Monkey Biz

Time to make some money: the business career of Rudy Giuliani

It was January 2002, and Rudy Giuliani had just left City Hall after two terms as New York’s mayor. He was an American hero and a global celebrity, saluted even by the Queen, for his resolute response to the September 11 terror attacks. Time Magazine’s “Man of the Year” for 2001 seemed destined for the White House. 

But Mr Giuliani had a weak point: his bank account was constrained by a career in public service and a costly divorce. It was time to make some money.

Mr Giuliani did so with zest. He opened a consultancy, Giuliani Partners, that attempted to spin cash from his reputation as the ultimate crisis manager and turnround expert — the executive who not only stabilised New York City after the attacks but had also previously managed to tame its crime and clean up its streets.

Giuliani Partners began with a bang, nabbing such clients as Delta Air Lines, Nextel Communications — maker of the mobile phone Mr Giuliani was toting on September 11 — and insurer Aon among others. Over the years its proprietor would become involved in a dizzying array of moneymaking ventures, from restructurings and real estate to a Texas law firm and Japanese consultancy.

Yet even in the early days of Mr Giuliani’s private sector career there were signs of the same tendencies that would eventually entangle him in a web of business and political intrigue in Ukraine and place him at the centre of an impeachment process that now threatens the Trump presidency.

George W Bush, then president, centre, then New York City Mayor Rudi Giuliani, left, New York Governor George Pataki, second from left, Senator Charles Schumer, second from right, and then New York City Fire Commissioner Thomas Von Essen, right, inspect the World Trade Center site, September 14 2001 © Doug Mills/AP

Alongside respected clients, Giuliani Partners also advised penny-stock outfits that seemed like strange prospects for a consultancy that billed itself as a smaller McKinsey. He may have been driven by bulging expenses. 

A mayor once known as a “slice of pizza kind of guy,” as his one-time communications director, Ken Frydman, put it, had monthly expenses by 2018 of about $232,000, according to a court hearing related to his third divorce. Among other extravagances, these included the cost of six homes — two in Palm Beach — 11 country club memberships and a high-end cigar habit.

As Mr Giuliani’s celebrity began to fade at home he was forced to look elsewhere for opportunities, associates say. “He was casting his net further and further from shore,” says a person who worked with Mr Giuliani. “The calibre of people who were reaching out became more and more questionable. At one point, you had the chief executive of Delta calling. Fifteen years later, you had Igor Fruman.”

Mr Fruman is one of the two south Florida businessmen indicted in October for allegedly funnelling foreign money into campaign groups aligned with Mr Trump. Before their arrests, Mr Fruman, who owned a bar in Odessa called Mafia Rave, and Lev Parnas became close associates of Mr Giuliani — both hiring him to further their business ventures and serving him in his mission to dig up dirt in Ukraine on one of Mr Trump’s political rivals, former vice-president Joseph Biden.

It is the latter mission that is at the heart of the impeachment case against Mr Trump, whom Democrats accuse of abusing power by withholding desperately needed military aid from Kyiv unless it announced an investigation into Mr Biden’s son, Hunter, and his ties to a Ukrainian energy company.

Mr Giuliani, famed for taking on the New York mafia, is himself now under investigation, according to several reports, with federal prosecutors from the Southern District of New York — the office he once led — scrutinising his past business dealings. Mr Giuliani has denied any wrongdoing.

The taint of scandal is a world away from the acclaim showered on Mr Giuliani after September 11. The adulation was such that people would stand to applaud when he entered a restaurant. He struggled to walk through airports, say former aides, because so many adoring fans would stop him to pay tribute.

Giuliani Partners hung out its shingle in a wood-panelled office near Times Square that was tasteful if unremarkable. Mr Giuliani brought along a cast of loyalists from City Hall, including former city lawyer Michael Hess, police commissioner Bernard Kerik and aide Anthony Carbonetti, among others.

Former New York City Mayor Rudolph Giuliani sits at his new desk following a press luncheon announcing the establishment of a new consulting firm Giuliani Partners and his company's alliance with Ernst & Young in New York, Tuesday, Jan. 15, 2002. sb/Photo by Shawn Baldwin
Giuliani at his desk after announcing a new consulting firm Giuliani Partners and his company’s alliance with Ernst & Young in New York, in 2002 © Shawn Baldwin/FT

“They had done some amazing things for redeveloping things in New York. I was intrigued with how to use those skills again,” Steven Oesterle, a former Ernst & Young vice-chairman who advised Mr Giuliani on his post-mayoral career and took a senior role with him, told a Michigan newspaper in 2007.

A former aide was more succinct. “The business was Rudy,” this person says, recalling how even powerful chief executives were awestruck to be in Mr Giuliani’s company. “People were throwing money at him.” 

The security arm was its anchor, given Mr Giuliani’s early fame for using computers and statistics to better target New York City’s crime-fighting efforts, and his embrace of the “broken window” theory of aggressively policing small crimes to prevent larger ones.

