N.Y. Seeks Back Taxes From Marc Rich

WASHINGTON â€”  The state of New York moved Thursday to collect $137.8 million in back taxes and penalties from Marc Rich, an action legal experts said could be the first of several civil problems for the former fugitive commodities broker who won an eleventh-hour pardon from President Clinton.

“If there’s a legitimate basis for civil action against him, he’s just like everybody else,� said E. Lawrence Barcella, a Washington defense lawyer and former federal prosecutor. “The pardon only relates to outstanding criminal charges.�

Still to come, according to Barcella and others, could be a Justice Department move to collect additional millions in unpaid federal income taxes, even though the pardon would keep Rich from being jailed.

Although Justice Department officials have made no decision, “I’m sure their position is that Rich’s pardon would not prevent a civil tax case,� added David J. Curtin, another Washington attorney who once tried cases in the department’s tax division.

New York officials said that Rich, who has been on the lam in Switzerland for 17 years since a federal grand jury charged him with tax evasion and other crimes, owes state taxes on money he made in the 1980s controlling two New York firms that admitted fraud involving illegal oil trading.

“Mr. Rich has avoided his tax payments in New York for nearly two decades while he was under federal indictment,� Arthur Roth, the state taxation and finance commissioner, said in a statement. “It is now time for him to pay the piper.�

In 1984, after Rich had fled to Europe, Marc Rich International Ltd. and Marc Rich & Co. AG each pleaded guilty to 38 criminal counts in a scheme involving the illegal trading of crude oil. The corporations paid $150 million to settle the cases but the personal case against Rich has remained open.

Roth said his department decided against filing civil litigation against the billionaire in the 1980s to avoid jeopardizing the criminal investigation.

But Barcella said Roth’s acknowledgment could raise a defense for Rich because “ordinarily a tax case would have to be filed prior to a person’s flight� to keep the statute of limitations from expiring in three years.

“As it is, Rich’s lawyers could challenge this action as being 17 years too late,� he said.

Officials said they are seeking $26.9 million in back taxes for 1980-82, along with $13.5 million in penalties and $97.4 million in interest. Roth said the state will seek court permission to immediately place a lien on any assets held by Rich in New York.

He said the civil tax action is aimed at “keeping him from removing any of his assets, and we expect to collect it all.�

Laurence A. Urgenson, an attorney for Rich, did not respond immediately to a request for comment.

Rich, who has refused to return to the United States to testify in congressional investigations into his controversial pardon, also figures in a new grand jury probe into the circumstances of Clinton’s action. The fact that his ex-wife, Denise Rich, made substantial political contributions and charitable donations to Clinton’s presidential library while lobbying for clemency has raised questions about whether the gifts were legal.

It would be a federal violation to buy executive clemency. In addition, it would also be illegal if foreign funds provided by Rich were used for political contributions.

The fact that Rich renounced his U.S. citizenship after his long-ago indictment would not protect him from owing U.S. taxes, legal authorities said.

“You can’t flee the country and give up being a citizen and then say, ‘I no longer owe you anything,’ � Curtin said. “In fact, a U.S. citizen as Rich was is subject to U.S. taxes no matter where you earn your money.�

The attorney added that even a person acquitted of criminal tax evasion can still be pursued by the government for back taxes in a civil fraud case. “And if the government alleges fraud, the three-year statute of limitations in a civil tax case does not apply,� Curtin said.

Barcella and Curtin said Rich also could be subject to any civil damage suits arising from his criminal charges, which involved allegations of illegal trading in crude oil and violating the embargo with Iran.