Metal Men: Marc Rich and the 10-Billion-Dollar Scam

by A. Craig Copetas

  “Give me another ten tons!”

  “Booked!”

  The cadmium market collapsed Friday morning. The traders who had reveled with Busch at Miranda’s started calling each other. Word was that traders everywhere were buying cadmium, but their industrial customers had plenty of the minor metal stockpiled and were loath to purchase more since the Busch-inspired frenzy had spiraled the price beyond reality. Five of the traders who had taken a bath on cadmium decided to meet at Langan’s Brasserie on Stratton Street, where they pledged to drown their sorrows in wine and line their mucous membranes with cocaine. “After the fourth or fifth or sixth bottle of wine, it was decided that we had had enough of the metal business and that we’d meet at Langan’s every Friday for the Klaus Busch Memorial Lunch,” said one of the group’s founders. “It was a great excuse for getting irresponsibly wasted like we did before we all became executive assholes.”

  But for the Marc Rich traders in attendance, the Heavy Metal Kids and their weekly Klaus Busch Memorial Lunch was a much-needed decompression chamber to relieve the ever-increasing agony of working in Rich’s London office. Though the Kids resulted from the spontaneous combustion endemic to the commodity-trading world, they were antithetical to the Marc Rich style of business, a fact that made the lunch all the more fun, prompting the Rich Kids to gladly foot the $200 to $300 bills with a laugh. “We were a small group of competitors who actually managed to find real friendship,” said one of the two original Heavy Metal Kids who came from Marc Rich. “I guess you could say we were a bridge club for old hippies.”

  Membership in the Heavy Metal Kids is informal and open to anyone in the business. Within a year, there were over twenty Heavy Metal Kids. Many of them traveled together, trading metals or attending industry conferences sponsored by Metal Bulletin around the world, from small industrial villages to cities starting with New York, Düsseldorf, and Paris. The Kids were the party kings, and whenever a conference began to get boring, they were found rolling fat joints of marijuana and snorting the best cocaine money could buy off mirrors they had unscrewed from their hotel suite walls. The preferred drink was a vodka martini, dry as sand, followed by steaks ordered so rare that chefs were required to “hit a cow over the head and light a match.” In New York, the bar was the Hudson Bay Inn on Second Avenue, a place popular with many Wall Street commodity brokers and always buzzing with the latest hot market gossip. Düsseldorf’s contribution was Sam’s West, an expensive drinking club where the Kids liked to loosen up before betting who could pull the youngest whore in the red light district. Party favors — which could run over $1,000 a night depending on how much cocaine was available — were put on the expense account.

  More than any other event on the trading calendar, the Heavy Metal Kids look forward to the annual London Metal Exchange Dinner held every October in London’s Grosvenor House. The LME Dinner is a dusk-to-dawn party in dozens of well-stocked hospitality suites rented for the evening by the corporations controlling the production, trading, and consumption of the Earth’s mineral wealth. Dinner begins promptly at eight o’clock in the Great Room, a huge ice rink converted after World War II into Europe’s largest dining room.

  The actions that yearly take place in the Grosvenor House suites are the evening’s special scenes. Alongside corporate directors, Third World potentates, and slickly dressed waiters passing drinks from silver trays are the Heavy Metal Kids. Trying to strike up conversations with the heads of major metal concerns, the Kids display the latest innovative uses for metal and have, on occasion, carried folding chrome Belgian trench knives in their pockets and worn sap gloves lined with eight ounces of evenly distributed lead powder. The evening never fails to get wild, forcing legitimate hotel guests either to bolt themselves behind closed doors or complain to the front desk about the rhythmical roar cascading through the hallways. Pranksters pile furniture into corners; entire floors are transformed into hospitality suites, a wilderness of fast-flowing bars populated by some of the industrial world’s wealthiest and most powerful men, now reveling like Moose Lodgers and stiffer than steel girders. “The hotel has only four elevators, each with a maximum capacity of ten people,” said a Heavy Metal Kid in a deadpan description of the social graces required to attend the LME dinner. “Traders must avoid the other players whom they have cheated, lied to, or otherwise upset during the previous twelve months. It’s important to institute polite conversations with dozens of people without revealing that you have completely forgotten their names.”

