Chairman Specter, Senator Leahy, distinguished Members of the Committee, thank you for this opportunity to provide information about the pardon of Marc Rich.

I am well aware that most if not all of you already have expressed your disapproval of this pardon. Nonetheless, I welcome the opportunity to sit before you and answer your questions about the case I made and the process I followed in making it.

I am here today as a lawyer who believes in the merits of the case I made. I do not expect today to turn back the tidal wave of opposition to the Rich pardon, but before today’s hearing is adjourned, I hope that all of you will know that I acted as a lawyer who pursued my client’s interests vigorously and ethically and that this pardon was based on the case I made. I joined the Marc Rich legal team in the spring of 1999 while I was an attorney at Arnold & Porter. The Rich defense team over the years included attorneys of unusual skill and unquestionable integrity, from law firms of stellar reputation, including Len Garment, who served as President Nixon’s White House Counsel; Larry Urgenson, who held a senior position in the Reagan Justice Department; Lewis “Scooter” Libby, who now serves as Vice President Cheney’s Chief of Staff, and other distinguished attorneys (App. A).

My principal mission, upon being retained, was to help bring resolution to the outstanding indictment against Mr. Rich at the Justice Department. During an intensive period of review that lasted for several months, I learned that the indictment grew out of a patchwork of energy regulations enacted in the Carter Administration that were later repealed on President Reagan’s first day in office. Those regulations attempted to limit the price of oil but, as in any complicated regulatory regime, there were many exceptions. The Carter regulations caused price discrepancies that, in turn, created a powerful incentive for major U.S. oil companies to try to avoid the regulatory regime. One way to do so involved “linking” price controlled domestic oil transactions with non-price controlled foreign transactions in dealings with international oil resellers. Specifically, U.S. oil producers structured transactions that provided additional profits on foreign transactions to compensate them for their inability to maximize profits on regulated domestic transactions. This resulted in complex linked transactions between the major oil companies and resellers around the world. These transactions are central to Mr. Rich’s indictment in which he, a colleague, and two associated companies were charged with a variety of crimes. And, for reasons I will explain, it is critical that you keep in mind the linked nature of these transactions, because the failure to see the linkage is what leads to the mistaken view of the tax and energy consequences of the transactions that the indictment represents. The indictment that had stood against Mr. Rich for almost twenty years was unique for two very important reasons:

First and foremost, prosecutors used the Racketeer Influenced and Corrupt Organizations Act (RICO) when they indicted Mr. Rich – one of the first times they had done so in a case not involving organized crime. In 1983, prosecutors used the RICO sledgehammer – a weapon originally designed to combat mob bosses like John Gotti – to attack Mr. Rich for what his lawyers believed amounted to no more than a regulatory dispute about price controls and taxes.

In 1989, the Justice Department changed their guidelines for the use of RICO statutes – essentially prohibiting its use in tax cases like this one. As you will no doubt recall there had been widespread condemnation of RICO abuse by New York prosecutors. Writing in his New York Times column in 1989, William Safire referred to the then-unrestricted use of RICO as a “legal monstrosity” adding that “politically ambitious prosecutors in New York, Chicago and elsewhere” had “been making themselves famous by misapplying RICO to targets who have nothing to do with organized crime” using “nuclear artillery” when only “elephant guns would do.”

In the same vein, the Wall Street Journal has long recognized that the US Attorney’s office in New York misused RICO and that the Marc Rich case was a prominent example of that abuse. In 1989, Yale-trained lawyer and weekly columnist Gordon Crovitz wrote: “It is worth taking a second look at Mr. Giuliani’s first big RICO case. This was the much-celebrated 1984 case against Marc Rich, the wealthy oil trader. A close reading of the allegations shows that these also effectively reduce to tax charges. The core of the case is that Mr. Rich wrongly attributed domestic income to a foreign subsidiary. Again, this sounds like a standard civil tax case, not RICO.”

Months later, the same paper’s editorial board said: “[The Department of Justice] should launch a complete review of all US Attorney RICO cases – from Mr. Giuliani’s first RICO-expanding case against Marc Rich in 1984 through current allegations against Chicago pit traders and Michael Milken.”

In fact, just days ago two Wall Street Journal reporters recognized that: “The indictment against Mr. Rich that was invalidated by Bill Clinton’s pardon was based in part on aggressive prosecution tactics later reined in by the Supreme Court and the Justice Department.”

