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In Private Sector, Giuliani Parlayed Fame Into Wealth
In June 2004, the government settled the case by requiring the Purdue Pharma affiliate that ran the Totowa plant to pay a $2 million civil penalty. The drugmaker did not have to admit wrongdoing or take its product off the shelf.
James W. Heins, Purdue Pharma's senior director of public affairs, said that "today our recordkeeping at all of our manufacturing facilities fully comply with applicable state and federal regulations." As for Giuliani Partners' work, he said, "we can say that we are pleased."
Nagel, who led the investigation, said Purdue got off too easily. "I would not have been happy unless we put them in shackles in front of the courthouse," she said.
Last week, Purdue settled another federal investigation when the company and three current and former executives pleaded guilty to falsely marketing OxyContin in a way that played down its addictive properties. People involved in the case said Giuliani met with government lawyers more than half a dozen times and negotiated a settlement that the sides agreed to in principle.
Though Giuliani personally approves clients, not all come with unblemished backgrounds. In December 2002, Giuliani Partners agreed to a lucrative contract to represent Florida-based security startup Seisint Inc., created by a close friend, Hank Asher. Seisint's data-mining product -- code-named Matrix -- caught the attention of federal and state authorities after Sept. 11 because the firm said that by searching through billions of public records, it could identify potential terrorists.
But Asher harbored a secret: In the early 1980s, he had smuggled kilos of cocaine from Colombia into Florida aboard his private jet. Asher was never charged with a crime but disclosed his past to federal agents later in life when he helped an effort to rid a Florida community of drug smugglers.
In documents introduced in a 2004 lawsuit, dissident Seisint shareholder Gerald Brauser alleged that Giuliani was hired to use his "influence with the federal government to enable Mr. Asher to take an active role in Seisint as a chief executive officer despite the allegations about his drug dealing." Giuliani and his firm were aware of the problems in Asher's past before taking the job, sources familiar with the situation said, speaking on the condition of anonymity because the work was covered by a confidentiality agreement.
The Bush administration committed $12 million in grants for Matrix, and more than half a dozen states joined. In the summer of 2003, newspapers disclosed Asher was collaborating with federal and state officials on Matrix despite his drug-running past, and he resigned from the company. Giuliani would later give a public defense of Asher, without mentioning he had been paid by Asher's company.
"I have a great admiration for what he's doing," Giuliani told a Florida newspaper in January 2004. "People do a lot of things in life. It's a question of what you can do to make up for it, and Hank has done a lot."
Matrix also faced mounting criticism from privacy advocates over its data mining. The Bush administration ended its funding in 2005, and most states dropped from the project in the face of lawsuits and bad publicity.
The turn of events prompted some Seisint investors to reexamine the contract Giuliani had negotiated. What they found startled them: Giuliani Partners was to receive $2 million a year in consulting fees, a commission on sales of Seisint products, and 800,000 warrants to buy company stock, according to the minutes of the December 2002 Seisint board meeting in which the contract was approved. Knowledgeable sources said Giuliani's firm got most of that compensation, with the warrants proving particularly valuable because Seisint was sold to data giant LexisNexis for $775 million. Brauser sued Seisint's board, alleging Giuliani was not worth the money. "The Board of Directors allowed the corporation to waste corporate assets by allowing the company to enter into a contract for which the company received no benefit," Brauser alleged.
When LexisNexis bought the company, Brauser's lawsuit was dismissed by agreement of both sides. Asher and Seisint officials declined to be interviewed. LexisNexis, the current parent company, distanced itself from the Giuliani contract, saying it was terminated shortly after Asher was jettisoned from the company.
Whether clients of Giuliani Partners hired the firm for its work or for its name has been an issue more than once, even in the case of the National Thoroughbred Racing Association, which Hess cited as one of the firm's successes.
In that instance, the industry group hired Giuliani's firm three weeks after an insider had rigged wagers on the Breeders' Cup and held all six winning tickets in the Pick Six, creating a $3 million payday. "Giuliani had a huge name," recalled Frank Angst, a senior writer at Thoroughbred Times. "People trusted that he would help the industry get its act together."
Angst said it soon became clear the association's intention for Giuliani's firm was less about finding security upgrades than it was about recovering horse wagering's reputation. Nine months after being retained, Giuliani Partners helped the racing association produce a lengthy report on the security issues facing the industry, making three major recommendations for protecting the wagering infrastructure. The industry group, however, has yet to fully adopt any of the recommendations, according to Angst. An association spokesman declined to comment and would not disclose how much Giuliani Partners was paid.
In 2002, Giuliani Partners landed a $4.3 million contract from a Mexican civic organization to advise authorities in Mexico City on how to tackle the city's vexing crime problems. Giuliani touted the deal during a splashy nighttime tour through the city's most dangerous neighborhoods, and his firm delivered a 146-point plan that the city's public security secretary, Marcelo Ebrard, trumpeted as an antidote to the city's entrenched crime.
Ebrard, now the city's mayor, said in a recent local television interview that many recommendations were implemented; the city put panic buttons on public buses and put surveillance cameras in high-crime areas. But other prominent figures disagreed. Jorge Castañeda, former foreign minister of Mexico, called the contract a "$4 million publicity stunt." Jorge Montaño, former Mexican ambassador to the United States, said the "people who paid Mr. Giuliani and his associates really made a great mistake. With all honesty, nothing that they suggested was successful."
The problem, Montaño said, was that Giuliani expected ideas that worked in New York to work elsewhere. "His recommendations were not based on the Mexican reality," Montaño said.