On Dec. 7, 2001, nearly three months after the terrorist attack that had made him a national hero and a little over three weeks before he...
WASHINGTON — On Dec. 7, 2001, nearly three months after the terrorist attack that had made him a national hero and a little over three weeks before he would leave office, New York Mayor Rudolph Giuliani took the first official step toward making himself rich.
He asked the city Conflicts of Interest Board for permission to begin forming a consulting firm with three members of his outgoing administration. The company, Giuliani said, would provide “management consulting service to governments and business” and would seek out partners for a “wide-range of possible business, management and financial services.”
Over the next five years, Giuliani Partners earned more than $100 million, according to a knowledgeable source, who spoke on the condition of anonymity because the firm’s financial information is private.
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That success helped transform the Republican considered the front-runner for his party’s 2008 presidential nomination from a moderately well-off public servant into a globe-trotting consultant whose net worth is estimated in the tens of millions of dollars.
In crafting its image, the firm took care to burnish its most valuable asset: the worldwide reputation Giuliani had earned for his composure and leadership in the days after the attack on the World Trade Center.
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“No client is ever approved or worked on without a full discussion with Rudy,” said the firm’s senior managing partner, Michael Hess, former New York City corporation counsel.
Through thick and thin
Famously loyal, Giuliani chose as his partners longtime associates, including a former police commissioner later convicted of corruption, a former FBI executive who admitted taking artifacts from Ground Zero, and a former Catholic priest accused of covering up sexual abuse in the church.
His clients have included a pharmaceutical company that, with Giuliani’s help, resolved a long Drug Enforcement Administration (DEA) investigation with only a fine; a confessed drug smuggler who hired Giuliani to ensure his security company could do business with the federal government; and the horse-racing industry, eager to recover public confidence after a betting scandal.
Clients of Giuliani Partners are required to sign confidentiality agreements, and Giuliani refuses to identify his clients, disclose his compensation or reveal any details about Giuliani Partners. He also declined to be interviewed about the firm.
“His name brings inherent value,” said John Mason, chairman of BioOne Solutions, a Florida decontamination company that merged with Giuliani Partners. “If someone has a need in our area, it’s unlikely they wouldn’t take his call.”
The Associated Press has reported that Giuliani also has profited from his Houston law firm, Bracewell & Giuliani, whose law and lobbying clients have included Saudi Arabia, Rupert Murdoch’s News Corp., and chewing tobacco maker UST.
The firm was known as Bracewell & Patterson before Giuliani came aboard in spring 2005. Since Giuliani became a partner, the firm has reported lobbying on various issues at the White House, the vice president’s office, Congress and every Cabinet agency except the Department of Veterans Affairs, the AP found.
Campaign spokeswoman Maria Comella declined to describe Giuliani’s work at Bracewell & Giuliani or how he was compensated.
Congress, the Pentagon, Energy and Education departments and the Environmental Protection Agency were among the offices most frequently contacted, reports show.
Giuliani left office on Dec. 31, 2001, with relatively modest means.
His final ethics report to the city listed gross assets of between $1.16 million and $1.83 million in 2001; most of that wealth was two Manhattan apartments and some retirement mutual funds.
The lone source of income he listed besides his $195,000 mayoral income was $20,000 to $60,000 a year from renting one of the apartments.
He asked the city’s Conflicts of Interest Board for permission to begin forming the firm in his final days as mayor with three aides he planned to take with him — the lawyer Hess, chief counsel Dennison Young Jr. and chief of staff Anthony Carbonetti.
Two others — Police Commissioner Bernard Kerik and Fire Commissioner Thomas Von Essen — were not mentioned but later joined the firm as senior vice presidents.
The firm opened for business in 2002. From an initial group of about a dozen principals and support staff, it has since quadrupled in size.
The core of the group comprised close political associates and City Hall advisers, not seasoned businesspeople. Some had problems in their pasts:
Bernard Kerik took the lead building the Giuliani Partners security arm. But even before Giuliani left the mayor’s office, city investigators had warned him Kerik might have ties to organized-crime figures, a warning Giuliani recently testified that he does not recall.