Unfortunately, by the time the Department of Justice had finally reined in their tactics, the Southern District prosecutors had misused RICO and its asset forfeiture provisions to coerce Mr. Rich’s companies into a $200 million guilty plea just to survive, and Mr. Rich had been labeled a racketeer and fugitive for not returning from his headquarters in Switzerland to be subjected to what he believed would be an unfair and prejudicial racketeering trial. Indeed, once his companies had been forced to plead guilty by the misuse of the RICO statute, Mr. Rich believed that he stood virtually defenseless as an individual to similar criminal charges.

The misuse of RICO was not the only unique aspect of this case. The second unique factor was that although prosecutors were still trying to subject Mr. Rich to criminal penalties, the major US oil companies that had structured the very transactions at issue in the indictment had themselves been pursued only civilly. In fact, when the United States Department of Energy (DOE) independently examined transactions involving one of Mr. Rich’s major trading partners, ARCO, it concluded that ARCO had improperly failed to account for the linked transactions and thereby had violated the excess pricing/profits regulations; yet, DOE pursued ARCO only on a civil basis for violations of the regulations. The Southern District of New York never indicted any of the U.S. oil companies that structured these types of transactions.

I want to emphasize: the same Department of Energy recognized that the Marc Rich companies had correctly taken into account the linked nature of the transactions on their books. But, despite DOE’s recognition that Mr. Rich’s companies had properly linked the transactions for accounting purposes, while ARCO had not, the prosecutors attacked these same transactions in their indictment against Mr. Rich. They took the position, directly contrary to the DOE regulators, that the domestic and foreign transactions should not be considered linked for U.S. tax and energy purposes. This inconsistent treatment by DOE and the Southern District goes to the heart of the U.S. government’s case against Mr. Rich. DOE used the administrative process to collect hundreds of millions of dollars in civil penalties from ARCO, while the Southern District criminalized the conduct of Mr. Rich based on an exactly contradictory analysis of the same facts.

This was not just my conclusion and that of the reputable attorneys I joined on Rich’s defense team. Two of the most preeminent tax authorities in the nation, Professors Bernard Wolfman of Harvard Law School and Martin Ginsburg of Georgetown University Law Center, had analyzed the transactions at issue and concluded that the Marc Rich subsidiary “correctly reported its income from those transactions and that a court, if called upon to decide the issue, would agree.” Contrary to statements that have been made about the Ginsburg/Wolfman analysis, both lawyers were fully aware of the prosecutors’ evidence against Mr. Rich, including the allegedly “sham” transactions and the record-keeping from the “pots.”

Put simply, the indictment against Mr. Rich was flawed – not just in my view, but also in the views later expressed by two departments of the United States Government. The case was built on a perception of the transactions later directly contradicted by the Department of Energy, and it was inappropriately ratcheted up into a RICO case in a manner the Department of Justice later acknowledged was inappropriate. The U.S. Government itself has undermined the Rich indictment, not just me or other lawyers for Mr. Rich. Knowing all of this, I found it difficult to believe that Mr. Rich’s lawyers had been unsuccessful for more than a decade in trying to convince the Southern District of New York to re-examine the charges against him. So, in October 1999, I turned to a man with whom I had worked in the past and for whom I have immense respect – then Deputy Attorney General Eric Holder.

I first met with Mr. Holder about the Rich case in late October 1999. The purpose of the meeting was to provide Mr. Holder with an overview of the flaws in the outstanding indictment against Mr. Rich. This conversation and other contacts with Mr. Holder are reflected in the documents I have provided to the Committee (App. B). According to my notes of a November 8, 1999 telephone conversation with Mr. Holder several weeks after our meeting, he told me that he and some senior DOJ officials thought that the refusal of the Southern District to meet with Mr. Rich’s attorneys was ill considered and in fact “ridiculous.” Subsequently, he told me that some officials at DOJ came to believe that on this matter, “the equities were on our side,” at least with respect to our request for a meeting.

At Mr. Holder’s suggestion, I wrote to Mary Jo White, the US Attorney for the Southern District of New York, on December 1, 1999, asking that her office re-examine the charges against Mr. Rich so that we might bring the matter to some resolution. But like the long list of distinguished lawyers before me, I, too, was denied even a meeting.

I have searched in vain for a written Justice Department policy that directs U.S. Attorneys never to discuss case merits with attorneys for alleged fugitives or other absent persons. No such policy exists. Indeed, there are many instances in which Justice Department prosecutors have engaged in discussions about case merits with indicted defendants residing abroad. Regardless of this absence of a firm government policy, even main Justice was unwilling to talk to us about the merits of the case, because Mr. Holder believed he must defer to the Southern District and not overrule his subordinates. This left us at an intractable impasse.