  The Grosvenor House staff, accustomed to the yearly dinner and all-night cocktail party, handle the behavior with true Tory breeding. Over the years they have tamed Communist-bloc executives who flashed fat rolls of dollars in front of any woman with the tenacity to remain in the open after midnight, and calmly defused the Heavy Metal Kid from South Africa who earned his stripes by trying, unsuccessfully, to drive a truck into the hotel lobby.

  The Kids consider the voyage to the autumn Guangchou Fair in China to be their clubhouse road trip, akin to a sailor’s first crossing the equator. The Fair trip is in late October, and the Kids depart London first-class on board the Cathay Pacific flight from Gatwick to Bahrain to Hong Kong on the first Monday after the LME dinner. Telexes have been sent to the Peninsula Hotel with instructions that one of the hotel’s green Rolls-Royces is to be waiting to whisk each trader individually into the city. Before going into China to buy raw ore and milled metal, the traders spend a few days at the Peninsula, meeting with their Southeast Asian agents to discover the latest news from inside the China National Metals and Minerals Import and Export Corporation (the largest of China’s metal enterprises), the Non-Ferrous Metals Industrial Corporation, and the Silver River — a Hong Kong hand-job parlor that one of the Kids named his Panamanian corporation after, because the place took its name from a metal.

  China and the whole Pacific Basin are important to the future of the commodity business. It’s a vigorous area with huge populations, fast growth, and an enormous appetite for making deals. In 1983, for instance, the United States traded more with Pacific countries than with its European allies. Though China had a mere $20 billion in hard currency reserves and a long way to go economically before catching up with its offshore neighbors, metal traders knew that the country’s economy was profoundly dependent on exporting its mineral wealth in exchange for the Western currency required to build the economy.

  The flight into China is CAAC 304, leaving Hong Kong at 11:55 A.M. and arriving in Guangchou twenty-eight minutes later. Ground transportation to the Dung Fang Hotel, an ancient palace that was once a Mandarin playground, comes in the form of an air-conditioned cab or motorcycle sidecar, luggage piled atop the knees. “Go into the Dung Fang with a good supply of aerosol mace because the rats there are the size of Great Dane pups,” said one of the Kids. “If any of the Chinese take you into downtown Guangchou for lunch, be prepared to enjoy bat casserole and these ugly-looking sea slugs that stare back at you from soup.”

  The business of the Guangchou Fair takes place outside the Dung Fang, in a gigantic exposition hall festooned with flowers across a street filled with bell-jingling bicycle riders whom traders must dodge to avoid getting ground into the pavement. But life in Guangchou is easier than in the rest of China, making the city a genuinely different place to conduct business. Foreigners can telephone for appointments here, while in other cities they need permits in triplicate from the local Foreign Affairs Bureau before meetings can be arranged. The advantages of a liberal system are abundant: Guangchou generates over 10 percent of China’s foreign exchange earnings and has become a required stop for any Westerner who wants to initiate business with the Chinese.

  Guangchou’s heat is sweltering, and the entire town is covered with a monotonous cloud of faintly luminous dust exuded by the industrial mills encircling the provincial capital. The atmosphere dictates the Chinese business dress code to be informal, but like everything in the trading world, there is a price to be paid. “It’s
very difficult to have any respect for a Chinese corporate head who’s wearing sandals, no socks, and has the worst pedicure since Cro-Magnon man,” observed a five-Fair veteran visiting Guangchou to help the Chinese open gold mines that could produce forty-five metric tons of gold a year, making China the world’s fourth-largest gold producer. Individual meetings are carried out in conference rooms located next to the exhibits of individual Chinese firms that have come to Guangchou to sell their products to the West for hard currency.

  The moment a trader arrives in the conference room, he is given a cup of tepid jasmine tea with which to clear his throat. A uniformed waitress, whose only job is to refill the cup, stands behind the trader. During bargaining it’s considered bad manners not to drink the tea continually, a process that demands strong kidneys of the visitor, because it’s also frowned upon to leave a business conference to use the bathroom. Above each table is a large fan that swirls a wet, wood-smelling fog of poorly grown Chinese tobacco throughout the room. Heavy spittoons filled with cigarette butts and cold tea ring the table. The negotiating pace is slow. It’s rendered ever more tiring by the laborious translation process and the sheets of detailed ore specifications and gradings that must be analyzed for compatibility with Western mills. Perhaps unconsciously, a trader will spend hours listening impassively to the Chinese merchants pitch items in which he has no interest whatsoever just to develop a rapport with his hosts. Traders often lug out two airline pilot briefcases laden with metal samples presented to them as gifts at the conclusion of each meeting. It’s impolite in China to refuse any gift; the guest is compelled to carry home two-pound chunks of ore and packets of powdered wolfram that make a trader’s briefcase heavier than Klondike provision sacks.

