Marc Rich / Glencore

Marc Rich (born Marcell David Reich; December 18, 1934 – June 26, 2013) was an international commodities trader, hedge fund manager, financier and businessman. A creator of the spot market for crude oil, he became one of history's most financially successful commodities traders.

He was best known for founding the commodities company Glencore and for being indicted in the United States on federal charges of tax evasion and illegally making oil deals with Iran during the Iran hostage crisis. He was in Switzerland at the time of the indictment and never returned to the U.S.  He received a controversial presidential pardon from U.S. President Bill Clinton on January 20, 2001, Clinton's last day in office.

Born Marcell David Reich
December 18, 1934 Antwerp, Belgium
Died June 26, 2013 (aged 78) Lucerne, Switzerland; buried in Israel
Citizenship Belgium, United States, Israel, Spain
Alma mater One term, New York University (did not graduate)
Occupation Founder of Glencore
Known for Banking, trading activities
Net worth   $1 billion (2010)
Spouses:
Denise Eisenberg (m. 1966-1996; divorced; 3 children)
Gisela Rossi (m. 1996-2005; divorced)

One of his biggest market coups came during the 1973-1974 Arab oil embargo, when he used his Middle Eastern contacts to circumvent the embargo and buy crude oil from Iran and Iraq. After purchasing the crude for roughly US$12 per barrel, Rich doubled the price and sold it to supply-starved U.S. oil companies. Later, following the overthrow of Mohammad Reza Pahlavi, the Shah of Iran, during the Iranian Revolution in 1979, Rich used his special relationship with Ayatollah Khomeini, the leader of the revolution, to buy oil from Iran despite the American embargo. Iran would become Rich's most important supplier of crude oil for more than 15 years. Due to his good relationship with Iran, Rich helped give Mossad’s agents contacts in Iran.

Glencore Xstrata plc is an Anglo–Swiss multinational commodity trading and mining company headquartered in Baar, Switzerland and with its registered office in Saint Helier, Jersey. The company was created through a merger of Glencore with Xstrata on 2 May 2013.  As of 2013, it ranked twelfth in the Fortune Global 500 list of the world's largest companies.

As Glencore, the company was already one of the world's leading integrated producers and marketers of commodities. It was the largest company in Switzerland and the world's largest commodities trading company, with a 2010 global market share of 60 percent in the internationally tradeable zinc market, 50 percent in the internationally tradeable copper market, 9 percent in the internationally tradeable grain market and 3 percent in the internationally tradeable oil market.

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In 1983 he was indicted on 65 criminal counts that included tax fraud and trading with Iran when it was holding American hostages.

One of the most serious allegations was that Mr. Rich had misrepresented the provenance of crude oil he sold in 1980 and 1981. Under complicated regulations then in place, newly found oil fetched a higher price than older oil. By illegally marking up the price of old oil and passing it through a bewildering chain of transactions, Mr. Rich sold oil at a markup of up to 400 percent. He was accused of making more than $100 million from the scheme, avoiding paying $48 million in United States taxes.

Mr. Rich paid the government about $200 million in civil penalties but fled to Switzerland to escape criminal prosecution. The Internal Revenue Service offered a $500,000 reward for his capture, and the F.B.I. put him on its “most wanted” list, along with Osama bin Laden. Even as he remained the world’s biggest trader of metals and minerals and lived in opulence, he was called the world’s most famous fugitive.

Then, on Jan. 20, 2001 — Mr. Clinton’s last day in office — Mr. Rich’s name appeared on the presidential pardon list. It immediately became the most debated White House pardon since President Gerald R. Ford gave one to Richard M. Nixon in 1974, and speculation about Mr. Clinton’s motivation was rampant.

It was soon learned that Mr. Rich’s former wife, Denise Rich, had made large donations to the Democratic Party and the Clinton library, and that Israeli officials, including Prime Minister Ehud Barak, had lobbied Mr. Clinton for the pardon. Rabbi Irving Greenberg, chairman of the United States Holocaust Memorial Museum, also pressed Mr. Rich’s case, on museum stationery.

