Really Rich Rudy

In 2001, Rudy Giuliani was Time magazine’s Person of the Year. By 2002, he was Consulting Magazine’s Consultant of the Year. And in another year or two, it was widely assumed, he’d be on another step in his rise, whether as Vice President or in a cabinet post. Then it would be on to the White House.

Instead, Mr. Giuliani has dug into his position in the private sector, where he has found unprecedented success in a new kind of consultancy that sells today’s highest-valued commodity: pure, crystalline security.

Mr. Giuliani has become a tycoon. In a 2002 divorce filing, he estimated his income from paid speeches alone-unadulterated Rudy- at $8 million. His business, dismissed at first as a resting place for his political ambitions, grossed tens of millions of dollars last year with more than 50 employees and marquee clients like Merrill Lynch. A sense of the firm’s scale emerges with the fact that it recently acquired a midsize investment bank with 140 employees. On March 29, Mr. Giuliani announced that he’d also become a partner in a Houston law firm.

Mr. Giuliani continues to position himself for a bid at the Republican nomination for President in 2008. New York Republicans would love to see him stop by the Governor’s mansion in Albany along the way. In public polls, he defeats Senator John McCain in a putative Presidential primary and Eliot Spitzer in a Governor’s race.

But Mr. Giuliani’s success in business has not been politically calibrated. It has been explosive, unorthodox and often impolitic, just like his eight years in City Hall. And as, until he was remade by Sept. 11, his draining Mayoralty seemed to rule out any bid for higher office, the comforts and the imperatives of business success could well mean that he will never be President.

A close examination of the details of the front-runner’s choices in his career as a business mogul show that success, growth and money seem to rank higher than the careful calculations of Republican primary politics.

The most vivid recent example occurred on Feb. 9 in Columbia, S.C. Mr. Giuliani had initially been booked by the South Carolina Hospital Association through the Washington Speakers Bureau to speak for his usual $100,000 fee. But then a massive tsunami devastated South Asia and “we just didn’t feel that a big old party was the right thing,” said Patti Smoake, the hospital association’s spokeswoman.

Instead, the South Carolinians held a fund-raiser called “From South Carolina to South Asia.”

Mr. Giuliani agreed to speak at the new event. He even wrote a $20,000 check to the Red Cross, the event’s beneficiary, according to figures cited by a South Carolina hospital official and obtained by The Observer. He batted away the inevitable political speculation that accompanied his visit to the crucial Republican primary state, telling a local reporter he was visiting “because I enjoy coming to South Carolina and because this is a worthy cause.”

Mr. Giuliani didn’t mention it at the time, but he also walked away from the tsunami benefit with $80,000 at a time when celebrities from Bill Clinton and the first President Bush to George Clooney were donating time to the relief effort. There was nothing illegal, or even particularly unusual, about his taking a fee from a charity event. But taking the money was not the move of a man whose political future depends on the good will of the voters of South Carolina, the decisive state in the 2000 Republican primary widely viewed as the immovable object between a socially liberal Republican like Mr. Giuliani and the nomination.

“It is not the gesture of someone who’s serious about running for the Republican Presidential nomination or someone who is getting sound political advice about South Carolina,” said Nelson Warfield, a Republican political consultant who was press secretary to Bob Dole’s bid for the Presidency. “If you want to be President, you have to make some sacrifices, and one sacrifice would be giving it up for free to the good people of South Carolina and the tsunami victims.”

The former Mayor’s decision to profit from a fund-raiser for tsunami victims in a politically sensitive state is only the most vivid example of how small a role his political ambitions have apparently played in his personal calculations. At times, he has shown a willingness to trade in political capital for, well, real capital. He has given his speeches to a wide range of organizations around the world with little apparent attention to American politics. And his firm hasn’t been shy about taking on politically unpopular clients, including the owner of the Indian Point nuclear power plant in Westchester and the pharmaceutical industry.

The senior managing director of Giuliani Partners, Michael Hess, rejected the notion that there’s any friction between business and politics. Their clients, he said, are carefully selected and vetted, and the work they do involves everything from making the nuclear plant safer to securing the supply of prescription drugs.

“We take these things on if we believe there’s good to be done,” he told The Observer. “It’s not influenced or conflicted by Rudy’s possible political future.

“We would not rep some kind of shyster place or a company that is doing the wrong thing or fooling the public,” he said. “We’re looking to make sure that projects we represent are good for the people and good for the economy.”

Whether this confidence is a sign of Mr. Giuliani’s conviction that he can sweep all before him, a quiet decision not to re-enter politics, or a simple appreciation for the money that his hero status is helping him to earn, possible opponents in New York and Washington greeted the South Carolina revelation as an unsought gift.