  “You must have the nerve to make deals quickly at a Guangchou Fair,” an agent from Fidelity Mercantile explained during a fifteen-course banquet in celebration of a tungsten deal. “If you have the nerve and the money to conclude a deal, you can make an absolute fortune.” In this context one metal man spent four days conducting some side action, trying to convince a representative from China’s governing State Council that he should construct a tourist lodge on the site of an extant hunting reserve in Heilungkiang Province where foreigners could stay after shooting deer, lynx, bear, and wild boar. Metal traders who have worked the Chinese coast for years say that the ultimate China deal is to purchase metal from a corporation in one province in the morning and then sell it to another province’s metal firm in the afternoon. A Guangchou Fair legend says that this unique back-to-back deal has been accomplished only once, over “Nice Pasteries” in the Chun Hui coffee shop at the Dung Fang in the spring of 1984. Another story in the lore of the Heavy Metal Kids involved a trader from Associated Metals who was so bored that he bet a trader from Bomar Resources $1,000 to jump into the Dung Fang fountain to see if there were any goldfish alive underneath the coating of green slime. “There were goldfish alive down there,” said the trader who lost the bet. “I couldn’t believe it.”

  After spending two nonstop weeks of dealing amid the bugs and steam of Guangchou, Western traders return to the Peninsula to decompress before flying home or heading off to sell scrap metal to steel mills on Taiwan. The Heavy Metal Kids have a standing competition to find the most expensive prostitute on the Nationalist Chinese island nation. The current record is $500, the cost of a sex-filled evening that features monkey brains eaten in skull to enhance a patron’s sexual desires. “By the time I left I was so wasted that I forgot the name of the place,” said the trader, a thirty-six-year-old German who was first taken there while working in Tokyo in 1974. “No one will ever beat the record.”

  The Heavy Metal Kids made money just as well as they spent it. In early 1978, one of their number found himself in Zaire’s Shaba Province, the location of about 65 percent of the world’s cobalt production. He heard rumblings that a rebel army was preparing to invade, a move that would drive away most of the skilled white engineers who mined the cobalt, thus stimulating the free-market price. Upon his return to London, the Kid stockpiled as much cobalt as he could find and waited patiently. The rebels crossed into Shaba later that fall, kicking cobalt prices up from $5 to $40 a pound within the space of two months.

  Bismuth — a chalky by-product of lead or zinc manufacture — was a golden nugget for the Heavy Metal Kid known fondly as the “French Fart King.” This trader knew that the consumption of bismuth was subject to large price fluctuations because of its misuse as a suppository. Bismuth had a reputation for being the most volatile metal to trade; the reason was France, a country whose rectums consumed nearly 1,259 metric tons of bismuth (one-third of the world’s production) to relieve indigestion in 1974. The Fart King, an English trader who sold the most bismuth to the French pharmaceutical industry, heard that the government was going to change bismuth’s classification from over-the-counter drug to prescription remedy in the wake of complaints by medical authorities that too many Frenchmen were dying from the effects of inserting too much bismuth up their alimentary canals. Late in 1974, the King floated a rumor that he needed cash and began selling warehouses of bismuth to other traders. Everyone thought they had made a killing off the King’s misfortune, but soon enough (by bismuth standards) the market had collapsed. By the middle of 1977 French consumption had fallen to 644 tons a year and by 1978 to only 346 tons. Bismuth’s plunge was a direct result of the French population’s overdosing on the metal. The Fart King, then a thirty-year-old trader, personified the finest traditions of the Heavy Metal Kids.

  The most popular of all the Kids was Robbie Lichtenstern, Marc Rich’s brash aluminum chief whose thirst for life best exemplified the waggish spirit of the group. Lichtenstern emerged from three generations of Dutch-Jewish traders; his father, Heinz, risked his own life to help smuggle fellow trader Meno Lissauer and his family out of Europe to avoid the concentration camps.

