Is there a clandestine cartel of highly successful commodities traders that control independent oil markets worldwide? Business Week thinks so...and names the notorious Marc Rich as their sensei. It is a compelling, fascinating piece of investigative reporting that appears in the July 18th issue of Business Week. The article is lengthy, but well worth your time.

A snippit from the full version that appears at Business Week online:

They are the Rich Boys. All operate in the world of onetime fugitive billionaire Marc Rich, the most-wanted white-collar criminal in U.S. history until his controversial pardon on President Bill Clinton's last day in office in 2001.

Rich came to prominence in the 1970s, when he worked at Phillips Bros. (later Phibro), then the biggest trader. With veteran partner Pincus "Pinky" Green, he pioneered "combat trading" -- getting trading rights from countries in turmoil. Rich, called El Matador for his killer instinct, did the deals. Pinky, "The Admiral," arranged shipping.

Traders soon learned the art of the Rich deal: Do whatever it takes. After Rich and Green left Phibro in 1973 to form their own company, they bought a house in the South of France and "stocked it with hookers from Paris and flew in oil guys who spent a week at their expense," says a former U.S. oil executive who knows Rich. "They got the oil contracts they wanted." A former Rich partner corroborates this. Green, who retired in 1992 after heart surgery, could not be reached for comment.

Rich is notorious for trading with Iran during the hostage crisis, South Africa during apartheid, and Cuba and Libya during U.S. trade embargoes. In 1983 he fled to Switzerland after being indicted by the Justice Dept. for racketeering, trading with the enemy (Iran), dodging a $48 million corporate tax bill, and other violations that could have resulted in 300 years of jail time. Rich's companies pleaded guilty to some charges and paid about $200 million in fines, penalties, and taxes, but the case remained open until the pardon. "Rich's philosophy is that no law applies to him," says Morris "Sandy" Weinberg Jr., the former U.S. prosecutor who pursued and indicted Rich in 1983.

Over the years, Rich has mentored scores of traders. Although the 70-year-old is past his peak in the business, according to industry experts, his protégés are thriving. "You could call it the University of Marc Rich," says a Senate investigator. As Alaskan and North Sea oil production declines, new supplies increasingly come from some of the most corrupt or politically unstable places on earth, such as Equatorial Guinea and Sudan. These are the new frontiers where major U.S. oil companies fear to tread because of sanctions, embargoes, and antibribery and anti-terrorism laws. But it's where these traders, many like characters out of the James Bond flick Goldfinger, make good money, especially when oil tops $60 a barrel.

Governments and law enforcers have long been suspicious of some Rich Boys. In a six-month investigation, BusinessWeek has pieced together the first comprehensive look at their sprawling and deliberately elusive operations. Our findings:

-- Rich has spawned the most powerful informal network of independent commodities traders on earth. He did it primarily by funding spin-offs and startups around the globe for decades, and by training scores of traders who have set up their own shops. Although Rich no longer maintains stakes in most of these outfits, he has helped create a network that, in sum, is far more formidable than his own company in the 1970s and 1980s, when it was the world's premier commodities trader.

-- The Rich Boys' often controversial activities are on the rise. They buy oil from places where corruption is extensive: Some of the Rich Boys have been named in scandals in Nigeria and Venezuela. They also sell oil from pariah states to U.S. refiners.

-- Although Rich testified in writing in March, 2005, to a House committee investigating the U.N. program that he was not in any way active in the Oil-for-Food program, documents suggest that he bought Iraqi oil in 2001 from various front companies, which BusinessWeek has identified. This took place just one month after his pardon. If so, it seems that Rich may have misled Congress. The CIA, the Senate, and others have concluded that from September, 2000, until September, 2002, buyers in the Oil-for-Food oil program had to pay illegal surcharges that Saddam used in part to buy weapons, though no documents show Rich made such payments. Some investigators believe Iraqi insurgents are now using that money.

-- One company from which Rich bought crude during this period was a front for extremist Russian and Ukrainian organizations. All were pro-Saddam; one was a staunch supporter of North Korean dictator Kim Jong Il. Another company was tied to a major money launderer for Saddam.

To reach these conclusions, BusinessWeek traced crucial connections from a number of official inquiries and documents. Key among these documents: shipping tables from the Middle East Economic Survey (MEES), the preeminent authority on tanker activity in the Middle East. These detail the ports, tankers, destinations, and buyers of Iraqi crude. Other insights came from a 2004 CIA report on Iraq, data from Switzerland's Federal Commercial Registry Office, and the many inquiries launched into Oil-for-Food. The Justice Dept., six congressional committees, a U.N. commission, Morgenthau's office, and several countries, including Switzerland, are all investigating the program. Extensive interviews with dozens of oil traders, government investigators, and energy experts around the globe helped form a clearer picture of how the network operates.

Heady stuff.

The full article appears here. Or look for the full issue on newstands.

-- MDT