Now, as a general rule, I agree that pardons should not be granted to alleged fugitives but there must be exceptions for unique circumstances. Mr. Rich is not the first person who has been pardoned despite his alleged fugitivity. Presidents Wilson and Carter pardoned all of the draft evaders of their eras. Mr. Holder himself advocated a pardon granted to a fugitive who had received prejudicial treatment because of his race. I viewed my case, though dissimilar, as another reasonable exception because I thought our legal arguments were compelling and because the government’s now admitted misuse of RICO had created the very situation – my client’s absence – that the government cited in refusing to discuss the merits of the case.

Accordingly, we decided in October 2000 to seek a presidential pardon. I believed that the President, as the chief law enforcement officer for the nation, essentially serves as our country’s top prosecutor. I believed a pardon petition would provide the president with the opportunity – if we could convince him of the merits – to reduce this case to its proper proportions: a civil regulatory dispute.

I personally notified Mr. Holder in his office on November 21, 2000, that I would be sending a pardon application directly to the White House. I told him then that I hoped to encourage the White House to seek his views. He said I should do so. At no time did I attempt to circumvent the Justice Department or prevent its views from being taken into account. In fact, I hoped that consultation with Mr. Holder by the White House would help me make my case for Mr. Rich, because I believed Mr. Holder was familiar with the charges and with our arguments as to their flaws. Most importantly, I knew that he realized we were at an impasse because the U.S. Attorney’s Office would not discuss the matter or consider our arguments.

On December 11, 2000, I delivered a two-inch thick pardon application to the White House – more than five weeks before the pardon was granted on January 20, 2001. While the application was under consideration, I wrote Mr. Holder on January 10, 2001 and asked him to weigh in at the White House with his views. I sent that letter to him hoping for his support, having been informed that his views would be important. I had that letter sent by messenger to the DOJ, though I now understand there were problems with its arrival and that it was routed to and received by the pardon attorney on January 18.

Still later, I called Mr. Holder the night of January 19, 2001, and told him that Mr. Rich’s pardon was receiving serious consideration at the White House, and that I understood he would be contacted before a decision would be made at the White House. It is now my understanding from Mr. Holder, from then-White House Counsel Beth Nolan and from former President Clinton, that Mr. Holder was indeed consulted and that he expressed a view. I was told that his view was important to President Clinton’s ultimate decision.

I want to emphasize that the process I followed in filing the pardon petition was one of transparency at both the Department of Justice and the White House. It was not the first pardon granted this way and it most certainly involved the Justice Department. In filing the pardon petition, I included the views of the prosecutors – in the form of the responses I and other counsel had received from the Southern District for a meeting and, most particularly, in the form of the original indictment of Mr. Rich. Furthermore, the process this pardon followed gave the president the opportunity to weigh his decision carefully. For over five weeks the White House had time to consider the views of the White House attorneys, the Justice Department and anyone else with whom it chose to discuss the matter to make a judgment on the merits.

The pardon petition was filed directly with the White House because I knew from personal experience as a former White House Counsel that it was not an uncommon practice. As the Washington Post has reported, “previous Administrations in their closing days” have considered pardons directly at the White House that have not gone “through the customary Justice Department screening process.” In fact, the Los Angeles Times reported last week that 46 other pardon petitions were submitted directly to the White House in a similar fashion.

Lastly, let me address the involvement of Denise Rich and Beth Dozoretz. Yes, both were involved. But I never believed their views would be the dispositive consideration for the President. I based my efforts on the legal case, as well as the support of the Government of Israel, not on the false presumption that any relationship with President Clinton would result in a favorable outcome.

Denise Rich is the ex-wife of my client, and she wanted President Clinton to grant her ex-husband and the father of her children this pardon. I encouraged her and her daughters to write letters to President Clinton. As in any pardon application, it was appropriate that the President hear from family members. I also encouraged Ms. Rich to follow up when she had the opportunity to see President Clinton at a White House holiday party – simply by making sure he had seen her letter. I know that she urged the President to consider this case carefully on that and perhaps another occasion. But I never suggested that she talk to the president about anything extraneous to the pardon itself. Indeed, I did not know at the time that she had made contributions in the past to the Clinton Library, nor did I know at the time the extent of her past fundraising for the Democratic Party.

As for the involvement of Beth Dozoretz, Beth has been a good friend of mine for several years. She is also a close friend of Denise Rich, and she is a good friend of President Clinton. I knew that she talked to the President with some frequency.

I expected that Ms. Dozoretz would inquire about the status of our application. And I believed she might provide me with a sense of our progress or lack there of. As a lawyer, I wanted information from as many sources as I could get about where my petition stood in the White House, so I could refocus my efforts and my arguments to achieve the desired result for my client. I talked to Ms. Dozoretz over the Thanksgiving weekend and told her I would be filing a pardon petition on behalf of Marc Rich, the ex-husband of her close friend, Denise Rich. I encouraged her to help me be sure that the President himself was aware that we had filed the petition. She did just that and later reported back to me that President Clinton had said I should make my case to Bruce Lindsey and others in the White House Counsel’s office.

