What's That Smell?

By Daniel Eisenberg

Outraged politicians calling for congressional hearings. Pundits railing about abuse of power. And long-suffering Democrats trying in vain to defend their party leader. The ugly, all too familiar scene in Washington last week almost made you wonder if Bill Clinton had won that elusive third term. Even as he secured an 11th-hour deal to avoid prosecution in the Lewinsky mess, Clinton was adding a brand-new chapter to his book of scandal.

On his last day in office, the man who understands the power of forgiveness better than most issued a list of more than 100 pardons. Tucked in among the names was that of Marc Rich., 65, one of the world's most wanted white-collar fugitives. In 1983, the brilliant, rapacious commodities trader, along with his partner, Pincus Green, was charged with an illegal oil-pricing scheme that amounted to what might be the biggest tax swindle in U.S. history, to the tune of almost $50 million--not to mention trading with Iran during the hostage crisis. The latter charge was later dropped against Rich's company but not against Rich and Green personally. (Not everybody was as lucky as Rich; junk-bond king Michael Milken, who was opposed by the SEC, and convicted spy Jonathan Pollard, who has no fans in the intelligence community, were denied pardons.)

Rich was not your typical fugitive living hand to mouth and sleeping under bridges. Born in Belgium and fluent in English, French, German and Spanish, he has spent the past 17 years in Switzerland, living in splendid exile outside Zurich, protected by a coterie of private security guards from Israel and running a $30 billion business that brokers everything from oil and gold to sugar and grain. Switzerland refused to extradite him. But now that point is moot. Thanks to Clinton, the billionaire who could have faced years in prison suddenly has a clean slate.

But Clinton's, yet again, is dirty. To many observers, Republican and Democrat alike, the pardon was simply outrageous--the latest egregious example of Clinton's moral turpitude. Rich's ex-wife, New York City socialite Denise Rich, just happens to be a major Clinton donor and fund raiser who has raked in millions of dollars for the Democratic Party during the past eight years. Rich's lawyer in the pardon case, Jack Quinn, was once Clinton's general counsel. Quinn personally lobbied Clinton, and various dignitaries--including, sources tell TIME, Israeli Prime Minister Ehud Barak and King Juan Carlos of Spain--contacted Clinton on Rich's behalf.

"I worked a long time on that case," New York City Mayor Rudy Giuliani, who was the lead prosecutor against Rich two decades ago, said at a news conference last week. "What the President did was an absolute outrage."

But it wasn't the only one. Other controversial recipients of Clinton's parting gifts included four Orthodox Jews from New York State who had bilked the government out of $40 million in education aid, housing subsidies and small-business loans. During Hillary Rodham Clinton's Senate campaign, the First Lady visited the Skver sect in New Square, N.Y., trying, successfully, to lock in a group that usually swings Republican. After the Skver turned out in force for Hillary, she invited the group's spiritual leader to the White House, where he asked the President to lighten the men's sentences. The subsequent commutations only heightened suspicions--vehemently denied by Clinton and the Skver--that there was a quid pro quo for their support on Election Day. And if that weren't bad enough, there was also the matter of $190,000 in gifts, including $7,000 in furniture from Denise Rich, that Bill and Hillary hauled in as they were leaving the White House--which means that President Clinton's final scandal is Senator Clinton's first.

But it's the Rich pardon--and especially the fact that Clinton granted it without consulting the Justice Department--that has generated the most heat on Capitol Hill. Though the pardon can't be revoked, Representative Dan Burton, the Indiana Republican and longtime Clinton critic who chairs the House Government Reform Committee, has already started gathering documents for a hearing; Senate Democratic leader Tom Daschle says it may be time to re-examine the President's pardon power. Even by Clinton's own reasoning, which he voiced in a speech two days before the pardon, Rich did not seem to qualify. "Most of these people should be able to vote and be full citizens," he said, "because they've paid."

During the past two decades, Rich has paid in his own inimitable way, doling out about $200 million to various charities. He also made overtures toward settling with the government for as much as $100 million. But "it was never about the money," says Morris ("Sandy") Weinberg, the original lead prosecutor alongside Giuliani, who now practices law in Tampa, Fla. "If the biggest tax evaders in the U.S. never did jail time, we could never prosecute another tax case."

It's no wonder, then, that in the fall of 1999, when Quinn contacted the U.S. Attorney's office in New York about making a deal, he got, as he says, "the back of the hand" from U.S. Attorney Mary Jo White. In Quinn's view, the original criminal prosecution of Rich was flawed, making an example of him for an offense that other oil companies had simply been fined for. But the Justice Department wasn't buying it. Officials insisted that no negotiations could begin until Rich went home to face the music.

By Thanksgiving 2000, Quinn had started a new game. During a meeting at the Justice Department on Nov. 21, he notified Deputy Attorney General Eric Holder of his plan to file a pardon petition with the White House. He asked Holder if he wanted a copy. Holder, who assumed that the White House would forward the petition to the Justice Department's pardon attorney for review, as was customary, said he personally did not. On Dec. 11, Quinn delivered the massive document, about the size of a phone book, which TIME has seen, to the office of White House Counsel Beth Nolan.

This time, for reasons that haven't been explained, the White House decided not to send the petition to Justice. While legal and not unprecedented, the decision added to the perception that Quinn and the White House weren't playing fair. On Jan. 5, worried about the approaching deadline, Quinn went straight to the top, sending a letter to Clinton that read, "I believe in this cause with all my heart." Five days later, he forwarded a copy of that missive to Holder, requesting his support. Curiously, because of an address mix-up, Holder didn't receive it until Jan. 17. By then, as Justice raced to draft a letter expressing its disapproval of the pardon, it was too late. "The whole thing is, you might say, Clintonesque," says a Justice Department lawyer.