“I assume that the people who gave to the charity assumed their money was going to tsunami relief, not Giuliani relief,” said Howard Wolfson, the spokesman for the New York State Democratic Party. “It raises the same old questions about Mr. Giuliani’s judgment, that somehow the same standards and rules that apply to others don’t apply to him.

“It’s wrong to take money for charity appearances. Mr. Giuliani ought to know that,” said Mr. Wolfson, who is also an advisor to Senator Hillary Clinton.

Mr. Giuliani’s spokeswoman, Sunny Mindel, told The Observer that the former Mayor gave generously to tsunami relief after the wave hit in December, and confirmed that he’d given money again in South Carolina, though she wouldn’t discuss the amount. Mr. Hess said Mr. Giuliani’s contribution was twice what the Hospital Association had suggested.

The former Mayor’s rise to private wealth comes at a time when, for career public servants, the question of money is an increasingly fraught one. The salaries of their corporate counterparts have shot up in recent decades, with the average compensation of America’s top C.E.O.’s more than tripling to $10.7 million in 2003 from its 1990 level, according to a survey of 50 of the country’s largest companies by Pearl Meyer and Partners. The salary of the Governor of New York, by contrast, rose to just $179,000 in 2004 from $130,000 in 1990, and even the President’s salary has only doubled in that period, to $400,000.

In his last year as Mayor of New York, Mr. Giuliani earned $195,000. Now, between Giuliani Partners, his speeches and a $3 million two-book deal, he makes enough to afford an East Side co-op apartment which was listed at $5.25 million; a $3.2 million Bridgehampton house; not to mention a $6.8 million divorce settlement with his second wife, Donna Hanover, plus monthly child-support payments that add up to more than a Mayor’s salary each year.

Meanwhile, the former Mayor has front-row seats on a tabloid-dominating saga: the tortured financial life of the current New York Governor, his onetime rival George Pataki. Mr. Pataki’s attempt to revive his awful poll numbers and sagging prospects was sidelined early this year by a set of reports about his and his wife’s intense attention to their family’s finances. Their efforts ranged from, according to reports in the New York Post, billing the state Republican Party for the wages of a domestic servant to finding consulting jobs for Mrs. Pataki with political allies, to pushing copies of Mrs. Pataki’s children’s book on business leaders.

It’s a circumstance Mr. Giuliani appears unlikely to face, even if he does choose to take the deep pay cut that the Governor’s job would entail. The extent of his savings is anybody’s guess, but he appears from public records to have paid in cash for the Hamptons house.

The speaking fees are just a profitable sideline. His main project is Giuliani Partners, whose status-a bit rocky after Bernard Kerik’s political implosion-seemed to stabilize with the announcement in March that Mr. Giuliani would be bringing aboard the top federal lawman in New York, F.B.I. Assistant Director Pasquale D’Amuro, to replace Mr. Kerik. Mr. D’Amuro retires from the F.B.I. on March 31 to become the C.E.O. of Giuliani Security and Safety L.L.C.

“We haven’t had any clients upset about [the Kerik affair] and the addition of Pat D’Amuro, I think, raises it to a new level,” Mr. Hess said.

The hire came four months after an acquisition that showed the scope of Mr. Giuliani’s ambition for his business. Last December, his firm acquired the accounting and consulting firm Ernst and Young’s American investment-banking practice, with 140 employees and six offices around the country. Giuliani Partners was created in 2002 in Ernst and Young’s midtown offices.

The takeover was a bravado move that put Mr. Giuliani’s achievement in perspective. It also made financial sense, said Richard Bove, an analyst at the investment bank Punk, Ziegel and Company.

“If you do consulting assignments you can make x dollars, but if you can take those consulting assignments forward into an actual transaction where you generate new funds for a company, you’re going to get a much higher return for the same activity,” Mr. Bove said.

And acquiring an intact bank neatly sidestepped Mr. Giuliani’s lack of financial expertise.

“He’s not going to be involved in the actual execution of a given situation,” Mr. Bove said. “The way corporate finance operations work, you have a front man who’s out there bringing in the business, and you have professionals inside the business doing all the work.”

The new investment-banking practice and sturdy security consultancy are part of a business that has allowed Mr. Giuliani to straddle the public and private sectors in America, a titan in each. Other former politicians have retired to make modest fortunes as lobbyists or influence peddlers. Mr. Giuliani, however, has not focused on drumming up government business for his clients, as a detailed New York Times examination of his business last year made clear.

That doesn’t mean, however, that the former Mayor’s business isn’t intensely political. The core of his firm’s practice is aiding companies in trouble, and as often as not that trouble is-at least partially-political. The client list often reads like the list of witnesses before Congressional committees in some of the highest-profile corporate crises of the last few years: Along with Entergy Nuclear Northeast, which owns the Indian Point nuclear plant, they include the manufacturers of the painkiller OxyContin, which had become popular as a recreational drug; the scandal-plagued National Thoroughbred Racing Association; and a pharmaceutical-industry trade group, for which Mr. Giuliani produced a study suggesting that imported prescription drugs may be dangerous.