On another occasion, Ms. Dozoretz talked to the President again. I wanted to hear from Ms. Dozoretz any information she might glean from the President as to where my petition stood with him. What I understand her to have reported is that the President was impressed with my arguments but was doing due diligence with lawyers in the White House so that he understood all the arguments – for and against the pardon.

Let me be clear on this point: the notion that the President was going to be convinced to grant this pardon because of support for it from Beth Dozoretz or Denise Rich, rather than because of the case we made and the support of leaders like Ehud Barak, the Prime Minister of Israel, is, in my view, untrue. Yes, I was eager to hear any reports about what the President was thinking. Yes, Ms. Dozoretz had been a political supporter of the President. But she was no longer the Finance Director for the DNC. She had left that job in October 1999. At this time, she was a friend of the President. And let me be clear about this as well: I never asked Ms. Dozoretz to talk to the President about this in a fundraising capacity; on the contrary, I emphasized to Ms. Dozoretz that this case could and must be made on the merits. She did not have to be convinced of that.

As far as I am concerned, the most conclusive evidence that the President granted this pardon on the merits was the twenty-minute telephone conversation I had with him on the night of Friday, January 19th. In that conversation, I could tell that President Clinton had obviously read and studied the pardon petition. He grasped the essence of my argument about this case being a case that should have been handled civilly, not criminally, and discussed whether the passage of time would permit statute of limitation defenses. I told him that I would waive those defenses. President Clinton then requested a letter to that effect within an hour.

These comments reflect the state of mind of a President who was searching for a decision based on fairness and equity and his understanding of a regulatory system long ago repealed by the United States. You may disagree with him and me. You may believe he made a big mistake. But I tell you that nothing – nothing – in my conversations with him remotely suggested to me that he was thinking about his friendships, his politics, or his Library. In this case as in others, when the press dissects a policy decision made by any elected official in Washington, it more times than not may find that people were involved or were nearby who at one time or another have raised money for political campaigns. That’s why I don’t disagree with Senator John McCain, who said about this matter: “The President may have had the purest of motives, but the appearance is bad.” The appearance is bad, as it often is in Washington when money has been raised by those who are close to elected officials. But I believe that President Clinton based his decision on his judgment of the merits, and I see no evidence to the contrary.

As we sit here today and discuss the pardon process and any changes that might be made to improve on it, it is useful to remember that the Constitution grants the pardon authority only to the President. The Justice Department has a Pardon Attorney, who reports to the Deputy Attorney General, and one of the major functions of the Deputy Attorney General is to serve as the departmental liaison with the White House staff and the Executive Office of the President, including specifically with respect to pardons. I informed the Deputy Attorney General of my petition. I encouraged the White House Counsel to seek his views. I did this over a period of two months, having briefed him about the case for more than a year before that.

The only man to serve both as president and Chief Justice of the Supreme Court, William Howard Taft, wrote that the reason the U.S. Constitution vests an absolute pardon power in the President is that it is “essential” that some authority “other than the courts” have the power to ameliorate or avoid the outcome of particular cases. The pardon power has never been limited to being granted only after a person has stood trial. As a 1995 Justice Department memorandum attests: “Throughout this nation’s history, Presidents have asserted the power to issue pardons prior to conviction.” Effects of a Presidential Pardon, 1995 WL 861618 (June 19, 1995). The Iran Contra pardons by President Bush are just one recent example.

In short, as then-Chief Justice Taft wrote for the Supreme Court in 1925: “Executive clemency exists to afford relief from undue harshness or evident mistakes in the operation or enforcement of the criminal law. The administration of justice by the courts is not necessarily always wise or certainly considerate of circumstances which may properly mitigate guilt.” [Ex parte Grossman, 267 U.S. 87, 120-21 (1925)]

President Clinton properly gave serious consideration to Mr. Rich’s pardon application. He demanded that Mr. Rich’s lawyers waive all procedural defenses related to the transactions in question so that Mr. Rich would be potentially subject to civil penalties, such as those faced by others who were involved in similar transactions. In short, I believe our nation’s top prosecutor handled this case in a way that it should have been handled years ago. * * *

In conclusion, Mr. Chairman, while you may disagree with President Clinton’s decision, I believe the facts establish that I represented my client’s interests fairly, vigorously and ethically. And I carried out this representation keeping both the Department of Justice and the White House informed.

Thank you for this opportunity to testify.