Cashing In on Catastrophe | The Nation


Cashing In on Catastrophe

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Giuliani Partners was not hired to defend Nextel's performance, however. It was retained instead to stress how important it was to protect the public from Nextel interference, and to promote the company's own self-serving solution. Only a few weeks after the attack, Nextel filed a proposal with the FCC, beating its own chest about the need to end its interfering ways. It offered to surrender some of its 800-megahertz frequencies to public safety, cutting the interference. In exchange, it wanted new, continuous spectrum from the FCC estimated to be worth a minimum of $4.9 billion. On May 2, 2002, when Giuliani announced his company's partnership with Nextel, the former mayor talked about the interference problem: "Giuliani Partners is committed to helping resolve these concerns and improving the ability of public safety authorities to speak with one another during both day-to-day operations and crisis situations." He also told the New York Daily News that he had reviewed the varied plans for fixing the problem and had decided that Nextel's was the best--"without any doubt."

This article is adapted from Grand Illusion: The Untold Story of Rudy Giuliani and 9/11, just published by HarperCollins. Copyright © 2006 by Wayne Barrett and Dan Collins.
Published by arrangement with HarperCollins Publishers. Anna Lenzer was the research assistant for the book. Research support was provided by the Investigative Fund of The Nation Institute.

About the Author

Dan Collins
Dan Collins is senior producer for CBSNews.com.
Wayne Barrett
Wayne Barrett is a Nation Institute Fellow who has been covering the presidential election for the Daily Beast and...

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As part of his Nextel duties, Giuliani appeared at conventions of public safety officials to talk about 9/11 and the need for antiterrorism preparedness. In his keynote speech at the convention of the Association of Public-Safety Communications Officials International in Nashville in 2002, for instance, he delivered his standard talk on 9/11 and his five principles for leadership, one of which was communication. Communication reminded Giuliani of the importance of being able to get through on the telephone in a time of crisis. "I am in favor of your support for the consensus proposal before the FCC that would allow public safety to have more frequencies and better communications," he said. "Thanks to you and Nextel who agreed on that. It can be positive for the future." A trade journal covering the convention called Giuliani "engaging, funny, seemingly honest and informative," but noted that "he never mentioned his consulting company's link to Nextel."

After forcing some changes in the Nextel plan, APCO and other public safety organizations rallied behind it, and it was artfully redubbed the Consensus Plan. But Giuliani and the Partners were also making friends at the FCC, doing volunteer jobs that had been brokered by Nextel's counsel. The Partners spent more than a year helping the FCC prepare a report about how local government can best communicate with the public. Sheirer, Von Essen and another Giuliani partner, Tony Carbonetti, attended a meeting of the FCC's Media Security and Reliability Council just as Nextel hired their firm in May 2002, and another partner, Tom Fitzpatrick, who spearheaded the New York Fire Department's disastrous radio contracting process, moderated an FCC panel. Finally, Giuliani himself was named to a prestigious FCC advisory council two months before the Nextel deal was approved.

"Everybody knows what we're doing, so there's nothing hidden," Giuliani told the New York Times, in explaining why he had not registered as a lobbyist for Nextel or anyone else. Actually, few did know what he was doing. Giuliani, for example, pushed his bandwidth crusade before the 9/11 Commission and in television interviews without ever acknowledging his interest. Two months before the FCC vote on the spectrum deal in July 2004, Giuliani called for "a dedicated bandwidth for emergency services" on Larry King Live and CBS as the solution to the 9/11 communications breakdown. He didn't specifically refer to the Nextel deal, saying only that the bandwidth was "doable but the FCC has to approve it."

By the time Giuliani made these appearances, his consulting deal with Nextel had come to an end, but the Partners still may have had the stock options, then valued at $15 million, that they received as part of their compensation. Shortly after the company got its new spectrum without the public auction usually required for such FCC largesse, Sprint merged with it in a $36 billion deal. Between 2002 and 2004, Nextel's stock rose nearly tenfold, according to the Wall Street Journal.

Giuliani Partners is a private company, and one that keeps its dealings very close to the vest. Conventional wisdom, encouraged by Giuliani Partners insiders, holds that the firm made around $100 million a year, or more than $2 million per employee. Giuliani had never seemed particularly concerned about money--he wouldn't have been scheming so desperately for a third $195,000-a-year term as mayor if wealth had been his top priority. But his sudden riches came in handy. His settlement with his former wife, Donna Hanover, in the summer of 2002 called for him to pay her $6.8 million over three years as well as child support. Hanover's lawyers estimated that Giuliani's income in 2002 was $20 million, a little more than half from speaking fees and book advances. And he quickly adapted to his new lifestyle, demanding first-class flights and accommodations for himself and his posse when he traveled and purchasing a $4 million summer house in the Hamptons for himself and Judy Nathan, whom he married in 2003. The couple also have an apartment on Manhattan's East Side worth more than $5 million, complete with Rudy's Yankee diamond rings displayed in wooden boxes, a lithograph of Winston Churchill above the fireplace, two white Churchill porcelain figures and a Joe DiMaggio shirt encased in glass.

Giuliani Partners attempts to present itself as just another vehicle for Rudy Giuliani's fight for justice. "We take these things on if there's good to be done," said Michael Hess. But most of the deals it has made were like the Nextel one--patently about a client's hope to cash in on Giuliani's fame, to borrow a little of his crime-fighting aura or to make use of the Partners' many connections in the increasingly profitable business of homeland security. Rick Perkal, a senior managing director at Bear Stearns Merchant Banking, told Newsday that his company had been impressed by Bernard Kerik's membership on a federal panel that was supposed to give the Department of Homeland Security advice on, among other things, what it ought to be purchasing. Bear Stearns had agreed to invest up to $300 million in new security-related ventures identified by Giuliani Partners, and Perkal said, "Being an adviser in Homeland Security, what has been helpful to us is that he understands the needs of the country. When we look at opportunities, companies that come up for sale, he can say: 'This is a good company. I think it has good growth prospects.'"

But the American public seems indifferent to such conflicts of interest. A June Quinnipiac University poll showed that Giuliani had the highest rating among nineteen national leaders and potential 2008 presidential candidates, ahead of John McCain, Hillary Clinton and Barack Obama.

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