The King of Oil: The Secret Lives of Marc Rich

by Daniel Ammann

  Denise, the Songwriter

  By the early 1980s Marc Rich had indeed achieved this success. He was a giant of the commodities trade, earning 100 million to 200 million a year. The family now lived in a ten-room apartment at 625 Park Avenue. Princess Ashraf Pahlavi, the twin sister of the ousted shah, owned a three-story, twenty-five-room penthouse in the same building. Rich’s daughters went to the best private schools, and the family spent their weekends at their beach house on Long Island’s Lido Beach. Their life would never be the same after Rich fled to Switzerland in June 1983. It meant a massive readjustment—even more so as they were caught totally unawares. The family moved from New York, widely extolled as the “capital of the world,” to the small village of Baar, Switzerland. It was not exactly the glamorous cosmopolitan hub that the Riches were used to.

  Rich was able to continue doing what he loved to do: working from early morning until late in the evening. The children attended elite boarding schools in the French-speaking area of Switzerland and the American International School in Zurich. Cut off from her circle of friends, Denise—the only member of the family who was born in the United States—had to reinvent herself. She tried to make the best of the situation. “I started writing songs professionally at that point also because I was so alone so much of the time,” she says. She had been writing songs for years and liked to compose with her acoustic guitar while in the bathtub. She was now ready to seek a wider audience for her music.

  She found amazing success. Sister Sledge, famous for their song “We Are Family,” recorded one of Denise’s songs in 1985. “Frankie” was an international number one hit and sold over 750,000 records. With the success of her own album, Sweet Pain of Love, one year later, Denise became a much sought-after songwriter. The list of artists who have performed her songs reads like an all-star lineup of R&B: Aretha Franklin, Mary J. Blige, Patti LaBelle, Natalie Cole, Marc Anthony, Céline Dion, Diana Ross, Donna Summer, Chaka Khan, and Grover Washington Jr. Denise increasingly traveled to London, New York, and Philadelphia—the heart of the Philly soul that she so loved—in order to pursue her career as a songwriter. She was happy that her husband was proud of her success. However, she was also aware of the fact that he was not so happy with her frequent absences. “He doesn’t like to be alone,” she told me. “Those kind of men don’t.” Nevertheless, after twenty years of marriage during which Denise had ignored her own ambitions, she was finally ready to move on. “It’s my turn now and I’m gonna do it,” she said.

  That Tall Blond German Woman

  The better things went for Denise, the worse they got for Marc. “Marc was depressed, but I didn’t want to hear about being depressed. It wasn’t my fault we had to leave the country,” she explains and throws a look at Danielle. It was the classic crisis that many couples experience when one partner finally decides to step out of the other’s shadow. Either they adapt to the new situation or they go their separate ways. In order to cheer him up, Rich’s family suggested he get out to the mountains more often and go to St. Moritz. Denise shakes her head at how naive she was back then. “I had no clue,” she tells me. “There were women up there in St. Moritz reading Forbes, you know, looking for a husband.” She assures me that Rich had never had an affair up until that point. “I was a blessed wife. His big affair was his business,” she says.

  Denise was, at first, not worried about the many good-looking, long-legged young women who tended to congregate in St. Moritz. She had failed to recognize that times had changed and that her husband was suffering more as a result of his voluntary exile than he was prepared to admit. They had been living in Switzerland for six years. It is a beautiful country, but it is also small and provincial. Rich, who loved to travel, could no longer go where his will took him. She, on the other hand, could travel the world. She recorded songs in London and went to Brazil to record a sound track for a film about the legendary mail train robber Ronald Briggs. She had the time of her life. “It was not a good time for Marc,” she says. “Things started falling apart.”

  It was around that time, in late 1989, that people began to notice the tall blond German woman at Rich’s side at the social events he attended. Gisela Rossi, née Reininger, was originally from Munich and was the widow of a rich Italian industrialist. She was a member of the European jet set that spent their winters skiing in St. Moritz and their summers in St. Tropez on the French Riviera or in Marbella on the Spanish coast. Rich met Rossi on a trip to St. Moritz.

