(FORTUNE Magazine) – "When the gods wish to punish us they answer our prayers." So wrote Oscar Wilde more than 100 years ago. He could have been referring to Marc Rich.

Until Jan. 20, when Rich was pardoned by President Clinton during his final hours in office, the world's most pampered fugitive was enjoying a safe, sumptuous life in Switzerland and Spain. The 66-year-old commodities trader, who fled the U.S. in 1983 to avoid prosecution for oil profiteering and tax evasion, thumbed his nose at those who wanted to bring him to justice. He entertained the Swiss elite at his mansion crammed with Dalis and Picassos on the Lake of Lucerne. He threw parties on the roof of Lucerne's avant-garde concert hall, which his philanthropy had helped build. He dined at his $9.5 million Moorish villa in glitzy Marbella with Placido Domingo and other celebrities. And he showed off his trophy wife, Gisela, 48, a six-foot-tall exercise fanatic whom he wooed on the ski slopes of St. Moritz.

Even more galling to some, exile hardly crimped Rich's success in the commodities business. After selling his stake in Marc Rich & Co. AG for more than $500 million in 1994 (the firm, now known as Glencore, is the largest metals and oil commodities company in the world), he's back with a new venture, called Novarco in the U.S., that has revenues of $7 billion and trades oil out of offices in White Plains, N.Y., a few miles from the Manhattan courthouse where Rich once faced a 325-year prison term.

Rich seemed sure to live out his days in plush exile, a dimly remembered figure in the U.S., far from the reach of its laws. So why bother to push for a pardon? Though Rich isn't talking, friends and former associates say he wanted to regain his freedom to travel. As a fugitive, Rich couldn't set foot in America--he wasn't allowed to visit one of his daughters, who died of leukemia in 1996--or any other country friendly to the U.S. for fear of being captured, extradited, and sent to jail. "The local authorities were looking for him in airports all over the world," says a former U.S. marshal who pursued Rich for more than a decade.

But now that Rich is free to stroll down Fifth Avenue or the Champs-Elysees, it's hardly a moment of triumph. Indeed, getting a pardon may prove to be the worst trade of his career. It set off a firestorm that has already singed a President who bypassed the normal pardoning process to exonerate a man whose ex-wife happened to be a major Democratic Party fundraiser. It has turned up the heat on Rich's partner and fellow fugitive Pincus Green, who was pardoned as well. And it threatens to engulf Rich in more litigation, including claims for back taxes that could exceed $100 million and criminal charges for embargo-busting commodities deals.

At issue is whether Rich is a U.S. citizen. If he is--and the evidence is overwhelming, even though Rich and his attorneys claim he abandoned his citizenship years ago--then he is liable for back taxes for the 18 years he has been living abroad as a fugitive. And, given the level of outrage over the pardon, chances are excellent that the government will pursue Rich wherever he's vulnerable. "If Rich hasn't paid his liability in full, he should be called upon to pay it," says former IRS Commissioner Donald Alexander. "If I were back in the tax shop, I'd do my best to make a civil fraud case against him."

The cosmopolitan, Belgian-born Rich and the homespun, Brooklyn-bred Green got into trouble in the West Texas oil patch in the early 1980s. The two had bolted Phil-ipp Brothers commodities house in 1973 in a dispute over bonuses and started their own company, Marc Rich & Co. Though the firm was based in Zug, Switzerland, Rich and Green worked in New York. In 1980 and 1981, according to a 65-count indictment, the two men exploited the government's complex energy regulations by buying price-controlled Texas crude for as little as $6 a barrel, relabeling the barrels to make them look like decontrolled supplies, then selling them for as much as $40 on the open market--a scam that generated $105 million in illegal profits. They allegedly used sham transactions to ship the profits to offshore subsidiaries that paid no taxes. And they were accused of profiting from the Iran hostage crisis by purchasing $200 million of Iranian crude, a violation of the U.S. embargo against Tehran.

In 1983, Rudolph Giuliani, then U.S. Attorney in Manhattan, brought criminal charges against Rich, Green, and two of their companies for tax fraud, racketeering, tax evasion, and trading with the enemy. At the time it was the biggest tax-evasion case in U.S. history: The government accused the companies of failing to pay $48 million due on their illegal profits and charged Rich and Green personally with orchestrating the scam. If convicted on all counts, each would have faced 325 years in prison. In late 1984 their companies agreed to settle all charges for $171 million. The deal allowed Marc Rich & Co., or any company owned by Rich and Green, to trade freely in the U.S. But it did nothing to settle the criminal case. Instead of negotiating a plea bargain as they had done for their companies, or fighting the charges in court, Rich and Green chose exile. Just before the indictments came down, they fled to Zug. Swiss authorities, arguing that tax evasion is not a crime in their country, refused to extradite them.

