The rhetoric, inaccuracies and media frenzy in the wake of the announcement
of a pardon for Marc Rich demonstrate why that pardon by President Clinton
had become the only solution to resolve a nearly 20-year-old but fundamentally
flawed indictment. This pardon was granted strictly on its legal merits.

First, one must understand that Clinton insisted that Marc Rich agree to drop
procedural defenses against civil actions that might be brought against him
by the United States upon his return. Rich has not escaped potential
liability for his actions -- only the overreaching criminal prosecution to
which he should never have been subject.

This is the heart of the matter. Based on a review of the merits, Rich should
not have been subject to criminal charges. This is among the precise
situations for which the presidential pardon was intended.

Here are the facts. The case grew out of the 1970s Arab oil embargo and
energy regulation designed to keep prices on existing oil production at 1973
levels, but there were many exceptions. As a result, major U.S. oil producers
had a powerful incentive to avoid the impact of the regulations.

The U.S. oil companies did this by dealing with international oil resellers
to "link" regulated oil transactions with unregulated ones. In 1980-81, two
Swiss companies associated with Marc Rich engaged in a series of such linked
transactions, typical of those engaged in during this period, involving U.S.
oil companies. In accordance with the law, the Rich companies treated
payments attributable to the offshore aspects of the transactions as being
exempt from U.S. taxes and price controls.

With oil companies under scrutiny, the U.S. attorney for the Southern District of New York,
Rudolph Giuliani, focused his attention on the Marc Rich companies and ambitiously turned
the proper reporting treatment of these complex corporate transactions -- essentially a civil
allocation dispute -- into a highly politicized criminal tax and energy fraud case alleging that
domestic oil revenues were improperly diverted offshore. As if that weren't enough, the indictment
included racketeering charges despite the Justice Department's acknowledgment years ago that
racketeering charges should not be leveled in tax cases.

Yet, none of the major U.S. oil companies that structured these transactions
was ever prosecuted criminally. Indeed, when the Department of Energy
examined the transactions, it concluded that one oil company had improperly
failed to account for the linked transactions, violating the regulation's
prohibition on excess pricing. At the same time, the department said that the
Marc Rich companies had properly accounted for the transactions.

The U.S. oil companies were pursued only in civil proceedings for their actions.
Yet for the past 17 years, the U.S. attorney has maintained a criminal indictment
against Marc Rich. The indictment relies on a position directly opposite to the finding
by the Energy Department that the accounting by the Marc Rich companies was proper.
The position taken by Rich is supported by two of the leading tax authorities in the country,
professors Bernard Wolfman of Harvard University and Martin Ginsburg of Georgetown University.

There were other questionable charges as well. Inflammatory accusations of illegal trading
with Iran were leveled but subsequently challenged by the companies and later dropped.

Equally incorrect is the claim that as a former White House counsel, I
violated the Clinton executive order banning White House contacts for five
years after government service. In fact, that order makes an exception for
"communicating . . . with regard to . . . a criminal or civil law enforcement
. . . proceeding." Moreover, I notified the deputy attorney general two
months before the pardon was granted that I would be filing an application in
the Rich matter with the White House, and I encouraged the White House
counsel to seek the Justice Department's views. I did not attempt to
circumvent the Justice Department.

I am not surprised by much of the confusion over the Rich case, because
despite changes in how the law must be applied, the indictment still stands
in its original form. When I made these arguments in 1999 to the U.S.
attorney and asked to enter into negotiations for resolution of the case, I
met with a dead end. Other lawyers for Rich had met with similar
recalcitrance in previous years. Rich must first return to the United States
to face criminal indictment, we were told.

The U.S. attorney holds fast to its view that this case warrants criminal
prosecution. Fortunately, under the president's pardon power, a mechanism
exists for making a new judgment, based on case merits. The presidential
pardon can and should be employed when a president resolves a dispute about
whether the law and policies of the Justice Department support the use of
civil rather than criminal sanctions in response to an individual's alleged
wrongful conduct in the eyes of the United States. For Marc Rich, this means
he no longer faces a seriously flawed criminal indictment but remains liable
for potential civil sanctions.

In my view it should have been dealt with in this way years ago.

The writer, a Washington lawyer, was a White House counsel to President Clinton.

© 2001 The Washington Post Company