Three days after the Swiss trading firm Marc Rich & Co. AG agreed to supply corporate records to a federal grand jury in New York, federal agents seized two trunks full of subpoenaed documents at Kennedy Airport Monday night to prevent them from being flown to Switzerland.
The documents belonged to a former Marc Rich subsidiary and had been subpoenaed by a grand jury investigating whether the subsidiary evaded U.S. taxes by allegedly shifting profits from oil trading transactions to the Swiss parent.
Yesterday, the two black steamer trunks sat in a New York federal courtroom in front of U.S. District Judge Leonard B. Sand, who has presided over the nearly 18-month battle between Marc Rich and federal prosecutors.
New York attorney Peter Fleming, who represented the new owners of the former subsidiary, said the documents were being shipped to Switzerland so they could be examined by the firm's New York counsel. "I think it can be explained," Fleming told Sand, "but I believe that is for another day."
The U.S. subsidiary had agreed months ago to provide prosecutors with the documents that presumably detail its side of the oil transactions. Some 70,000 pages have been turned over by the subsidiary, but thousands more pages remained to be produced, including those in the trunks.
The Swiss parent had refused for more than a year to turn over its records on the transactions and was fined $50,000 a day by Sand on June 29.
On Friday, Marc Rich promised to surrender the Swiss-held documents after Sand issued orders attaching Rich's assets at 30 companies with which the Swiss firm was known to have relationships.
Marc Rich, who nine years ago set up the trading firm that bears his name, is also a half-owner of the company that owns Twentieth Century-Fox Film Co. Rich and associate Pincus Green, who had directed the secretive $10 billion trading empire from New York, reportedly moved to Switzerland in mid-June.
The documents seized Monday night were owned by Clarendon Ltd. AG, which was Marc Rich International Ltd. until June 30 when the subsidiary was quietly sold by the Swiss firm to three of its five previous owners.
Assistant U.S. attorney Jane Parver told Sand yesterday that prosecutors had received information that more documents were to be shipped to Switzerland last night.
Prosecutors would not indentify either the Clarendon employe who was to accompany the documents or explain how the government was alerted to the shipment. Parver told the court that reservations had been made on several different airline flights to Switzerland Monday night and that when the Clarendon employe was approached, she told Parver she had been instructed "by counsel" not to talk to government lawyers.
Fleming said he appeared at the hearing as the "alter ego" of Washington attorney Edward Bennett Williams. Sand said Williams had asked that yesterday's hearing be postponed because he could not attend. Sand held the hearing anyway.
Williams represents Clarendon Ltd., as well as Marc Rich and his associate Green.
Green and Rich were the only owners of the New York subsidiary that are not owners of Clarendon, according to Assistant U.S. attorney Morris Weinberg, who has headed the government's efforts in the tax investigation. The subsidiary was a U.S. corporation. Clarendon is Swiss.
Sand ordered Clarendon to produce every document subpoenaed by the grand jury by noon today. He said that any document examination, stamping or copying could be done by Clarendon's lawyers under the supervision of the U.S. attorney's office.
The documents the Swiss parent has agreed to produce are still due Aug. 19, Weinberg said. By Aug. 19, the company will have paid $2.6 million in fines to the court.
The grand jury has been investigating whether in 1980 the New York subsidiary bought oil at a loss from the Swiss parent in order to shift about $100 million in profits out of the grasp of U.S. tax laws to more lightly taxed Switzerland. Because grand jury investigations are secret, prosecutors have declined to discuss the exact dimensions of the investigation.
In battling the federal subpoena, the Swiss firm first argued that U.S. courts had no jurisdiction in Switzerland, an argument rejected by a federal appeals court and the Supreme Court. The firm later invoked Swiss secrecy laws, but Sand rejected that argument and imposed the fine June 29.