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A rocky road to riches

With Giuliani's soaring worth after 9/11 came private-sector missteps.

January 25, 2008|Bob Drogin | Times Staff Writer

BOCA RATON, FLA. — On June 22, 2004, Rudolph W. Giuliani made a bold promise in the fight against terrorism.

The former New York mayor told reporters that his newest business venture, called Bio-ONE, would swiftly eliminate deadly anthrax from a tabloid newspaper office. The site still stood padlocked, more than 2 1/2 years after the worst biological terrorism attack in U.S. history.

"You will see me walk through those doors," pledged Giuliani, who is now seeking the Republican presidential nomination.

But Giuliani never entered the building.

Health authorities did not lift the quarantine until February 2007 -- long after Bio-ONE had quit the cleanup in a dispute over how to disinfect photos of Bigfoot and other tabloid targets. A rival company was hired to finish the job.

The episode left local officials disappointed.

"I figured the home of the National Enquirer was going to be the home of a national hero," said Steven Abrams, Boca Raton's mayor. "That obviously didn't happen."

The case marks a little-known setback in Giuliani's high-powered business career. He has earned tens of millions of dollars over the last six years from speeches, investments and business deals. But he also has foundered at times, despite his political firepower.

Now his once-promising White House bid is in trouble. After near-bottom rankings in every electoral contest so far, Giuliani is staking his candidacy on Tuesday's Florida primary. His campaign probably cannot survive a loss here.

Giuliani's celebrity as a leader who rallied New York after Sept. 11 has been key to both his past business success and his current political ambitions.

In 2001, his last year in office, Giuliani claimed a net worth of about $1 million. In 2006, according to campaign records he filed last summer, he reported more than $17 million in income and about $50 million in stocks, business interests, real estate and other assets.

He earned $11.4 million that year giving speeches to trade conferences, business associations, schools and other groups. He delivered hundreds of such speeches over the last six years, including at least 30 overseas, charging fees of $100,000 to $300,000 each.

The topic rarely varied. As the keynote speaker for the Cosmetic, Toiletry and Fragrance Assn.'s annual meeting in Boca Raton in March 2005, Giuliani focused on "leadership during crises," especially his own role during New York's "darkest hour," according to the group.

Giuliani also capitalized on his fame by heading Giuliani Partners, a management consulting group he founded with former aides. Based in New York, the boutique firm reportedly has earned more than $100 million with contracts to help clients improve corporate governance, financial planning and crisis management.

But progress came in fits and starts.

Giuliani and his team bought and later sold an investment banking unit that saw a sharp drop in revenue the first year. Another subsidiary, set up to focus on safety and security, lost clients after the director, Bernard B. Kerik, was forced in 2004 to withdraw from consideration as secretary of Homeland Security. Kerik, who served as police commissioner under Giuliani, is awaiting trial on federal charges of fraud and tax evasion.

The Giuliani group's first client, Purdue Pharma, showed the limits of his celebrity.

Purdue Pharma produced OxyContin, the nation's No. 1 prescription painkiller. Abuse of the narcotic analgesic, known on the street as hillbilly heroin, had exploded to nightmare levels. The U.S. Drug Enforcement Administration director declared that OxyContin had caused or contributed to 465 deaths in two years.

In May 2002, Michael Friedman, Purdue Pharma's chief operating officer, called Giuliani "uniquely qualified" to save his company's battered reputation.

"The management experience, law enforcement background, leadership and integrity of Giuliani Partners and its CEO Rudolph W. Giuliani are tremendous assets to our company," Friedman said in a press release still posted on the Giuliani Partners website.

Over the next two years, Giuliani appealed to members of Congress, federal and state prosecutors, and the head of the DEA to keep OxyContin on the market while seeking ways to curb prescription abuse. After the DEA documented theft at Purdue Pharma's manufacturing plants, Giuliani Partners sought to improve security and record-keeping.

"We believe that government officials are more comfortable knowing that Giuliani is advising Purdue Pharma," Howard Udell, the company's chief lawyer, said in a statement issued by Giuliani Partners.

But John L. Brownlee, the U.S. attorney in western Virginia, made plans in 2006 to indict Purdue Pharma and three of its top executives -- including Friedman and Udell -- for misleading the public about OxyContin's dangers. Giuliani met or spoke by phone with Brownlee six times to argue for his client, according to the prosecutor's office.

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