Cashing In on Catastrophe

Even before he left office as New York City's mayor at the end of 2001, Rudolph Giuliani was telling reporters about Giuliani Partners, the management consulting firm he intended to open up with his old City Hall team. The partners were more of a Giuliani posse than a group of peers. Michael Hess, the former city corporation counsel, was named managing partner. Fire Commissioner Tom Von Essen became a senior partner, as did Police Commissioner Bernard Kerik, whose later nomination as head of Homeland Security would go down in flames after revelations that his concern for following the rules and avoiding ethical conflicts appeared close to nonexistent. The only partner who came from outside the City Hall crowd was Roy Bailey, former finance chair of the Republican Party of Texas, who'd gotten to know Giuliani when he helped raise money for Giuliani's abortive 2000 Senate campaign against Hillary Clinton. Bailey helped finance the new company, whose reported start-up payroll was $10 million a year.

The most valuable commodity the new company had to sell was not management expertise but the aura of America's Mayor--the man whose cool-headed 9/11 leadership had taken on mythic proportions. While Giuliani's first term as mayor brought him renown as a crime fighter who made New York livable again, his second term was a slowly escalating disaster before 9/11. The city, which admired his feisty stubbornness when the enemies were drug dealers and cop killers, had grown tired of a seemingly endless series of political catfights with school chancellors, black neighborhoods, museums, rival politicians and even hot-dog vendors. And, as would become clear later, Giuliani had allowed the city to meet the disaster unprepared in myriad ways, ignoring the well-noted lessons of the first attack on the towers, which occurred less than a year before he became mayor.

Now, with Giuliani traveling the country as a 2008 Republican presidential hopeful, his record both as mayor and afterward is coming under increasing scrutiny. In no area is there more to examine than in the story of Giuliani Partners.

Giuliani Partners' initial press releases religiously avoided any mention of the attacks--Rudy is described as the man who "returned accountability to city government and improved the quality of life for all New Yorkers." But when their clients, who were very frequently companies in trouble, told the world they had just hired a renowned team of "crisis managers," no one pretended their critical expertise came from handling snowstorms or subway fires.

Before long, Giuliani Partners was all over the map, consulting on security for nuclear power plants one day, on efficient bulk purchasing for New York-area hospitals another. It signed on to help the troubled, scandal-plagued WorldCom establish a "model form of corporate governance" and to help Delta Airlines with its bankruptcy. It agreed to review the National Thoroughbred Racing Association's electronic betting systems after a race-fixing scandal. It formed a series of investment alliances that purchased interests in everything from a Tokyo wind-power company to a California firm, CamelBak, which made backpacks with sipping tubes for people like long-distance bikers and soldiers in desert postings. (Kerik was enthusiastic; it was "a perfect mechanism to stay hydrated," he told the Daily News, envisioning every New York City firefighter equipped with a CamelBak as a matter of course. "If I was a fireman I'd want one.")

The Partners also rekindled relationships with some old friends who played central roles in some of the biggest city failures on 9/11. Among them was a "strategic partnership" with CB Richard Ellis, the successor of the firm that had found the city the perfect location for a command center--high above lower Manhattan in one of the World Trade Center towers. The announcement of the deal, in which Giuliani Partners would be advising Ellis on "location and site assessment" as well as on emergency preparedness and fire safety, was made without any discernible sense of irony.

Cashing in on 9/11 took many forms. In 2004 Giuliani Partners signed up Pharmaceutical Research and Manufacturers of America, which was concerned about the popularity of drug re-importation. American pharmaceutical companies sold their product at much lower prices in Canada and Europe, where national price controls were in effect. The big profits came in the United States, where Congress had vigilantly guarded the drug manufacturers' right to charge what the market would bear. But American senior citizens had begun taking bus trips to Canada to buy their medication, and, in a far more ominous development for the drug companies, members of Congress were talking about making it legal to import cheaper prescription drugs from across the border. PhRMA wanted Giuliani Partners to prepare a report on the safety of these practices.

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