business

Team Giuliani, Back in Business

New York's ex-mayor and his City Hall posse are now consultants -- a lucrative move, and a savvy one if he plans to reenter politics

Call it the hero syndrome. A straight-talking tough guy gets a top job and starts ripping up the place. He grates on people. But as conditions start to improve, they learn to love him. By the end, he's almost deified, and corporate leaders clamor for his golden touch. First, a $3 million deal with Talk Miramax for two books. Then, speaking engagements that pay up to $100,000 a pop. And, of course, the high-profile consulting venture.

Former General Electric chief Jack Welch? Nope, Rudolph Giuliani. On Jan. 15, two weeks after leaving his job as mayor of New York City, he officially opened Giuliani Partners in the midtown offices of Ernst & Young. Unlike Welch, who is sharing his wisdom with clients as a high-priced solo operator, Giuliani has taken a hefty chunk of his Gracie Mansion team in tow.

FAMILIAR FACES.

  The new business experts include former city employees such as Chief of Staff Anthony Carbonetti, Communications Director Sunny Mindel, Counsel Dennison Young, Jr., political advisor Bruce Teitelbaum, Special Counsel Dan Connolly, and Corporation Counsel Mike Hess. Giuliani even has two other celebrity leaders on board: former Fire Commissioner Thomas Von Essen and ex-Police Commisioner Bernard Kerik, who has his own book in stores. The most direct business expertise comes from an outsider, longtime friend and fundraiser Roy Bailey, a Dallas insurance executive who will be keeping a particular eye on the new consultancy's business development.

In total, there are five managing partners and 15 associates, all of whom are friends or former colleagues of Giuliani. "This was the team I relied on to reorganize city government," he says, noting that his choices were part strategic and part personal. "We like each other, and we work well together."

The former mayor -- who joked he doesn't want to be called "Sir" until his knighthood comes through -- wouldn't discuss either specific clients or the financial arrangements of his firm's "strategic partnership" with Ernst & Young. But he did say he's spoken with four or five clients so far, including at least one foreign government. While other governments and public-sector organizations are an obvious target, Giuliani says "the main focus and the excitement will be taking many of the things that worked in turning around New York City and making them work in the private sector."

That includes everything from dispensing advice on crisis management and finances to assessing or designing security programs. Says Giuliani: "If someone comes to us and says: 'I want you to think through the security problems we might have -- the normal ones and the new ones in light of the new world we appear to be living in,' I know I can turn to Tom Von Essen, who I've done this a thousand times with in city government."

APPLICABLE INSIGHTS?

  When it comes to advising business leaders, former top fireman Von Essen obviously plans to assume a much broader role than fire safety. Among other things, he expects to draw on his experiences in labor relations and the merger of his department with Emergency Management Services, as well as security and safety planning. And, Von Essen jokes, Giuliani "has put me in charge of hostile takeovers." Whether he would have been offered such a plum post prior to September 11 was not revealed, but Von Essen says the tragedy allowed each man to get a profound sense "of how we both reacted in extreme situations."

Even so, some might question the breadth of strategic insights that a veteran fire chief, however heroic, can offer Corporate America. While few doubt the charisma or skill set of New York's hero mayor and his team, even fans say there's a limit to how broadly they can capitalize on their experiences in city government. As Richard Grasso, chairman and CEO of the New York Stock Exchange, says: "This isn't designed to be a competitor to Booz Allen." Instead, Grasso thinks the partnership will evolve to become more of a think tank that offers concentrated expertise on a range of topics.

That said, Grasso marveled at the former mayor's ability to reach beyond his constituency after September 11 in order to quickly work out solutions with the state government, federal emergency officials, and other communities. In negotiating the various details and power blocs to ensure a quick recovery, Grasso says: "He was the consummate quarterback's quarterback." The Big Board's chief, for one, doesn't doubt that the new venture has a lucrative future.

Despite the obvious challenges of commercializing and profiting from eight years of city government expertise, competitors are also not about to write them off. Michael Cherkasky, president and CEO of Kroll, Inc. global risk consultancy, believes that the star power of Giuliani, combined with his team's now-infamous record in turning around New York City and managing the terrorism crisis, will prove particularly attractive to governments with ties to the U.S.

SUPPORT STRUCTURE.

  Cherkasky cites the mayor's techniques in dealing with crime problems, fiscal hardship, and terrorism as some of the drawing cards. But he adds that he's "not sure how it's immediately transferable to the corporate market." Among other things, Cherkasky points out that in-depth security assessments require intelligence gathering, architects, engineers, and a larger infrastructure that's not immediately apparent in the fledgling partnership.

There are, of course, the global resources of Ernst & Young. Chairman James Turley notes that, among other things, the tax-and-business consultancy works with clients on technology and systems risk. "What better teaming than to match the safety, security, and terrorism expertise that Giuliani Partners has with the deep systems-risk capabilities that we have," says Turley. "What we're all about, in many ways, is helping clients manage risk."

What E&Y also has is money. Not only is it funding the working capital of Giuliani Partners, it's also participating in Giuliani Capital Partners. The private equity joint venture will invest in promising high-growth companies, with a particular focus on security and protection. Giuliani's folks will identify and even counsel the candidates, perhaps taking equity in exchange for services, while E&Y will handle financial advice, due diligence, and, of course, any tax consulting connected with the activities.

Although Giuliani and Turley laid the groundwork for the consultancy prior to September 11 (they met four days before), the attacks and resulting publicity surrounding Giuliani certainly seem to have honed the focus of his new business. "It's hard to think in a pre-September 11 world," the former mayor says. "But, even before that, people might have come to us about issues surrounding crime or normal security issues. September 11 just dramatized that."

RESTLESS RUDY?

  The question that's likely to loom over the nascent business is how long its celebrated chief will stay at the helm. While Giuliani may be content to get rich off his expertise right now, he could well throw his hat into the political arena again soon. Among other things, the former mayor dabbled in the New York Senate race against Hillary Clinton before backing out because of prostate cancer. He also tried unsuccessfully to extend his term as mayor.

At the moment, he says: "My plan is to develop this business, and do the other things I'm doing, and be involved in politics by helping other people." But he doesn't rule out a future leap into the spotlight. And when he does, he'll no doubt have a ready-made team to make the next transition.

By Diane Brady in New York

Edited by Beth Belton

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