Swiss authorities invoked secrecy laws Friday night to seize many documents subpoenaed by a U.S. grand jury and prevent them from being shipped to New York by the giant Swiss commodities trading firm Marc Rich & Co., AG.
The grand jury is investigating whether the Swiss firm's former U.S. subsidiary shifted more than $100 million in profits from New York to Switzerland in order to avoid paying U.S. taxes.
An official in the Swiss embassy here insisted that Switzerland was not trying to "frustrate" the U.S. courts. He said the U.S. government can "request" the subpoenaed documents from the Swiss government under Swiss laws that require the nation to cooperate with other countries in cases involving tax fraud.
The U.S. Attorney in Manhattan, Rudolph Giuliani, said he did not know the full details of the Swiss action, but that he could not understand how Swiss law could prevent a company from "turning over ordinary business records" to the federal grand jury. He said the subpoenaed documents do not include bank records, which are heavily protected under Swiss law.
Marc Rich & Co., whose annual sales exceed $10 billion, had resisted supplying the documents for more than a year, but backed down a week ago under pressure from a $50,000-a-day fine levied by U.S. District Court Judge Leonard B. Sand and orders by Sand requiring more than 30 companies to attach any Rich assets they might have in their custody. Rich & Co. promised Sand it would produce all the subpoenaed documents--records, correspondence and telexes--by Aug. 19.
The fine will continue to run until all the documents are produced--by Aug. 19 Rich will owe $2.6 million--but after Rich agreed to provide the documents, Sand lifted most of the attachments.
Swiss authorities here said they did not know how many or what type of documents were seized Friday night. But sources close to the case said they understood that not all of the subpoenaed documents were seized and that the Swiss trading firm is expected to produce many of the documents required by the court.
Last Monday, U.S. authorities seized two steamer trunks of documents owned by the former Rich subsidiary, Marc Rich International Ltd., moments before the documents were to be flown to Switzerland. The former subsidiary, now called Clarendon Ltd., had agreed to comply with the grand jury supbpoena more than a year ago, even as its Swiss parent fought it.
Attorney Peter Fleming, who represents Clarendon, told Sand last week that the steamer trunks full of documents were being shipped to Switzerland so that Clarendon's New York attorney could examine them at the same time he was looking at Clarendon documents in Switzerland.
The Swiss embassy's legal officer, Juerg Leutert, said in a telephone interview yesterday that the Swiss federal prosecutor was "obliged" to seize the documents when he learned Marc Rich & Co. had agreed to comply with the subpoena.
Leutert said the prosecutor is investigating whether to charge Marc Rich with violating Swiss laws barring companies from divulging business secrets to foreign governments.
Leutert said the Swiss suggested twice last month--once verbally, once in writing--to the U.S. government that the documents sought by the grand jury be handled either under the tax treaty between the United States and Switzerland or under Swiss law. Both the treaty and the law require Swiss cooperation in cases involving tax fraud. Leutert said the United States has not responded to either suggestion.
Whether the Rich company's alleged behavior--which involved the New York subsidiary buying oil at a big loss from the parent company to shield $100 million or more in profits from U.S. tax laws--constitutes tax fraud under Swiss law could not be determined.
Leutert said that if all the requirements of the law are met, Swiss courts could make the documents available in a matter of weeks, "provided Marc Rich does not file an objection against the Swiss order."
Leutert said that the State Department, the Justice Department and Judge Sand were informed of the Swiss prosecutor's action. Neither Sand nor officials at either federal agency could be reached for comment.