Subject: [NEXTEL-1] Giuliani, Once Foil on Wall Street, Joins Bear Stearns

From: [email-masked]
Date: Fri, 01 Aug 2003 21:17:21 -0400

Giuliani, Once Foil on Wall Street, Joins Bear Stearns

July 31, 2003 12:58am
Dow Jones Business News

Rudolph Giuliani, who as a prosecutor made his name as the scourge of
Wall Street, is becoming a Wall Streeter himself.

The former New York City mayor, and before that the Justice
Department's U.S. attorney in Manhattan, is joining with the
investment arm of Bear Stearns Cos. to launch a $300 million fund. The
goal: to back firms whose products and technologies could make
American companies more secure against terrorism.

The deal furthers the transformation of Mr. Giuliani from public
servant to deal maker and investor.
[rudy.hedcut]

It is sweet irony. Back in the 1980s, he and the Securities and
Exchange Commission jointly brought a series of high-profile
insider-trading cases against some of the Street's most powerful
people and securities firms. Mr. Giuliani, who also made his name in
bringing many cases against the mob, often spoke of treating
financial-crime defendants just like any other criminal -- a stance
that infuriated many on Wall Street.

Now he is working with Wall Street. In the new venture with Bear
Stearns, Mr. Giuliani and his management-consulting firm, Giuliani
Partners LLC, will be able to take stakes in the companies in which
the fund invests. In the past six months, he and his firm have been
consultants to David Matlin, a so-called distressed-debt investor who
has a large stake in MCI debt and is working to gain control of the
company formerly called WorldCom Inc. Last year, Merrill Lynch & Co.
hired him as an adviser in negotiations with New York State Attorney
General Eliot Spitzer, as his office investigated allegations of
conflicts of interest in brokerage-firm stock research.

Wall Street is certainly more lucrative than City Hall. Mr. Giuliani's
firm stands to earn tens of millions of dollars in fees from these new
ventures. In 2001, his last year as mayor, he earned less than $200,000.

The new fund, which is part of Bear Stearns's $1.5 billion
private-equity fund, is expected to help companies with proven
technologies expand their marketing reach, thanks to the clout of Mr.
Giuliani's name. "We believe Mr. Giuliani represents the best branding
in this business," says John Howard, head of Bear Stearns Merchant
Banking, Mr. Giuliani's partner in the new undertaking.

The new fund is already looking at companies that have developed new
technologies for identifying people -- digitalizing fingerprints,
perhaps, or scanning the eye. The fund also might invest in companies
developing methods to identify biological and chemical agents, such as
the sarin gas that paralyzed the Tokyo subway system some years ago.

Potential clients range from nuclear-power plants to pharmaceutical
labs and hotels, Mr. Giuliani says, noting that the same measures that
protect against terrorist attacks could also protect against more
immediate threats such as employee embezzlement.

"We have been evaluating these technologies for five or six years,"
says Mr. Giuliani, referring to the city's Office of Emergency
Management and noting that the awareness of the need for such tools is
greater in New York than anywhere else. "This is a unique investment
opportunity."

The alliance comes at a frustrating time for private-equity firms.
There haven't been a lot of attractive opportunities in recent months,
leaving many underinvested and forced to buy deals from each other.
Security and public safety are a growth area at a time when other
potential deals are sparse, says Mr. Howard.

Mr. Giuliani says he expects the fund to be fully invested in less
than 18 months. But since the fund is looking for deals of as much as
$75 million, there is the potential for big losses as well if the
investments don't succeed. In addition, it remains to be seen how much
appetite cash-strapped companies have to undertake expensive
security-enhancing measures.

Mr. Giuliani, 59 years old, was mayor from 1994 through 2001. As U.S.
attorney for the Southern District of New York from 1983 until early
1989, he made his name in part by going after such Wall Street figures
as arbitrageur Ivan Boesky and junk-bond deal maker Michael Milken.

He faced criticism that he was using prosecutions to elevate his
political profile and at one point took heat for arresting a pair of
arbitrageurs in what was seen as a public humiliation, leading one of
them off in handcuffs. Charges against those arbitrageurs were later
dismissed, and a number of convictions obtained by his office were
later overturned on appeal.

http://www.hoovers.com/free/news/detail.xhtml?ArticleID=NR20030731460_b1bc0009a62b750b

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