Rudy's problem is he's NOT conservative enough for the GOP base and he's got lots of baggage -- eg. 3 marriages and a shady business background...McCain has hired some of Rove's dirty tricksters and they will smear Rudy...this is from the conservative Forbes magazine and you may see some of it come out in the campaign...
The Company He Keeps
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By Nathan Vardi 11.13.06
As a businessman, he's been mixing with a sketchier crowd.
Rudolph W. Giuliani sprinted through October as if he were running for national office. He was, of course, campaigning for other Republican candidates--popping up, over a period of ten days, in Detroit; Schaumburg, Ill.; Portland, Ore.; Seattle; New York City; Mystic, Conn.; Concord, N.H.; Providence, R.I.; and Stamford, Conn. Wherever he went, Giuliani was the main attraction. The crowds didn't want to hear much about election 2006; they wanted to know if Rudy was planning to run for president in 2008. "I'll make the decision sometime next year," he announced in New Hampshire. Is the outcome in doubt?
Giuliani is the closest thing in America to a mythic hero. His reputation was forged in the refiner's fire of Sept. 11, which burned away the dross of what had been a successful but contentious two terms as New York City's mayor, a guy who reduced crime, yet picked fights with squeegee men and jaywalkers. In the aftermath of the attacks Giuliani rose to become a transcendent figure of compassion and strength whose courage was acknowledged by Queen Elizabeth II, who gave him an honorary knighthood, and Time magazine, which made him its "Person of the Year" in 2001. That image has helped Giuliani become the most popular politician in the U.S.; recent polls show him leading all contenders--Republicans and Democrats--who are contemplating a run at the White House.
Since leaving office in early 2002, Giuliani has been winning more than political capital. While battling prostate cancer (he won that war) and raising hell in a very public divorce (he is now married to Judith Nathan, his third wife), he has been banking millions of dollars a year. His Leadership (Talk Miramax Books, 2002) figured in an estimated $3 million in advances for two books. He earns as much as $8 million a year on the speaking circuit (FORBES hired him to speak at a conference last year). Giuliani Partners, a management consultancy that oversees Giuliani Security & Safety and Giuliani Capital, has nabbed tens of millions of dollars in contracts and deals.
Rudy is hardly the first ex-pol to cash in on his name. The revolving door between the government and the private sector has always moved briskly. Giuliani Partners was set up to make money and "do good," says Michael D. Hess, a partner and a former Giuliani administration official. "I think people are attracted to the organization because of the image of leadership and trust and integrity," says Steven D. Oesterle, a partner and managing director of the firm. Question is, have Giuliani's moneymaking efforts buffed or tarnished the gold-plated name?
There have been white-shoe clients. Giuliani Partners has advised the likes of insurer Aon (nyse: AOC - news - people ), CB Richard Ellis, the real estate services firm, and Entergy (nyse: ETR - news - people ), the giant New Orleans utility. Nextel Communications (nyse: S - news - people ) paid Giuliani Partners 1.2 million stock options with an exercise price of $4.50. The firm says it sold out at a profit, but before the shares rose to $33 in August 2005, when Nextel was bought by Sprint. It also points to its work for U.S. Foodservice, helping the unit of the disgraced Dutch grocery chain Royal Ahold overcome its accounting and legal headaches.
But there have also been plenty of scuffed-shoe customers. Giuliani Partners and its units have repeatedly become entangled in petty deals that seem unworthy of someone with national aspirations. It has accepted fees from companies with over-the-counter penny stocks, made alliances that have gone nowhere or made little financial sense and engaged with businesses and individuals who have come under scrutiny by regulatory and law enforcement officials. Such associations are astonishing for this tough, Brooklyn-born prosecutor who nailed gangsters like Paul Castellano and white-collar felons like Marc Rich, Ivan Boesky and Michael Milken. It's the sort of carelessness that suggests either poor judgment or inattention. "We do this very careful due diligence," says Hess. "We would never get involved in anything that is at all shady or risky or questionable."
Perhaps Rudy Giuliani the businessman delegates too much. At the firm, he relies on a tight inner circle: Most of the nine partners are veterans of the Giuliani administration. One former executive, onetime NYPD Commissioner Bernard Kerik, has been a conspicuous embarrassment. Kerik joined Giuliani Partners in 2002 and headed the security unit, then known as Giuliani-Kerik. President Bush in 2004 nominated Kerik to head up the Department of Homeland Security. Kerik withdrew his name on the pretext of having once hired a nanny who may have been an undocumented alien. He resigned and sold his shares of Giuliani-Kerik. In June Kerik pleaded guilty to two misdemeanors, admitting that while he was a public official he accepted $165,000 in apartment renovations from a contractor. He also admitted that he failed to report a $28,000 loan from a real estate developer and agreed to pay $221,000 in fines.
Still, Giuliani has continued to permit those closest to him to drag his name into potentially compromising situations. Example: the agreement with Lighting Science Group, a Dallas firm whose shares trade on the o-t-c bulletin board. The deal came to Giuliani last year through Roy W. Bailey, the former finance chairman of the Texas Republican Party and current Giuliani Partners managing director. "I have known Roy for 20 years," says Ronald Lusk, Lighting Science's chief, who agreed to pay Giuliani Capital, for help in raising money and finding clients, $150,000, plus a warrant to purchase 1.6 million shares at 60 cents.
Shares of the company, which proposes to finance LED (light-emitting diode) lights for parking garages, recently traded for 25 cents. Lighting Science and Giuliani Capital have also set up a joint venture to split whatever energy savings parking garages eke out on their utility bills from LEDs the company gives them gratis. This is the third incarnation of Lusk's enterprise (it lost $412,000 on $137,000 of revenue for the six months ending June 30): It started out as a nursing home operator, then morphed into a data management business that wound up in bankruptcy court in 2002 before finding new life in lights. "We like the technology," says Oesterle.
Friendship also dragged Giuliani into Command Security, another o-t-c bulletin board stock, which rents out security guards and lost $100,000 on $85 million of revenue in the year ended Mar. 31. Bruce Galloway, Command's chairman and chief backer, also runs the $45 million (assets) Galloway Capital Management in New York. To snag Giuliani, Galloway turned to a business associate, Richard Chwatt, co-owner of Jericho State Capital in Boca Raton, Fla. "Richard Chwatt's wife is very, very dear friends with [Rudy Giuliani's wife] Judith Nathan, and that's how we got the relationship," says Galloway. Not so, says, Giuliani's Hess: "The business, I do know, did not come about through the social relationship of the two women."
For a year's work--revising the employee manual, introducing new clients, having Giuliani host a breakfast at Manhattan's Yale Club--Giuliani Security & Safety will earn $2.1 million. Chwatt was rewarded for making the introduction: Jericho State Capital got $90,000 and a warrant for 350,000 shares exercisable at $2 (shares now trade for $2.60), and will receive $7,500 a month and a warrant for 150,000 additional shares if the contract is renewed, which is "likely," says Galloway.
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