8/20/2018 Giuliani's Profitable Partnership - WSJ

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POLITICS AND POLICY

Giuliani's Profitable Partnership

Steinmetz Ties Aided Business E orts And Speaking Fees

By Mary Jacoby and Andrew Morse

Updated Dec. 1, 2007 12 01 a.m. ET

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

The Business: A partnership Rudy Giuliani forged with held five-year-old consulting business,
an Israeli diamond-trading family helped his consulting
firm expand in Japan, and it generated speaking fees.
New York-based Giuliani Partners LLC,
The Background: The case offers a rare peek at the
whose clients he has declined to identify.
candidate's consulting business. In addition to large speaking fees that
The Bottom Line: Initial goals to help Japanese
went directly to Mr. Giuliani, the Sage
companies expand sometimes fell flat.
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

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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.

Green Power's Toshio Hori and Mr. Giuliani on Feb. 7, 2005. The major shareholders behind the $2.5-
billion Sage funds are Israelis Daniel and

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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.

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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.

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-- Miho Inada, T.W. Farnam and Naoto Okamura contributed to this article.

Write to Mary Jacoby at mary.jacoby@wsj.com and Andrew Morse at

andrew.morse@wsj.com

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