  “Of course, it was a dangerous situation,” remembers Ursula Santo Domingo, who often spent her winter holidays with the Rich family in St. Moritz. “There are all these women who come to St. Moritz and end up comforting all the unaccompanied men. Along came Gisela, and she caressed him and ran her fingers through his hair and did everything he wanted.” It was the beginning of the end for the marriage. “He fell for her hook, line, and sinker,” Denise says. “He was very naive about women. He wasn’t cheating, he had no girlfriends. My father always said, ‘When you are that naive and that green, you fall into the first trap.’ ”

  The affair began while Denise was in Worcester to be at her mother’s deathbed. Danielle found out about the relationship and alerted her. Denise would fight to save their marriage for two years, even though her father had told her, “You won’t be able to reverse this.” “Don’t be ridiculous,” Denise replied. “It’s over twenty years of marriage.” A divorce was out of the question for Denise. That was not the way she had been raised. Her parents had been married for fifty-three years. She thought the affair would remain an affair and her husband would soon come back to his senses. “I wouldn’t leave him,” Denise says and interlaces her fingers. “I stayed for two years. I did whatever I could. I loved him. I didn’t want my kids living in a broken home. Our family made a commitment to stay together. I was trying very, very hard. I really was. But he couldn’t get out of it. She was doing everything he wanted, and she was there all the time. She was always on time. This woman was so street-smart and manipulative. So manipulative. She also had a lot of friends helping her. It was fun for them to steal a husband. ‘Let’s see if we can get this Rich guy,’ they would say to themselves. He fell into the trap and he couldn’t see it. It happens to men, it just happens.”

  Don’t Be Late

  Whereas Denise had spoken from the heart, Marc Rich tried to remain diplomatic when I asked him what had gone wrong with his marriage. “I became unhappy with certain things about Denise, and I met Gisela, whom I liked.” Could he not accept the fact that Denise was often away pursuing her songwriting career? “She spent a lot of time with her music, that’s true, and she had certain characteristics which bothered me. She is always late, always. Still.”

  After two years of struggle, Denise finally gave up. The two legally separated, and Denise returned to the United States. She filed for a divorce in April 1992. Denise chose to have the trial in Switzerland, as she knew that according to Swiss law she might be entitled to half of the fortune that her husband had accumulated during their marriage. She hired the aggressive lawyer Max Lebedkin to represent her in court. Lebedkin was known for doing whatever was necessary to make sure the wives of rich men came away rich from their divorces. As was usually true when he was involved, the Riches’ divorce escalated into an all-out struggle. It would be one of the bitterest, most expensive, and most public divorce trials the world had ever seen.

  Lebedkin sought a settlement of around half a billion dollars.3 The crafty lawyer claimed that Denise and her parents had put up a substantial amount of the seed capital that Rich had needed when he had founded his company in 1974. She had supported her husband for over twenty years and had given birth to his three daughters. Thus, Lebedkin argued, Denise had a right to half of her husband’s fortune, which amounted to “at least” 1 billion. According to Forbes, Rich was worth at that time approximately 800 million, whereas Fortune put the sum at 1.1 billion. Only hours after receiving Denise’s claim, Rich’s lawyers came up with a counteroffer
: 3.33 million in cash on the spot.4 Perhaps Rich thought he could deal with the marriage as if it were just another trade. “Marc is actually a generous person, but his reaction in this case was rather strange,” a friend of Rich’s said. “The offer was an insult.”