Now a stroke of the presidential pen has ended the criminal case. But how much Rich and Green still owe the U.S. remains a matter of considerable confusion. Even Clinton may not have understood the situation fully. On the evening of Jan. 19, as he was finalizing his pardon list, the President told Jack Quinn, his former White House counsel and the attorney representing Rich, that he would grant the pardon on one condition. He requested, and received later that night, a letter promising that Rich and Green wouldn't use the statute of limitations to duck any civil claims connected to the original case that the government might bring.

Clinton's demand is perplexing because the $171 million settlement covered everything. "They've paid in full, through their companies," says Martin Auerbach, a former assistant U.S. attorney who worked on the case. "Please ask Jack Quinn what civil damages he's talking about." Quinn didn't respond to requests for comment.

But neither the $171 million payment, nor the pardon, prevents the U.S. from bringing charges for tax evasion or other misdeeds that Rich and Green may have committed as fugitives--assuming they're still citizens. The State Department won't comment on their citizenship status, citing privacy laws. But former law enforcement officials insist that the two are U.S. nationals. "In my view, they never properly renounced their citizenship," says Howard Safir, the former New York City police commissioner who pursued Rich as head of the U.S. Marshals Service in the 1980s.

A 1991 U.S. appeals court ruling supports Safir. Rich had argued in a 1988 breach-of-contract suit filed against him in New York that the U.S. courts didn't have jurisdiction since he had become a Spanish citizen in 1982 by taking an oath in Madrid. At the same ceremony, Rich claimed, he had relinquished his U.S. citizenship. The appeals court said that swearing you're no longer a U.S. citizen isn't enough. The person renouncing must also show that he's doing so with the right intentions, which includes surrendering the rights and benefits of being an American.

The court found that Rich flunked the test. He had acted like an American long after he supposedly ditched his citizenship, using his U.S. passport to travel in 1983. And, when it benefited him, Rich swore in a lawsuit in Switzerland that he was a U.S. citizen.

If Rich is still a citizen, he would be liable for back taxes on his worldwide income. Expatriates get a credit for any tax they pay in their country of residence. But if the U.S. tax is higher--certainly the case in Switzerland, where there are no capital gains taxes--they owe Uncle Sam the difference. Rich's income isn't known, but he told FORTUNE in 1986 that he and Green earned salaries of about $1 million a year. And it's safe to estimate that his capital gain on the sale of Marc Rich & Co. was more than $200 million. With interest and penalties, Rich could easily owe the IRS $100 million.

Rich and Green could also be charged with violating U.S. embargoes. A 1986 antiapartheid law made most trading with South Africa a crime. But Rich and Green, industry sources say, were supplying South Africa with oil into the 1990s. Then there's Cuba. According to Jose Oro, a former director at the Ministry of Basic Industries who defected to the U.S. in 1991, Rich advanced cash to the money-strapped Castro regime in the late 1980s to import mining equipment and raw materials. In exchange he got minerals, primarily gold and nickel, which he traded on world markets. "Rich was looking for a quick buck," says Oro, who estimates Rich was doing tens of millions of dollars a year in business with Cuba, despite a long-standing U.S. embargo.

"U.S. citizens who participated in trading with Cuba could face criminal prosecution under the Trading With the Enemy Act," says Hal Eren, a former Treasury official and an attorney with Clifford Chance Rogers & Wells.

Government officials won't say if they're pondering fresh investigations. But if they do choose to pursue Rich, it's a safe bet he'll remain elusive. A surprise call that a U.S. law enforcement officer made to Pinky Green during the Gulf War may provide a clue as to the former fugitives' intentions. He traced Green to the King David Hotel in Jerusalem and called his room. "Hey, Pinky," he crowed, "I'm watching CNN, and it looks like you're getting pounded by Scuds. Why don't you give yourself up and come home? You'd be safer!" Green slammed down the phone. Now that missiles are flying again--Congressional hearings on the pardon are set for this week--it's unlikely either man will find it safe enough to come home.

ADDITIONAL REPORTING Paola Hjelt

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