoid the impact of the regulations.
The U.S. oil companies did this by dealing with international
oil resellers to "link" regulated oil transactions with
unregulated ones. In 1980-81, two Swiss companies associated with
Marc Rich engaged in a series of such linked transactions,
typical of those engaged in during this period, involving U.S.
oil companies. In accordance with the law, the Rich companies
treated payments attributable to the offshore aspects of the
transactions as being exempt from U.S. taxes and price controls.
With oil companies under scrutiny, the U.S. attorney for the
Southern District of New York, Rudolph Giuliani, focused his
attention on the Marc Rich companies and ambitiously turned the
proper reporting treatment of these complex corporate
transactions -- essentially a civil allocation dispute -- into a
highly politicized criminal tax and energy fraud case alleging
that domestic oil revenues were improperly diverted offshore.
As if that weren't enough, the indictment included racketeering
charges despite the Justice Department's acknowledgment years ago
that racketeering charges should not be leveled in tax cases.
Yet, none of the major U.S. oil companies that structured these
transactions was ever prosecuted criminally. Indeed, when the
Department of Energy examined the transactions, it concluded that
one oil company had improperly failed to account for the linked
transactions, violating the regulation's prohibition on excess
pricing. At the same time, the department said that the Marc Rich
companies had properly accounted for the transactions.
The U.S. oil companies were pursued only in civil proceedings
for their actions. Yet for the past 17 years, the U.S.
attorney has maintained a criminal indictment against Marc Rich.
The indictment relies on a position directly opposite to the
finding by the Energy Department that the accounting by the Marc
Rich companies was proper. The position taken by Rich is
supported by two of the leading tax authorities in the country,
professors Bernard Wolfman of Harvard University and Martin
Ginsburg of Georgetown University.
There were other questionable charges as well. Inflammatory
accusations of illegal trading with Iran were leveled but
subsequently challenged by the companies and later dropped.
Equally incorrect is the claim that as a former White House
counsel, I violated the Clinton executive order banning White
House contacts for five years after government service. In fact,
that order makes an exception for "communicating . . . with
regard to . . . a criminal or civil law enforcement . . .
proceeding." Moreover, I notified the deputy attorney general two
months before the pardon was granted that I would be filing an
application in the Rich matter with the White House, and I
encouraged the White House counsel to seek the Justice
Department's views. I did not attempt to circumvent the Justice
Department.
I am not surprised by much of the confusion over the Rich case,
because despite changes in how the law must be applied, the
indictment still stands in its original form. When I made these
arguments in 1999 to the U.S. attorney and asked to enter into
negotiations for resolution of the case, I met with a dead end.
Other lawyers for Rich had met with similar recalcitrance in
previous years. Rich must first return to the United States to
face criminal indictment, we were told.
The U.S. attorney holds fast to its view that this case warrants
criminal prosecution. Fortunately, under the president's pardon
power, a mechanism exists for making a new judgment, based on
case merits. The presidential pardon can and should be employed
when a president resolves a dispute about whether the law and
policies of the Justice Department support the use of civil
rather than criminal sanctions in response to an individual's
alleged wrongful conduct in the eyes of the United States. For
Marc Rich, this means he no longer faces a seriously flawed
criminal indictment but remains liable for potential civil
sanctions.
In my view it should have been dealt with in this way years ago.
The writer, a Washington lawyer, was a White House counsel to
President Clinton.
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Kadosh, Kadosh, Kadosh, YHVH, TZEVAOT
FROM THE DESK OF:
*Michael Spitzer* <[EMAIL PROTECTED]>
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