Kerik abruptly left the firm in 2005, after his nomination by President Bush to become homeland-security secretary, supported by Giuliani, collapsed. That was a year before he pleaded guilty to a misdemeanor charge he accepted free work on his apartment from a contracting firm accused of having organized-crime ties.
Pasquale D’Amuro, tapped to replace Kerik, is a respected former FBI executive who had risen through the ranks as one of the bureau’s savviest antiterrorism agents to become its third-ranking official.
In 2004, a Justice Department inquiry into the removal of souvenirs from the World Trade Center site disclosed that D’Amuro had asked a subordinate to gather half-a-dozen items from Ground Zero as mementos just weeks after the attacks.
D’Amuro later acknowledged he had kept one piece of granite he received in June 2003. The FBI took no action against D’Amuro, and he donated his memento to the New York FBI office before retiring.
Alan Placa was brought in by Giuliani in 2003. An old friend, he resigned as vice chancellor of the Diocese of Rockville Centre on Long Island a week after being confronted by the newspaper Newsday with allegations that former parishioners had been abused.
The newspaper published portions of a 2003 Suffolk County grand-jury report in which accusers said he used his position to stifle complaints of abuse by clergy.
The firm would not make Placa available to comment, but Newsday has reported Placa denied the allegations, was not charged with a crime and is going through a process within the church to clear his name. The firm has described him as a “consultant.”
Over the years, Giuliani Partners formed several subsidiaries or strategic alliances.
They included an investment bank called Giuliani Capital Advisors that counseled companies on bankruptcies and investments. It was sold for an undisclosed amount as Giuliani prepared his run for president.
The firm also created several security divisions. The first, Giuliani-Kerik, advised companies on matters as diverse as making buildings more secure and marketing security products. In 2005, after Kerik left, it was renamed Giuliani Security & Safety.
Giuliani Partners also created an overseas arm called Giuliani Security & Safety Asia, and a consulting unit called Giuliani Compliance Japan.
When Hess describes the work of Giuliani Partners, he says it is impossible to pinpoint a single specialty. But he did say, emphatically, the firm has not tried to use Giuliani’s political ties to influence federal officials.
“We don’t do lobbying. And therefore that is not something where we are running to talk to a regulator or an agency,” Hess said. “In terms of people he has known in the government, whether city, state or federal, we just don’t do that.”
In May 2002, Purdue Pharma, a Connecticut-based drug company, hired the firm at a time when the Drug Enforcement Administration and the Food and Drug Administration had begun investigating a wave of overdose deaths attributed to the firm’s powerful and lucrative painkiller, OxyContin.
The agencies were looking into the product’s illicit use as a recreational drug and were probing lax security at the company’s manufacturing plants in New Jersey and North Carolina.
In a news release, Purdue said Kerik would conduct a security review at Purdue’s Totowa, N.J., manufacturing plant, while others in Giuliani’s firm started designing an early-warning network to find prescription-drug abuse, develop standards for prescription monitoring and try to increase public awareness.
Behind the scenes, Giuliani contacted then-DEA Administrator Asa Hutchinson, whom he had befriended two decades earlier, and also Karen Tandy, who later took Hutchinson’s place as DEA chief. Giuliani arranged a meeting in the conference room of Hutchinson’s office to discuss the DEA’s plans to keep the drug from being misused.
“The main thing I remember was his commitment to help the company develop safeguards,” Hutchinson said. “He was going to bring his expertise to see where security needed to be improved and to provide confidence in the handling of a very dangerous drug.”
Laura Nagel, who headed the DEA’s office of diversion control, was not happy. “My reaction was that they went around me,” she said. “They went and got Rudy. I think they thought they were buying access and insight into how to manage things politically.”
A week before the first anniversary of the Sept. 11 attacks, Giuliani joined Hutchinson and then-Attorney General John Ashcroft for the opening of a traveling DEA exhibit on drug trafficking and terrorism.