On the day before of the Bush Inauguration, Quinn pleaded Rich's case in a face-to-face meeting with Clinton. During the entire half-hour chat, Quinn insists, only the legal issues were discussed. Later that day, around 6:30, Quinn informed Holder that the White House was actively considering the pardon and asked if he had any final objections. Holder said he didn't know enough about the case to make a judgment, but added that the federal attorneys in New York, who hadn't been consulted yet, were "going to howl" if it was approved. When approval came, the only condition was that Rich waive his right to use the statute of limitations to contest any civil penalties. "Quinn made a strong case," Clinton told reporters last week, "and I was convinced he was right on the merits."

The pardon case was strengthened by an extraordinary lobbying effort. For starters, there was Denise Rich, the Grammy-nominated songwriter and Democratic diva who throws some of the most happening fund raisers in New York City and Aspen, Colo., frequented by the likes of Martha Stewart and Michael Jackson. Despite their less than amicable divorce a few years ago--Marc left her for a younger blond--Denise recently wrote a supporting letter at the request of Marc's New York attorney, Robert Fink. The daughter of Holocaust survivors, Denise has been one of the Clintons' most loyal supporters, giving $70,000 in soft money to Hillary's Senate race. It was Denise who held a morale-boosting, $4 million Democratic fund raiser starring Bill Clinton at her Fifth Avenue apartment in September 1998, one of his first appearances after the release of the Starr report. But now the spotlight on Denise may have become too hot; late last week she backed out of a welcome-home party for former HUD Secretary Andrew Cuomo, a potential New York gubernatorial candidate in 2002.

Less visible were Marc Rich's allies in Israel, where his foundation has donated millions of dollars to museums, hospitals and the resettlement of Soviet and Ethiopian Jews. Sources tell TIME that Barak, taking a break from the stalled Middle East peace negotiations, spoke with Clinton several times to vouch for Rich's "humanitarian role in Israel." Other VIPs, including Jerusalem Mayor Ehud Olmert and former Mossad head Shabtai Shavit also wrote letters on Rich's behalf. Shavit said Rich "used his extensive network of contacts" to help Israeli intelligence. In all, Clinton received more than 20 personal letters, some written directly to the President, in favor of the pardon and an additional 50 praising Rich's philanthropy.

Some of the institutions that wrote letters, from Sacred Heart University in Fairfield, Conn., to Sha'are Zedek Hospital in Jerusalem, had no idea what they would be used for. Avner Azoulay, a former Mossad operative who runs the Rich Foundation in Tel Aviv, had asked them to write appreciations for a book about the foundation. "I didn't ask the writers' permission to include their letters in the petition to the President. Why should I? I use these letters in many other cases to show the work we are doing," Azoulay told TIME. Other Rich supporters had financial links to his family. Michael Steinhardt, a New York City hedge-fund manager and a former chairman of the Democratic Leadership Council, was among those who wrote a letter in support of his friend. His note didn't mention that, from the early 1980s through the mid-'90s, Steinhardt managed at least $3 million for Marc Rich, Denise Rich and her father.

That's chump change to Rich, who, since arriving in the U.S. during World War II, has amassed a fortune estimated at well over $1 billion. An average student and self-described "business machine," Rich dropped out of New York University to learn the commodities business from fellow European Jewish immigrants at Philipp Bros. He was a quick study, thriving in the high-stakes, split-second world of commodities trading, in which your demanding customer might be a Third World dictator and information is the hottest commodity of all.

Before long, this soft-spoken boy wonder had helped create a new, hugely profitable oil-trading business for the firm, and he wanted a bigger share of it. In 1974, when Rich and his trusted colleague, Pinky Green, didn't get the $1 million bonuses they had been promised, they decided to strike out on their own. As his business took off in the late '70s and early '80s, Rich became even bolder. He worked secretly with the Malaysian government to drive up the price of tin and allegedly violated international embargoes by selling Soviet oil to South Africa. He even briefly went Hollywood, partnering with Marvin Davis to buy 20th Century Fox.

After his flight, while the U.S. contemplated kidnapping Rich or putting a bounty on his head, he continued his lucrative exploits, allegedly helping Russian oligarchs plunder their country's resources. "He considers himself a citizen of the world, inconvenienced by the laws of nations," says Howard Safir, the former New York City police commissioner who, as head of operations for the U.S. Marshals Service in the '80s, tried unsuccessfully to lure Rich to a country that would deport him.

When he arrived in Switzerland, Rich had no idea he would be staying so long. For his 50th birthday, on a rainy day in 1984, he threw a bash for hundreds of guests in the ornate ballroom of Lucerne's National Hotel. Denise sang a couple of songs, and Rich staged a mock boxing match between a clown wearing Rich's corporate logo and another dressed as a New York City cop. Rich seemed to have found the good life, but he could never really enjoy it, as his onetime attorney Leonard Garment, a former adviser to Richard Nixon, learned when he visited Rich. "I would really like to be able just to walk down Fifth Avenue and wave to my friends," he told Garment. Now that Clinton has granted Rich his wish--and has to suffer the recriminations--the former President may find himself longing for much the same thing. --Reported by Elaine Shannon, Michael Weisskopf and Adam Zagorin/Washington and Eric Silver/Jerusalem

With reporting by Elaine Shannon, Michael Weisskopf and Adam Zagorin/Washington and Eric Silver/Jerusalem