When he was 18, a friend of his father’s got him a job in the mailroom at Philipp Brothers, then the world’s largest raw-materials trading company. He was referred to as “the business machine” for his dedication to trading, and made a tidy profit by buying mercury at the outset of the Korean War and selling it to manufacturers who needed it to make batteries for the Army.

By 1967 he was heading the Madrid office of Philipp and had begun to develop ways to buy and sell oil for immediate delivery, rather than relying on the traditional long-term contracts preferred by big oil companies. Some credit him with helping to start the “spot” market for crude oil. He began to buy and sell oil from Iran, then an American ally.

Mr. Rich and his partner Pincus Green, known as Pinky, left the firm in 1974, unhappy with Philipp’s conservative approach to trading and resentful of not getting bonuses. They formed Marc Rich AG, which later became Glencore International, a commodities trading behemoth. Mr. Rich sold his 51 percent stake in 1993.

After the pro-American Shah Mohammad Reza Pahlavi was overthrown in 1979, Mr. Rich defied a United States boycott of Iran and continued buying its oil — even as 52 Americans were held hostage for 444 days. He used some of the oil to supply Israel surreptitiously.

In an interview with Daniel Ammann for the book “The King of Oil: The Secret Lives of Marc Rich” (2010), Mr. Rich characterized his Iran deals as simply proper business. “They respected the contracts, “Mr. Rich said. “We performed a service for them. We bought the oil, we handled the transport and we sold it. They couldn’t do it themselves, so we were able to do it.”

Mr. Rich traded with Libya under Col. Muammar el-Qaddafi, South Africa under apartheid (in violation of an international embargo), the Communist dictatorships of Cuba and Romania, and undemocratic Latin American countries. He often did business with countries at war.

He favored loud ties and Cuban cigars, collected Picassos and van Goghs and socialized with Henry Kissinger and Plácido Domingo. He owned half of 20th Century Fox in the first half of the 1980s. He had homes in Switzerland, Israel and Spain.

In 1966, he married Denise Joy Eisenberg, who wrote songs recorded by Aretha Franklin and Patti LaBelle. Their daughter Gabrielle died of leukemia in 1996, the same year the couple divorced.

daughters Ilona Schachter-Rich and Danielle Kilstock Rich

Surging Rare-Earth Prices Spur Mining in Kazakhstan

(Bloomberg) -- Surging rare-earth prices are spurring developments of deposits in Kazakhstan, Kyrgyzstan and Greenland as China cuts exports of the metals used in BlackBerrys, televisions and Toyota Motor Corp.’s hybrid cars.

Sumitomo Corp., Japan’s third-largest trading house, and its local partner in Kazakhstan plan to start a pilot plant about the end of next year to produce rare earths using uranium tailings, said Yerzhan Ishanov, deputy director of general affairs at Summit Atom Rare Earth Co., Sumitomo’s venture with Kazatomprom, Kazakhstan’s state-owned nuclear company.

China, the source of more than 90 percent of the world’s rare earths, in July reduced its second-half export quota by 72 percent to ensure domestic supply. Prices have jumped as much as sevenfold in the past six months, prompting companies including Glencore International AG, Stans Energy Corp. and Greenland Minerals & Energy Ltd. to seek to restart and open mines.

“For main applications like rare-earth magnets and glass catalysts, the (demand) increase is from 10 to 15 percent a year,” Summit Atom’s Ishanov said. Japan’s consumption of the metal products is around 40,000 metric tons at present, he said.

China’s move to constrain supply has soured diplomatic relations with Japan, which is moving to secure supplies from Vietnam, the U.S., India and Germany. Rare earths are also used in Boeing Co. helicopter blades and Raytheon Co. missiles.

iPod, Laptops

Rare earths are 17 chemically similar elements, including neodymium and dysprosium. Prices of neodymium oxide, which is used in mini hard drives in laptops and headphones in Apple’s iPod, have surged four-fold to $80 kilogram from $19.12 in 2009, according to Lynas Corp., whose Chief Executive Officer Nicholas Curtis is scheduled to attend the 6th International Rare Earths Conference starting today in Hong Kong.

