Giuliani’s Profitable Partnership
By: Wall Street Journal
Steinmetz Ties Aided Business Efforts And Speaking Fees
By MARY JACOBY and ANDREW MORSE
A partnership Rudy Giuliani forged with a wealthy diamond-trading family from Israel helped his effort to expand his fledgling consulting business in Japan, and generated more than $600,000 in speaking fees for the Republican presidential candidate.
The former New York mayor’s previously undisclosed relationship with the Sage Capital Growth — a medium-size private equity firm associated with the diamond-trading Steinmetz family of Israel — shows how money came his way after he earned international acclaim leading the city through the Sept. 11, 2001 terrorist attacks.
It offers a peek at Mr. Giuliani’s closely held five-year-old consulting business, New York-based Giuliani Partners LLC, whose clients he has declined to identify. In addition to large speaking fees that went directly to Mr. Giuliani, the Sage relationship helped his firm expand into a foreign market where he and his team of ex-New York City criminal justice, municipal and fire department officials lacked experience.
They went beyond their core security expertise to work with companies in sectors ranging from condominiums to alternative energy — though their promises to help Japanese companies to expand sometimes fell flat.
Mr. Giuliani’s personal contributions appear largely to have been to make speeches in Tokyo and elsewhere to promote his partnership with Sage, and to lend his celebrity status to conferences. Two of the Japanese companies Sage invested in prominently posted photos of the former mayor posing with their executives.
“At the beginning, there was some hope this would lead to something bigger, but that just didn’t materialize,” said Nobuyuki Omori, an investor relations manager at Digital Garage Inc., an Internet firm the Sage-Giuliani partnership had vowed to help expand.
At one point, Mr. Giuliani was slated to head a Sage-funded philanthropy alongside major business leaders in the U.S. and Japan, though that effort is now dormant.
The Sage relationship has also benefited Mr. Giuliani’s presidential campaign. Sage executives and their relatives, including Americans living in London and Jerusalem, have given more than $20,000 to his White House bid, federal records show.
The Sage alliance is just one part of the extensive overseas business network Mr. Giuliani assembled shortly after leaving the mayor’s office in early 2002. Beyond Israel and Japan, Mr. Giuliani’s firm has a contract to advise the government of the Persian Gulf country of Qatar on security, The Wall Street Journal has reported.
Mr. Giuliani isn’t required to disclose his closely held company’s partnership with Sage, and he didn’t list it on the public financial report he filed to run for president. While representatives of Sage and Giuliani Partners, agreed to answer questions about their alliance, Mr. Giuliani and the Steinmetzes declined through spokespeople to comment for this article.
The major shareholders behind the $2.5-billion Sage funds are Israelis Daniel and Raz Steinmetz, a father and son team who made a fortune in diamond-trading and investing. A spokesman for the Steinmetzes said Mr. Giuliani had never met them.
Daniel Steinmetz and his brother, Beny, own stakes in Steinmetz Diamond Group, has mined gems in Sierra Leone and the Democratic Republic of Congo. The brothers are also investors in an online high-end luxury-goods company called Odimo Inc., based in Sunrise, Fla., which has posted repeated losses, according to Securities and Exchange Commission filings. Forbes magazine has pegged Daniel and Raz Steinmetz’s net worth at around $500 million.
From its base in New York, Sage Capital Growth manages several private equity funds for Daniel and his son, Raz, that invest in technology firms, distressed or bankrupt companies and corporate spin-offs. One subsidiary invests in Japanese real estate.
Another Giuliani company — Giuliani Compliance Japan, which helps corporations comply with regulatory requirements — has a tie to Sage. It is a joint venture with a Japanese software company, Softbrain Corp., in which Sage has a stake.
Sage also invested in various technology companies in Japan, then hired Mr. Giuliani’s firm to advise those companies on improving their operations. A spokeswoman for Giuliani Partners declined to say how much Sage had paid the firm since their partnership began in 2004.
“We wanted to present to the Japanese companies a package, where they get not only funding [from Sage], but also a very reputable and credible consulting company that could help them develop their business,” said Gilad Gat, a Sage adviser.
In February 2005, a Sage-related fund agreed to invest 10 billion yen in Tokyo-based Dynacity Corp., a condominium complex developer. The goal was to create a jointly-run fund management company that would allow Dynacity to start a global expansion, including into the U.S., according to a company press release.
“Giuliani Partners and Sage Capital have great expectations for the fund that we will operate with Dynacity,” the release said, in a quote attributed to Geoffrey Hess, a partner at Giuliani Partners in New York who helped manage the relationship with Sage.
It is unclear whether Dynacity ever made any transactions outside of Japan from introductions from the Giuliani-Sage partnership. The person in charge of managing that relationship, Hiroki Mita, left Dynacity, according to Koji Nishida, a company representative.
In 2005, Sage invested 100 million yen in Tokyo-based Green Power Investment Corp., which develops alternative energy projects, such as wind farms. Toshio Hori, the head of Green Power, had his photo taken with Mr. Giuliani, which still appears on Green Power’s Website.
But Mr. Hori said beyond the photo op, his firm didn’t see much of Giuliani Partners. Sage later asked Green Power to remove Mr. Giuliani’s name from its Web site. “To me it looks like Sage just made use of Giuliani’s face for their business,” Mr. Hori said.
Mr. Giuliani collected a total of $600,000 for two speeches paid for by Sage and one by Softbrain, the company affiliated with Sage, according to the personal financial disclosure report he filed to run for president. The speeches took place in Spain and Japan.
“We thought it was going to be beneficial both for us and for them to have this kind of speaking engagement,” said Sage’s Mr. Gat.
His fee for a fourth paid speech for Sage isn’t known. Mr. Giuliani appeared in Tokyo in February 2005 to announce his alliance with Sage, spokespeople for Sage and Mr. Giuliani said. Federal campaign disclosure requirements, however, do not require him to detail his income in 2005. His typical fee for an overseas speech is $200,000.
The Giuliani-Sage ties extended beyond business to philanthropy.
In 2005, Mr. Hess registered a nonprofit foundation called the Giuliani Sage Japanese-American Leadership Foundation that intended to use donations from Sage to sponsor scholarships for American and Japanese business students, according to Internal Revenue Service records and Mr. Hess.
IRS records show Mr. Giuliani was slated to chair an advisory board including the head of the Japanese consulate in New York and the president of Toyota’s North American operations.
In the end, the foundation sponsored only one Japanese student who studied for a few weeks in the U.S., Messrs. Hess and Gat said. IRS records show it spent $78,200 in 2005.
The foundation still exists but is dormant, Messrs. Hess and Gat said.
– Miho Inada, T.W. Farnam and Naoto Okamura contributed to this article.
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