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The Wall Street Journal: Can Giuliani’s Name Turn Buzz Into Money?

EXTRACT: In the summer of 2005, Mr. Oxford says, he traveled to London with Mr. Giuliani to meet top executives of what is now Royal Dutch Shell PLC. Mr. Oxford says the firm could not have scored the high-level meeting without Mr. Giuliani: “Leaders around the world admire Rudy and want to talk to him.” The meeting didn’t bring in any new business, but Mr. Oxford says he believes that Bracewell solidified its stature with the energy company. The company confirmed the meeting but declined to elaborate.

THE ARTICLE

Former Mayor Opens Doors
For Law Firm in New York,
But Jury Out on Rainmaking
By NATHAN KOPPEL
March 20, 2007; Page B1

What’s Rudy Giuliani’s name worth?

As political operators size up that question for the 2008 presidential race, a law firm in Texas faced it two years ago in a more mundane context — whether signing up the former New York City mayor would rope in enough business to justify the costs to partners in Houston.
 
The firm, then known as Bracewell & Patterson LLP, took on Mr. Giuliani as partner, changed its name to Bracewell & Giuliani LLP, opened a Manhattan office and took losses of about $20 million to boost the cachet of the under-the-radar regional firm. As Patrick Oxford, Bracewell’s managing partner, says, with Mr. Giuliani aboard fewer potential clients now ask, “Who in the hell are these guys?”

That profile will only get bigger as Mr. Giuliani pursues the presidency. What is less clear is whether all that attention will pay off financially. While Mr. Giuliani has attracted lawyers to the office and used his celebrity and connections to get the firm meetings it might not otherwise have, his rainmaking abilities are harder to assess. The firm won’t identify new clients Mr. Giuliani has brought in.

“I’ve met with a lot of new prospective clients of which many have turned into clients,” Mr. Giuliani says, also declining to name names.

Mr. Giuliani, by all accounts, does little actual lawyering. The New York office, which opened in May 2005 and now includes about 36 lawyers, is still a losing proposition. Mr. Oxford says the office lost $4 million to $5 million less than expected last year and maintains that by the end of 2007, the office will be operating at a profit. Startup costs are steep for any firm in New York. Jenner & Block LLP, for example, opened in New York in late 2005 and has yet to cross the profit threshold, says partner Ronald Marmer.

Corporate law firms have long linked up with ex-politicos in the hopes that their name recognition, contacts and experience in the halls of government will lead to business. Just this month, Chadbourne & Parke LLP hired New York’s former governor, George Pataki; former Ohio congressman Michael Oxley joined Baker Hostetler LLP in Washington, and yesterday, Pittsburgh-based Eckert Seamans Cherin & Mellott LLC announced the hiring of former Pennsylvania senator Rick Santorum. (See Who’s News.)

The hires can pay off for firms, as political figures often can get their phone calls returned and possess a “keen insight” into how the regulatory process works, says William Perlstein, co-chairman of Wilmer Cutler Pickering Hale & Dorr LLP, which has about 140 lawyers with government experience. “But the presence of a political figure alone is not going to be sufficient to handle top-level work,” Mr. Perlstein says. “You need to have an experienced group working with that person.”

The Bracewell/Giuliani hookup built in far greater expectations on Bracewell’s part than just adding another well-connected lawyer. Aligning with Mr. Giuliani provided a way for Bracewell to tackle an ever-difficult problem for regional law firms trying to break out nationally — how to build a presence in the lucrative but also competitive, and expensive, New York legal market.

“From a Texas point of view, coming to New York is a big, big step” for Bracewell, says Mr. Giuliani, who has worked at top New York firms in between government service. “A lot of firms have failed.”

With roughly 400 lawyers, Bracewell has operations in Washington and other locations. Energy companies and banks represent a significant part of the firm’s client base; it opened an office in Kazakhstan in 1997 to service oil producers and their lenders in the Caspian Sea region. Bracewell also has a significant business representing local school districts in Texas.

But in size and profitability — partner salaries averaged $600,000 last year, according to the firm — Bracewell ranks behind some of the leading Texas firms, such as Baker Botts LLP, home to former Secretary of State James A. Baker III.

“Before Rudy Giuliani joined, Bracewell was a solid but sleepy midsized Texas firm,” says Thomas Ajamie, of Houston’s Ajamie LLP. “Giuliani injected adrenaline into the blood system there.”

