In 1983 Rich and partner Pincus Green were indicted on 65 criminal counts, including income tax evasion, wire fraud, racketeering, and trading with Iran during the oil embargo (at a time when Iranian revolutionaries were still holding American citizens hostage).^[8][19] The charges would have led to a sentence of more than 300 years in prison had Rich been convicted on all counts.^[19] The indictment was filed by then-U.S. Federal Prosecutor (and future mayor of New York City) Rudolph Giuliani. At the time it was the biggest tax evasion case in U.S. history.^[20]

Learning of the plans for the indictment, Rich fled^[9] to Switzerland and, always insisting that he was not guilty, never returned to the U.S. to answer the charges.^{[Notes 1]} Rich's companies eventually pleaded guilty to 35 counts of tax evasion and paid $90 million in fines,^[8] although Rich himself remained on the Federal Bureau of Investigation's Ten Most-Wanted Fugitives List for many years,^[22] narrowly evading capture in Britain, Germany, Finland, and Jamaica.^[23] Fearing arrest, he did not even return to the United States to attend his daughter's funeral in 1996.^[24]

On January 20, 2001, hours before leaving office, U.S. President Bill Clinton granted Rich a controversial presidential pardon. Several of Clinton's strongest supporters distanced themselves from the decision.^[25] Former President Jimmy Carter, a fellow Democrat, said, "I don't think there is any doubt that some of the factors in his pardon were attributable to his large gifts. In my opinion, that was disgraceful."^[26] Clinton himself later expressed regret for issuing the pardon, saying that "it wasn't worth the damage to my reputation."^[9]

Clinton's critics alleged that Rich's pardon had been bought, as Denise Rich had given more than $1 million^[27] to Clinton's political party (the Democratic Party), including more than $100,000 to the Senate campaign of the president's wife, Hillary Rodham Clinton, and $450,000 to the Clinton Library foundation during Clinton's time in office.^[23]

On August 11, 1999, Clinton commuted the sentences of 16 members of FALN, which is a Puerto Rican paramilitary organization that set off 120 bombs in the United States, mostly in New York City and Chicago. There were convictions for conspiracy to commit robbery, bomb-making, and sedition, as well as firearms and explosives violations.^[5] The 16 were convicted of conspiracy and sedition and sentenced with terms ranging from 35 to 105 years in prison. Congress, however, recognizes that the FALN is responsible for "6 deaths and the permanent maiming of dozens of others, including law enforcement officials." Clinton offered clemency on the condition that the prisoners renounce violence, seeing as none of the 16 had been convicted of harming anyone and they had already served 19 years in prison. This action was lobbied for by ten Nobel Laureates and the Archbishop of Puerto Rico.^[6] The commutation was opposed by the U.S. Attorney's Office, the FBI, and the Federal Bureau of Prisons and was criticized by many, including former victims of FALN terrorist activities and the Fraternal Order of Police.^[7] Hillary Clinton, then campaigning for her first term in the Senate, initially supported the commutation,^[8] but withdrew her support three days later.^[9]

Congress condemned this action by President Clinton, with votes of 95–2 in the Senate and 311–41 in the House.^[10][11] The U.S. House Committee on Government Reform held an investigation on the matter, but the Justice Department prevented FBI officials from testifying.^[12] President Clinton cited executive privilege for his refusal to turn over some documents to Congress related to his decision to offer clemency to members of the FALN terrorist group.