  “Marc Destroyed Our Family”

  Denise also took the counteroffer as an insult, and she soon hit back as hard as a humiliated wife can. She agreed to an extensive interview with one of Switzerland’s most widely read gossip magazines.5 When the magazine hit the streets, the divorce proceedings went dirty. The interview was entitled “I Want Half of My Husband’s Billions.” In it Denise stated, “Marc Rich destroyed our family. I was a very loyal wife and devoted mother for twenty-five years. We all suffered from the scandals and the insults. People gossiped about my husband. They said he was a criminal. But I stood by him. Now he shows his gratitude by cheating on me with another woman and by publicly embarrassing both me and my children.” Denise had never spoken so negatively of Marc, and she would never do so again. Her words reflected not only the anger of a deeply wounded spouse but also the tactics of her aggressive lawyer. Lebedkin had found the exact means of doing the maximum possible damage to Rich. As a weapon Lebedkin chose what Marc Rich feared most: publicity. “He constantly lied when it came to his finances and his fortune,” Denise told the gossip magazine. “While we were still together he always wanted to impress me and everyone else with his enormous wealth. The only thing that has changed is that he still wants to impress everyone with his fabulous fortune, but now he wants me to believe that the reality is somewhat different.”

  Neither party in the proceedings was squeamish in its choice of methods. Denise sued her husband in both Switzerland and New York. She claimed that he had taken advantage of her twice. In 1988, back when the marriage was a happy one, the two had decided to establish a charitable foundation in Switzerland. Both partners planned to donate 40 million of their own money to the foundation, which Denise did.6 Denise claimed, however, that her husband had never contributed his share. This claim was rejected by the court in Zug. In New York Denise filed a civil suit against her husband and his business partners. She accused them of using the money in a trust fund, which was intended for their three daughters, for their own ends by means of “self-dealing” and “fraudulent transactions.”7 According to court documents, she claimed her husband had attempted to “defraud me in the most vicious and disgusting manner.” She lost at trial.

  365 Million for Denise

  Rich’s company was a confusing network of over two hundred private companies and subsidiaries spread over five continents. Many of these companies—all of which existed under the umbrella of Marc Rich + Co. Holding—were closely connected with one another, whereas others were completely independent. A few of the companies had equitable interest in outside companies. Rich and his partners had originally created this labyrinthine structure because it would allow them both to minimize risks and to make private deals without letting others know that Marc Rich was controlling the show. Now the convoluted network of companies offered a further advantage—it was nearly impossible to determine Rich’s wealth.

  Denise’s father finally intervened in the proceedings and prevented the case from escalating to the point of explosion. Emil Eisenberg was very fond of Marc and continued to stand by him despite the criminal charges against him. Rich, in turn, had great respect for his father-in-law, who reminded Rich of his own father. Eisenberg had also placed a great amount of trust in Rich and had unhesitatingly given him money when he founded his company in 1974. Rich would always be grateful for Eisenberg’s help. Eisenberg traveled to Switzerland in order to negotiate a divorce settlement with Rich. “The lawyers made a big mess,” he said to his son-in-law. “Let’s make sense of the whole thing.” Finally someone had spoken in terms that the trader Marc Rich could understand.

  On June 14, 1996, Marc and Denise Rich were finally divorced. Their marriage had lasted for thirty years. The terms of the settlement were never made public. Several knowledgeable sources have confirmed to me that Denise Rich received a total of 365 million; of course, they do not wish to be named when speaking about this very private affair. The 365 million was split into two packages. Like all of the four partners’ wives, Denise had a stake in her husband’s company. She owned 13.91 percent of Marc Rich + Co. Holding. In December 1990—while she was still married to Rich—Denise received 165 million for her 1,070 shares in the course of a capital reduction.8 In addition, Rich agreed to pay Denise a further 200 million. When I asked him about this sum Rich just smiled and said what he always says when the research is correct but he does not wish to officially confirm the results. “It’s not far from the truth.”