One early assignment was a $4m contract, paid by business leaders in Mexico City, to help tackle crime there. Mr Giuliani made 146 recommendations, all of which were accepted by Mexican officials. Yet they had little immediate impact.

“The improvement in overall crime in 2003 was marginal and in some cases actually went up,” says Facundo Rosas, an official at the attorney-general’s office who dealt with Mr Giuliani, and called his diagnosis “a bit generic.”

The results might have been better, Mr Rosas allowed, if the measures had been applied over a longer period. 

Giuliani Partners would also train security services in Qatar and consult on safety issues for a nuclear plant seeking to have its licence extended in New York. At the time, a spokesman for Entergy, the plant owner, explained Mr Giuliani’s unique stature to the Wall Street Journal: “All you’ve got to do is look at the polls: if he says the plant is safe, people are going to believe him.”

This courtroom sketch depicts from left, attorney Kevin Downing, Lev Parnas, Igor Fruman, and attorney Thomas Zehnle standing before U.S. Judge Michael Nachmanoff, at federal courthouse in Alexandria, Va., Thursday, Oct. 10, 2019. Parnas and Fruman, two Florida businessmen tied to President Donald Trump's lawyer and the Ukraine investigation, were charged with federal campaign finance violations. The charges relate to a $325,000 donation to a group supporting President Donald Trump's reelection. (Dana Verkouteren via AP)
This courtroom sketch depicts from left, attorney Kevin Downing, Lev Parnas, Igor Fruman, and attorney Thomas Zehnle standing before Judge Michael Nachmanoff, at federal courthouse in Alexandria, Virginia, in October © Dana Verkouteren/AP

Mr Giuliani had done only a few stints in private practice as a lawyer in between his terms as a prosecutor and then mayor. Still, a person who worked at Giuliani Partners in those days described the boss as taking eagerly to the private sector. 

“He likes solving big problems,” the person recalls. “He approached Giuliani Partners the way he approached running New York City. It was that Rudy.”

But Mr Giuliani’s very first business engagement has since come back to haunt him, and indicates how his considerable reputation could be put to questionable use. Purdue Pharma turned to him in 2002 when federal prosecutors were beginning to connect a growing opioid epidemic to its sales of OxyContin, the powerful and addictive pain medication. 

During a speech to public relations executives, Robin Hogen, the Purdue executive then trying to counter a blitz of bad publicity, explained that the company concluded it needed to think politically — not scientifically — to defend OxyContin. 

“We certainly need a spokesperson that has the reputation and integrity Mr Giuliani has for this issue,” Mr Hogen told the New York Post at the time.

Giuliani Partners was hired to tighten security at factories where OxyContin was being produced. Mr Giuliani, meanwhile, met several times with the main prosecutor pursuing the case. 

In the end, Purdue’s parent company would plead guilty in 2007 for the aggressive manner in which it marketed OxyContin. But its plea deal spared its executives potential prison terms and allowed the company to continue to do business with the federal government.

Democrats in Congress are now seeking further information about Mr Giuliani’s work for Purdue, which they say resulted in “excessively lenient” handling of the case.

WILMINGTON, NC - AUGUST 9: Former New York City Mayor Rudy Giuliani introduces Republican presidential candidate Donald Trump during a campaign event at Trask Coliseum on August 9, 2016 in Wilmington, North Carolina. This was Trump's first visit to southeastern North Carolina since he entered the presidential race. (Photo by Sara D. Davis/Getty Images)
Giuliani introduces Republican presidential candidate Donald Trump during a campaign event in August 2016 in Wilmington, North Carolina © Sara D David/Getty

There were other hiccups. Mr Kerik, who led the security business, was nominated by President George W Bush in December 2004 to head the Department of Homeland Security but forced to withdraw a week later because of tax issues. He would later serve prison time for tax fraud. 

Giuliani Partners also attracted negative headlines for a $2m contract it signed to advise a start-up, Applied DNA Sciences, which was developing anti-counterfeiting technology. Its main backer had previously pleaded guilty to wire fraud. The company had no revenue at the time but its over-the-counter shares took off on the news of its association with Mr Giuliani.

These episodes did little to blunt Giuliani Partners’ momentum. In 2004 it acquired Ernst & Young’s financial services team for $9.8m to create a boutique investment bank: Giuliani Capital Advisors. The idea was to sell advice on restructurings, mergers and acquisitions and other transactions to its security clients. Mr Giuliani’s designated role was rainmaker. 

“He would bring in the business and they would execute,” recalls a person who advised the firm.

Giuliani Capital Advisors carved out a niche in bankruptcies, working on the restructuring of Delta Air Lines, as well as those of US Airways and Aloha Airgroup. Giuliani Partners also launched a corporate governance consultancy in Japan.