Stans Energy may restart operations at an open-pit mine in Kyrgyzstan within 18 months to 24 months, Robert Mackay, president and chief executive officer of the Toronto-based company, said in an e-mail in response to Bloomberg questions.

Ramping up of global production “may be somewhat protracted given the time it takes to obtain the necessary permits and establish a supply chain for such complex materials,” Mackay said.

Summit Atom aims to produce 1,100 tons of rare-earth concentrates a year from the pilot plant to supply Japan, Ishanov said. The company may increase its production capacity to between 10,000 tons and 15,000 tons by 2014-2015, he said.

Global demand for rare earths will rise to about 225,000 tons by 2015, compared with 125,000 tons this year, Molycorp Inc. said last month, citing research from Roskill, a U.K.-based metals and minerals research company. Molycorp, owner of the world’s largest non-Chinese deposit of rare-earth metals, and Lynas both plan to open mines in the next two years.

Greenland Project

Greenland Minerals plans to start production at a mine in the southwest of Greenland in 2016, Damien Krebs, metallurgy manager of the Perth, Australia-based company, said in an interview.

The company aims to trade its shares on the London Stock Exchange next year to raise about $100 million to finish the initial study of the project, Krebs said. An initial estimate of the capital cost for the project was $2.2 billion, including a processing plant, he said.

Government agencies of Japan and South Korea and companies including General Electric Co. have approached Greenland to see how they “can secure the rare-earths in the future,” Krebs said.

China has come to dominate the market because it has been able to produce the elements more cheaply and with fewer environmental restrictions than its competitors. While the elements aren’t as rare in nature as the name implies, they are difficult to find in profitable concentrations, expensive for Western producers to extract and often laced with radioactive elements.

Rare-Earth Prices Soar as China Quotas Hit Manufacturers Abroad

(Bloomberg) -- Rare-earth prices have jumped as Chinese export quotas crimped worldwide supplies for the elements used in the manufacture of disk drives, wind turbines and smart bombs.  Prices have climbed sevenfold in the last six months for cerium oxide, which is used for polishing semiconductors, and other elements have more than doubled, according to Metal-Pages Ltd. in London, which tracks rare-earth prices.

Actions by China, which produces more than 90 percent of the world’s rare earths, have drawn criticism from U.S. lawmakers and officials in Japan and Germany. China reduced its second-half export quota for the minerals by 72 percent in July. It is now further restricting exports, according to industry participants.

“Materials are still being held up in customs and shipments are delayed,” Jeff Green, president of J.A. Green & Company LLC in Washington, who represents miners and users of the elements, said in a telephone interview yesterday. “Many believe rare-earth quotas for the second half of 2010 are exhausted, leaving materials unavailable for sale.”

President Barack Obama’s spokesman said the National Security Council staff is looking into reports that China is blocking shipments.“They’ve seen the reports,” press secretary Robert Gibbs told reporters traveling with Obama on a West Coast campaign trip.“They’re looking into them but don’t have anything they could confirm about those reports.”

China’s Comments

China said the quota reduction was needed in order to shut polluting mines and still be able to meet domestic demand. It will “continue to supply rare earth to the world” while maintaining restrictions “to protect exhaustible resources and ensure sustainable development,” the Commerce Ministry said in a statement yesterday.

Contributing to the rise in prices is an expectation of further restrictions. China will probably tighten export controls on rare earths next year, Shigeo Nakamura, president of Advanced Material Japan Corp., said at a conference in China yesterday.

Rare earths are a group of 17 chemically similar metallic elements, such as lanthanum, cerium, neodymium and europium. The elements are used in radar, high-powered magnets, mini-hard drives in laptop computers, catalytic converters for vehicles, electric-car batteries and wind turbines.