  “My Biggest Failure”

  Six months after the divorce, on December 16, 1996, Rich married Gisela—his lover of many years. They had already been living together for quite some time. In July 1993 the couple had relocated to the village of Meggen in the canton of Lucerne. They moved into the stately Villa Rose on the banks of Lake Lucerne. Rich insisted that Gisela convert to Judaism before they married (a fact that did not meet with universal accep tance in Switzerland’s Jewish circles).

  Rich’s marriage to Gisela would not remain a happy one. When I once asked him what had been his greatest failure, Rich thought about the question for some time before asking, “Business-wise, you mean?” I realized that for once Rich was thinking about something other than closing a deal and said that I was not necessarily asking about business. “Next to the case, my next biggest failure was my marriage to my second wife, Gisela,” Rich said. For a moment I was stunned by Rich’s openness. Then I asked him why the marriage had not worked. “At the beginning it was very good. Then she got spoiled, with money and possessions. She decided she wanted more and I said no,” Rich explained. “Do you regret divorcing Denise?” I asked. “No, I don’t, but I regret marrying Gisela,” he answered. On June 15, 2005, Rich divorced for the second time. I wanted to know if it had been an expensive affair. Friends of Rich’s have told me that Gisela received “several tens of millions” in the settlement. “I don’t want to remember,” Rich said and laughed. “As expensive as Denise?” I asked. “Much less,” he replied.

  The END of the KING of OIL

  I

  f the 1970s and 1980s were Rich’s golden age, the 1990s were by far his darkest years. It was a time of death, divorce, and disposal. The death of Rich’s daughter in September 1996 coupled with his divorce from Denise marked the lowest point during these sad times, yet in the 1990s Rich also suffered his greatest financial failure—a fact that has remained a secret to this day. A single bad deal cost him 172 million and took his company to the edge of collapse. It was the deal that finally forced Rich to sell his company. One of Rich’s former managers told me about this debacle when I asked him about the company’s greatest failure. We were sitting in his office, which I will not describe, as he does not want it to be recognized. Before getting into the details, he stood up, shut the door, and asked me to turn off my tape recorder. “Please, don’t get the wrong idea,” he said and lit a cigarette. “I have the greatest respect for Marc Rich. I am what I am thanks to him, but this megalomaniacal deal also belongs in his biography.”

  The trouble started in July 1992. David Rosenberg, a young trader described by colleagues as a gambler, decided he was ready to go for the big time. He had racked up a number of successful aluminum deals over the previous few years and had been promoted to director of the company’s metals division. Rosenberg now wanted to attempt what several traders before him had singularly failed to do; he wanted to secretly corner a market in an attempt to manipulate global prices for a metal. He sat down with two of his most important rivals, the German Metallgesellschaft AG and the Spanish Asturiana de Zinc SA.

  Together the three parties bought a long position on zinc on the London Metal Exchange (LME), the world’s largest metals trading exchange. This meant that the three parties had obligated themselves t
o purchase zinc at a predetermined time and at a predetermined price. Investors who “go long” on a commodity can turn a profit when the prices rise or lose money when prices fall. Rosenberg and his partners simultaneously began buying huge amounts of zinc in an attempt to drive up the market price in the hope of obtaining a higher price for the zinc that they had purchased. It was a gigantic yet incredibly risky operation. Rosenberg and his associates secretly bought around 1 million metric tons of zinc—approximately 20 percent of the annual global production and nearly two-thirds of all the zinc traded on the LME. All told, they spent well over 1 billion in their attempt to reduce the global supply of zinc.

  The Worst Deal of Rich’s Career

  At first everything went according to plan. Within weeks, Rosenberg and his confederates were able to drive prices to a multiyear high. By September 1992 zinc had risen to 1,400 per metric ton. “They were buying and buying and making the price go up,” the manager explained. “It was a high-risk, speculative operation.” However, they were unable to keep their secret operation under wraps. The trade press soon began publishing articles detailing the inexplicable rise in zinc prices. As was usually the case when inexplicable things were happening on the market, people began pointing fingers at Marc Rich. This time they were right.