Giuliani Campaigns Throughout Florida On Primary Day....MIAMI BEACH, FL- JANUARY 29: Former New York City mayor and Republican presidential candidate Rudy Giuliani checks his watch as he eats breakfast at Wolfie Cohen's Rascal House on Florida primary day January 29, 2008 in Miami Beach, Florida. Florida voters headed to the polls today to vote on primary day. (Photo by Joe Raedle/Getty Images)
Giuliani checks his watch as he eats breakfast at Wolfie Cohen’s Rascal House on Florida primary day January 2008 in Miami Beach, Florida © Joe Raedle/Getty

But it was well understood in the office that Mr Giuliani’s focus was the White House. He could not run in 2004 because it was to be George W Bush’s second term. So Mr Giuliani began gearing up for the 2008 campaign.

He did so by courting Mr Bush’s Texas supporters. An early backer was Roy W Bailey, a Dallas insurance executive and prominent member of the state Republican party.

Mr Bailey introduced Mr Giuliani to Patrick Oxford, the managing partner of Bracewell & Patterson, the Houston-based law firm that counted Enron and other energy heavyweights among its clients. In 2005, Mr Oxford would bring Mr Giuliani into the firm, renaming it Bracewell & Giuliani. 

The partnership, unveiled at a press conference at the Waldorf Astoria hotel, was supposed to plant Bracewell’s flag in New York while giving Mr Giuliani a steady pay cheque — $1.2m in 2006 — and expanding his network of boosters. Both Mr Bailey and Mr Oxford have since become prominent fundraisers for Mr Trump.

By the time Mr Giuliani formally declared his campaign in February 2007, polls showed him as the clear frontrunner. The next month, he sold Giuliani Capital Advisors to Macquarie, the Australian investment bank, apparently deciding it was too much of a distraction. The price was not disclosed, but said to be about $100m.

The campaign opened a rare window into Mr Giuliani’s wealth, particularly his sideline as a paid speaker, delivering canned remarks about leadership to such groups as the National Grocers Association, Lehman Brothers and the Financial Times. According to a financial disclosure form, he earned $11.3m in 2006 and early 2007 for 124 speeches, some costing as much as $200,000. He demanded private jets to ferry him to his speeches and blocks of hotel rooms for an entourage that included his third wife, Judith Nathan.

For the Giulianis, the presidential campaign was supposed to be a crowning moment. Instead, they crashed. After finishing a desultory third in the Florida primary, the state on which he had pinned his hopes, Mr Giuliani ended up dropping out of the Republican contest in January 2008. Addressing his supporters, a wistful Mr Giuliani spoke of his heritage as the grandson of immigrants, and called for a more inclusive Republican party: “We have to reach out to all Americans — that’s the way to break through the red state-blue state divide.

epa01343472 The heavy weight WBC World Champion Vitaliy Klitschko (L) speaks with former Major of New York city Rudolph W. Giuliani during their news conference in Kiev, 13 May 2008. Vitaliy Klitschko and Rudolph Giuliani discussed about plans and possibility of strategically development of Kiev as European city. Vitaliy Klitschko runs for Kiev?s Major during elections, which will take place at 25 May 2008. Rudolph Giuliani arrived to Ukraine at Monday for three-day visit for Vitaliy Klitschko invitation
The heavy weight WBC World Champion Vitaliy Klitschko (L) speaks with Giuliani during their news conference in Kyiv in 2008 © Sergey Dolzhenko/EPA

The loss not only left his political prospects in disarray but it marked a turning point for his business career, too. Giuliani Partners had drifted in the boss’s absence. Now he was returning, but with less to offer. “The bloom was off the rose and the whole thing was less solid,” says Jon Reinish, a Democratic strategist in New York, noting that, as the financial crisis was gathering pace, there was no longer the same appetite for Mr Giuliani ’s security expertise. 

Mr Giuliani’s next business move was a surprise: a few months later, he plunged into real estate, announcing a partnership with a family-owned developer in Maryland, Berman Enterprises, to raise a $750m property investment fund. Mr Giuliani had little experience in the field. But it had a certain logic: Berman, which had ties to Russia and the former Soviet republics, wanted to appeal to wealthy investors in places where Mr Giuliani was still a draw.

One of those places was Ukraine. Mr Giuliani had first visited in 2003, at the invitation of a local oligarch and politician, Vadim Rabinovich, to participate in a ceremony at a September 11 memorial in Kyiv.

In a few years, Mr Giuliani would become a regular in Ukraine, rubbing shoulders with Kyiv’s mayor, boxer Vitali Klitschko and a politically influential rabbi, Moshe Reuven Azman, who had links to Mr Fruman, and a cast of oligarchs. These are some of the same figures Mr Giuliani would later approach in his capacity as Mr Trump’s personal lawyer, seeking information about the Bidens’ dealings in Ukraine.

At the time, though, he was just another politician-turned-businessman, on the road, and trying to make a living.

Additional reporting by Jude Webber in Mexico City and Roman Olearchyk in Kyiv

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