  The Lichtenstern family was living in Amsterdam when war broke out in Europe. In 1940 Heinz, then a senior executive of the Lissauer Group, participated in a plan to pay off a Reich commissioner in gold and carry the Lissauers from Holland to Spain in a railroad car that had been secured through a phony letter of credit. Arriving in Spain the Lissauer family was smuggled out of the country with the help of a man called Tannenbaum, the local Lissauer Group trader.

  Required to wear the Star of David and risking sterilization by Reich doctors authorized to neuter Dutch Jews, the Lichtensterns remained in Amsterdam until the autumn of 1943, when they were rounded up and deported via the Westerbrook transit station to the Theresienstadt concentration camp in Czechoslovakia. Theresienstadt, an old Bohemian fortress town, was Hitler’s Potemkin village, a deadly film set for many prominent Jews whose disappearance might prove embarrassing to the Reich. The village was also a way station to the death camps, and, according to the transit rota, the Lichtensterns were scheduled to leave the week of May 8, 1945 — the week of Robbie’s seventh birthday and the Allies’ liberation of the camp. “What I remember of it was hell,” Robbie Lichtenstern recalled three decades later in his clipped continental accent. “We lived off the orange peels the guards threw into the garbage.” That horrible experience revealed itself in later life by his refusal to use the same towel twice, and insistence on dining only at the world’s finest restaurants and always championing the underdog.

  After liberation, the Lichtensterns sailed to Brazil, where Robbie became fluent in Portuguese, German, Dutch, French, and English. The family moved to America in the mid-fifties. Heinz Lichtenstern went to work trading out of the Lissauer Group’s offices in Manhattan while Robbie spent his teenage years going to school in the morning and stealing cars at night, a “hobby” that landed him in reform school by the time he was sixteen years old. As a young man, Robbie rebelled against all attempts at discipline; he hated the metal business, preferring to spend his days wagering at backgammon. Finally, under pressure from his father and constant reminders from family friends that the Lichtenstern birth rite dictated
he become a metal trader, he acquiesced and accepted a job arranged by his father making little more than $200 a week working for the Lissauer Group.

  Robbie Lichtenstern became a great metal trader because he loved gambling; he also ran up nearly $30,000 worth of gaming debts while a young trader in London. It was impossible to pay off his gaming house creditors on a $200-a-week salary, so Robbie went to his father for help. Heinz Lichtenstern believed that his son’s life would come together once he married and told his son that he would float him a five-year loan if he settled down into a normal lifestyle. Although he never repaid his father or settled into a conventional lifestyle, Robbie did marry, and went on to develop what many traders believed to be the finest trading mind in the profession, honing his prodigious talents as a strategic metals trader in Europe, the Far East, and South America.

  Lichtenstern was one of the first traders outside Philipp Brothers to join ranks with Marc Rich in 1974. He established himself quickly as the firm’s top trader and was gladly welcomed by Rich’s Inner Circle. But there was more to Robbie Lichtenstern than his vivid trading skills. He was a passionate man, interested in people, who vehemently avoided any suggestion of betraying a friendship for the sake of a deal. “Robbie never screwed anyone on a deal,” a trader for Derek Raphael explained. “Robbie knew how to make money, but never at the cost of a friendship.”

  Robbie Lichtenstern enjoyed overindulgence and never ceased to stretch the limits of his Bohemian world. He voiced no qualms about renting women for Rich customers visiting London, spending — by his own account — some $25,000 a year on call girls, many of whom became his friends outside the bedroom. He smoked marijuana for the first time in the mid-seventies while living in a flat on Portman Square in London. A trader he worked with had just returned from a business trip to Africa bearing a wrapped banana leaf that had been stuffed with an extremely potent Zimbabwean grass and buried underground for three months, a procedure designed to heighten the ferocity of the weed to psychedelic levels. Watching the trader chip tiny chunks of African cannabis from the solidified banana leaf with a kitchen knife, Lichtenstern became worried that he might do something awful while under the drug’s influence and decided to tie pillows to all the living room furniture to avoid injury if “reefer madness” set in. “I warned Robbie to take only one small hit,” the trader said, recalling the evening. “Robbie wouldn’t listen. He sucked up three large tokes and complained that he didn’t feel anything. Then he vomited all over his French poodle.”