Mr. Giuliani has generally avoided taking on a spokesman’s role for his consulting clients-valuable as that might be. Mr. Hess said the firm insists on doing “substantive” work before announcing a client. But the former Mayor did take a high-profile role on the pharmaceuticals report, holding an airport press conference to discuss the dangers of imported prescription drugs. He also put his stamp on Mexico City’s attempts to cut crime with a high-profile visit.

And there’s little doubt that the Giuliani name and the Giuliani mystique-along with his record of success in New York-are core business assets.

“Working with Giuliani lends a certain credibility that you’re doing something; you’ve hired the best person available to address your problems,” said Tom Rodenhauser, a management-consulting consultant. (His real job.) “There are a lot of boutique consulting firms where you’re essentially buying the founder’s presence, and some clients need that.”

But Ms. Mindel stressed that the firm picks and chooses among potential clients, and said that Mr. Giuliani’s reputation is not for rent.

“We are not interested in the type of client who might want to come to us and not want substantive work and just want to use the name,” she said.

Giuliani Partners did recently attract notice by taking on another controversial client, Applied DNA Sciences, a California penny-stock company bankrolled by investors with a history of securities-related charges. According to USA Today, Giuliani Partners signed a one-year agreement entitling them to $2 million in fees and 21 million of the company’s shares, which were worth $10 million at the time of the deal. “It has all the markings of something Giuliani himself would have looked into as U.S. attorney in the old days,” Stephen Meagher, a former federal prosecutor, told the paper in describing Applied’s soaring stock despite its business record and lack of profits.

The business denied that the Giuliani deal had been key to driving up its stock price, which it noted rose gradually after the deal.

Other major clients are uncontroversial. They include Nextel Communications, which is wrestling for a segment of the radio spectrum, the financial services company Aon and the real-estate firm CB Richard Ellis.

Still, it’s easy to imagine Mr. Giuliani’s work for Entergy surfacing in one of Eliot Spitzer’s campaign advertisements should Mr. Giuliani make the run for Governor-a move many Republicans are hoping for, but which Mr. Giuliani has shown no sign of making.

“In 1989, people criticized him for clients in his large law firm he never even represented,” said former Public Advocate Mark Green, an old Giuliani antagonist. “You have to assume it will occur in an ’06 or ’08 race. He’s not just a lawyer representing them in procedural matters, but has chosen, say, Indian Point as a commercial entity he believes in.”

Mr. Hess dismissed that concern.

“We don’t say, ‘Oh my goodness, we can’t represent a pharmaceuticals company or can’t represent a nuclear company because it might be used in a political ad at some point in the future,'” he said. “If someone is going to use it, they’ll use it, and we’ll answer.”

So far, however, by fiercely guarding the details of his privately held company, Mr. Giuliani has generally avoided attention to his business dealings. His paid speeches are typically closed to the press.

The only real public questions over his speeches arose in Adelaide, Australia, where Mr. Giuliani spoke to the Queen Elizabeth Hospital Research Foundation. The foundation’s director, Maurice Henderson, later went public with his complaints that Mr. Giuliani had been paid the equivalent of $230,000 while the foundation took in just over $15,000 from the fund-raiser. Nelson Mandela, Cherie Blair and the former President Bush had booked speeches through the same promoter who arranged Mr. Giuliani’s speech and fees, but Mr. Henderson told The Observer that some of the responsibility lay with the former Mayor.

“It’s his name out there,” he said. “If he’s going to let these promoters go out and represent him, he really ought to know what the hell they’re doing.”

In one other case, a fund-raiser for the Red Cross in Vancouver, Mr. Giuliani’s fee seems to have roughly equaled the event’s receipts, which were announced to be $100,000-the same amount as he was paid to help raise the money.

Back in South Carolina, the Hospitals Association still hasn’t made public the amount it raised from Mr. Giuliani’s speech. The fees, Ms. Smoake said, were paid by sponsors, and donations collected at the benefit will go directly to the Red Cross.

However, Ms. Smoake said that, since the benefit’s receipts hadn’t finally been tallied, she was not even sure whether the benefit’s total take had exceeded Mr. Giuliani’s fee.

Daniel Borochoff, the president of the American Institute of Philanthropy, a charity watchdog group in Chicago, dismissed the argument that since sponsors paid Mr. Giuliani’s fee, there was no loss to the charity.

“The fee was a charitable donation that could be going to the tsunami,” he said. “Money is fungible, and when it’s spent on one thing, it’s not available to anything else.”

But the Hospital Association, Ms. Smoake stressed, remains glad that Mr. Giuliani came, and grateful for his personal contribution.

“He was very, very supportive of the cause,” she said.

-with reporting assistance by Joseph Tuzzo Really Rich Rudy