“It’s pretty frightening that there may be a gap where U.S. industry pays an extraordinary price,” U.S. Representative Mike Coffman, a Colorado Republican, said in an interview. He said U.S. rare-earth mining isn’t likely to resume until at least late 2012 at a mine in Mountain Pass, California.

‘Unified Front’

“The administration needs to join with other countries and have a unified front to tell China this is not appropriate,” he said.

China’s control of the $1.2 billion market for rare-earth elements gives it “market power” over the U.S., the Government Accountability Office, the investigative arm of Congress, said in a report in April. China restricts exports of the elements through quotas and export taxes, the GAO said.

China has begun to use that market power recently, according to Japanese officials. They said supplies of the elements to Japan were cut after a Chinese fishing trawler collided with two Coast Guard boats in the East China Sea near islands claimed by both countries.

This week, Chinese customs officials began stopping shipments to the rest of the world, according to two people involved in the industry who spoke on the condition of anonymity because of concern about Chinese reaction. Chinese customs officials are delaying shipments by requiring shippers to open containers of the elements for chemical analysis, one of the people said.

Situation Fluid

What’s not clear is whether China has imposed new restrictions or exporters have simply filled the quotas that China imposed in July, the people said.

“Right now it’s very difficult to find prices because the situation is so fluid,” Ed Richardson, vice president at Thomas & Skinner Inc. in Indianapolis, a maker of magnets for the military who has sought U.S. funding to use rare earths. “China is not talking, but this does fall in line with the quotas they laid out in July.”

Prices for cerium oxide rose to $36 a kilogram Oct. 19 from about $4.70 a kilogram on April 20, according to Metal-Pages. Neodymium, used in magnets, rose to $92 a kilogram from about $41 in April and $46.50 in July, the company said.

Hybrid Vehicles

About 37 percent of worldwide rare-earth sales in 2008 were for magnets used in products such as hard-disk drives, hybrid- electric vehicles and guided missiles, according to Industrial Minerals Co. of Australia. An additional 31 percent went into phosphors, used in making energy-efficient lights.

China set a production cap of 89,200 metric tons this year, while reducing its export quota to 22,300 tons, according to estimates by Guosen Securities Co. It announced that quota in July, and prices have climbed since then.

Companies and government officials have already begun to react to the threat of a shortage of the elements.

The U.S. rare-earth mine in Mountain Pass, California, shut down most operations in 2002. Molycorp Inc., which owns the mine, plans to reopen it, and Chief Executive Officer Mark Smith said this week that it may double the planned capacity to 40,000 metric tons.

Glencore International AG, the world’s biggest commodities trader, also said this week that it would try to restart the Pea Ridge rare-earth mine in Missouri.

National-Security Risks

The U.S. Defense Department is studying the national- security risks of dependence on China, and Congress is considering legislation to boost U.S. mining and production.

Gamesa Corp. Tecnologica SA, Spain’s biggest wind-turbine maker, said countries such as the U.S., Canada and Australia hold unexploited deposits of rare earths. While most of the minerals are currently obtained from China, “there is no scarcity of rare-earth minerals in the medium to long term,” a Gamesa spokeswoman said by e-mail, declining to be identified in line with company policy.

In Germany, the government yesterday adopted a strategy to secure supply of raw materials including rare earths. Chancellor Angela Merkel said last week that it’s “urgently necessary” to boost European investment in eastern Europe and Central Asia to counter expanding Chinese interest in rare minerals.

Companies Reduced

China has cut the number of rare-earth companies this year, said Li Zhong, deputy general manager of Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. By 2015, the government wants to reduce the number of rare-earth oxide producers to 20 from 90, he said.

Traders are now waiting to learn what quotas China may impose on exports for 2011, Green said.

“China might raise the production cap and export quota slightly next year,” said Wang Caifeng, who until last week was deputy director at the Ministry of Industry and Information Technology who oversaw the sector, saying that was her personal opinion. She is now in charge of setting up the ministry- affiliated China Rare Earth Industry Association.