Talks between Bracewell, which has a cadre of partners with deep ties to the Republican Party, and Giuliani started in 2004. Roy Bailey, a Houstonian and a managing director of Mr. Giuliani’s security-consulting firm Giuliani Partners LLC, introduced Mr. Giuliani to the firm’s managing partner, Mr. Oxford, an influential Republican who served as a volunteer organizer for President Bush’s 2004 reelection campaign.

“We both recognized at an early stage the role I could play in helping them build the New York office and introduce them to clients,” says Mr. Giuliani, who says he only seriously considered joining one other firm that he declines to name. He had lunches and dinners with about 60 Bracewell partners before the firm agreed to hire him.

Bracewell paid up for the privilege — Mr. Giuliani and Giuliani Partners received $10 million for the deal. (Giuliani Partners, which remains a separate entity, was paid in part to compensate for Mr. Giuliani dividing his time between the consulting business and the law firm.) The former New York mayor also draws an undisclosed salary at the firm. Bracewell initially asked its partners to personally guarantee about a $25 million line of credit that was taken out to cover the Giuliani hire and New York office opening. Partners are no longer on the hook for that loan, Mr. Oxford says.
 
Mr. Giuliani has been particularly effective at using his connections to attract lawyers to the office. Among Mr. Giuliani’s first recruits were Michael Hess, who was appointed by the mayor in 1998 to serve as New York City’s top lawyer, and Kenneth Caruso, who had served under Mr. Giuliani in the Justice Department in the 1980s.

Last year, Bracewell lured Mark Palmer, then at Linklaters, one of the largest firms in the world. He says Mr. Giuliani was a “lynchpin” in his decision to join Bracewell, because it showed the firm’s commitment to developing a native New York image. “There is nothing more local than Rudy Giuliani in New York City,” Mr. Palmer says, adding that he was also enticed by the possibility that his partner could become president. “From a business-development perspective, the idea that the firm has managed to get its senior partner in the White House is tremendous,” Mr. Palmer says.

Mr. Oxford says Mr. Giuliani and the New York office have helped deepen relationships with existing clients, such as Verizon Communications Inc. and Reliant Energy Inc.

In the summer of 2005, Mr. Oxford says, he traveled to London with Mr. Giuliani to meet top executives of what is now Royal Dutch Shell PLC. Mr. Oxford says the firm could not have scored the high-level meeting without Mr. Giuliani: “Leaders around the world admire Rudy and want to talk to him.” The meeting didn’t bring in any new business, but Mr. Oxford says he believes that Bracewell solidified its stature with the energy company. The company confirmed the meeting but declined to elaborate.

Mr. Giuliani is not required to bill time, Mr. Oxford says, noting that he has helped on three or four projects in his two years at the firm. But Mr. Oxford believes the improved visibility is far more important than billable hours. Many corporations, however, still know little about Bracewell’s practice specialties, says Michael Rynowecer, the president of BTI Consulting Group Inc., which conducts market research for law firms. “Giuliani gave them an awareness factor,” says Mr. Rynowecer. “But what do people know about them? They are still low on that score.”

On the negative side of the attention coin, Mr. Giuliani’s presidential campaign has brought added scrutiny to Bracewell. A raft of articles has questioned Bracewell’s ties to certain clients, such as Citgo Petroleum, an energy company controlled by Hugo Chávez, the anti-American president of Venezuela — even though Mr. Giuliani did not work on the account.

“Of course, there will be issues raised” about Bracewell during the campaign, says Mr. Giuliani, who sold the investment-banking arm of his consulting firm to an Australian bank earlier this month for an undisclosed sum. “There are always issued raised. But they have no substance, because the firm conducts itself in an honest, ethical and decent way.”

If the former mayor wins the 2008 election, Bracewell will face another issue: What to call itself. Ethical rules governing law firms would require it to drop the coveted Giuliani name, says Mr. Oxford. If so, he says, the firm may revert to calling itself “just Bracewell.”

And that might be just fine with them. “Whether there will be buyer’s remorse likely hinges in part on how well Mr. Giuliani fares in 2008,” says Edward Groves, a New York partner with Andrews & Kurth LLP, a Houston-based competitor of Bracewell. “If he wins, the management of the firm will look like geniuses.”

Write to Nathan Koppel at [email protected]

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