Giuliani, who as a prosecutor and mayor had emphasized his record fighting crime, also spoke at a luncheon that day that raised about $20,000 for the DEA Museum Foundation.
Bill Alden, the foundation president, said he did not learn until later that Giuliani was working for Purdue Pharma.
After the fundraiser, Nagel said she was summoned to accompany Hutchinson to a second meeting with the former mayor, this one in Giuliani’s 24th-floor offices in New York. Hutchinson said the meeting was for the DEA’s benefit.
“Giuliani and his team went through the details of his plan” to keep OxyContin out of the wrong hands, he recalled. “We were receivers of the information.”
In June 2004, the government settled the case by requiring the Purdue Pharma affiliate that ran the Totowa plant to pay a $2 million civil penalty.
The drug maker did not have to admit wrongdoing or take its product off the shelf.
Nagel said Purdue got off too easily. “I would not have been happy unless we put them in shackles in front of the courthouse,” she said.
Last week, Purdue settled another federal investigation when the company and three current and former executives pleaded guilty to falsely marketing OxyContin in a way that played down its addictive properties.
People involved in the case said Giuliani met with government lawyers more than half a dozen times and negotiated a settlement that the sides agreed to in principle.
Though Giuliani personally approves clients, not all come with unblemished backgrounds.
In December 2002, Giuliani Partners agreed to a lucrative contract to represent Florida-based security startup Seisint, created by a close friend, Hank Asher.
Seisint’s data-mining product — code-named Matrix — caught the attention of federal and state authorities after Sept. 11 because the firm said that by searching through billions of public records, it could identify potential terrorists.
But Asher harbored a secret. In the early 1980s, he had smuggled kilos of cocaine from Colombia into Florida aboard his private jet.
Asher was never charged but disclosed his past to federal agents later in life when he helped an effort to rid a Florida community of drug smugglers.
In documents introduced in a 2004 lawsuit, dissident Seisint shareholder Gerald Brauser alleged that Giuliani was hired to use his “influence with the federal government to enable Mr. Asher to take an active role in Seisint as a chief executive officer despite the allegations about his drug dealing.”
The Bush administration committed $12 million in grants for Matrix, and more than half a dozen states joined.
In the summer of 2003, newspapers disclosed Asher was collaborating with federal and state officials on Matrix despite his drug-running past, and he resigned from the company.
“I have a great admiration for what he’s doing,” Giuliani later told a Florida newspaper in January 2004. “People do a lot of things in life. It’s a question of what you can do to make up for it, and Hank has done a lot.”
Matrix also faced mounting criticism from privacy advocates over its data mining.
The Bush administration ended its funding in 2005, and most states dropped from the project in the face of lawsuits and bad publicity.
The turn of events prompted some Seisint investors to re-examine the contract Giuliani had negotiated. What they found startled them: Giuliani Partners was to receive $2 million a year in consulting fees, a commission on sales of Seisint products and 800,000 warrants to buy company stock.
Knowledgeable sources said Giuliani’s firm got most of that compensation, with the warrants proving particularly valuable because Seisint was sold to data giant LexisNexis for $775 million.
Brauser sued Seisint’s board, alleging Giuliani was not worth the money.
When LexisNexis bought the company, Brauser’s lawsuit was dismissed by agreement of both sides. LexisNexis said the Giuliani contract was terminated shortly after Asher was jettisoned from the company.
Hess cited the National Thoroughbred Racing Association as one of the firm’s successes.
The industry group hired Giuliani’s firm three weeks after an insider had rigged wagers on the Breeders’ Cup and held all six winning tickets in the Pick Six, creating a $3 million payday.
Frank Angst, a writer at Thoroughbred Times, said it soon became clear the association’s intention for Giuliani’s firm was less about finding security upgrades than it was about recovering horse wagering’s reputation.
Nine months after being retained, Giuliani Partners helped the racing association produce a lengthy report on the security issues facing the industry, making three major recommendations for protecting the wagering infrastructure.
The industry group, however, has yet to fully adopt any of the recommendations, according to Angst. An association spokesman declined to comment and would not disclose how much Giuliani Partners was paid.