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Giuliani prepares to rescue WorldCom from the ruins

Published Sep. 4, 2005

He is trying to rid horse-race wagering of corruption, keep the painkiller OxyContin off the black market and help a major brokerage handle conflict of interest charges.

Now Rudolph Giuliani says he is ready to tackle the spectacularly bankrupt WorldCom Inc.

Even some admirers say the former New York mayor's next big thing may be too much for him. But some say Giuliani _ the mob-busting ex-prosecutor and Time magazine Man of the Year who saw New York through the aftermath of Sept. 11 _ sees another opportunity to prove he is a master of the universe and, perhaps, make millions in the process.

"He believes that he can do anything. He wants to be president," said former Mayor Ed Koch, who has alternately praised and criticized Giuliani over the years.

Giuliani, 58, said his consulting firm, Giuliani Partners, is working with a leading WorldCom investor to advise the crippled telecom giant after it emerges from the biggest bankruptcy in U.S. history. He said he wants to turn the company, tarred by a $9-billion accounting fraud scandal, into a "model of corporate governance," using principles he describes in his new best-selling book, Leadership.

According to news reports, Giuliani's associate, bond investor David Matlin, wants to install him as WorldCom chairman.

Giuliani said it is premature to talk about the chairmanship, but he said twice at a news conference this week that WorldCom should have a separate chairman and chief executive. Michael Capellas, a former Hewlett-Packard executive, was named chairman, CEO and president of WorldCom only last Friday.

Running the largest U.S. city is not the same thing as heading a multibillion-dollar company, telecommunications analyst Drake Johnstone said. He said WorldCom needs an experienced industry executive to lead a turnaround.

"Yes, he's well-respected, but he hasn't run a major corporation," Johnstone said.

But Fred Siegel, a writer and history professor who has advised Giuliani, said the former U.S. attorney's experience prosecuting white-collar crime has made him familiar with corporate inner workings.

"This is not quite the leap it appears to be," said Siegel, adding Giuliani is known for his exhaustive preparation. "He's one of those guys with a cast-iron rear end who will sit down and absorb an enormous amount of material."

Yet he and others wonder whether Giuliani is spreading himself too thin.

"The reasonable question to ask is: Can he take on all these challenges at once?" Siegel said. "And I don't know the answer to that."

Despite its high-profile contracts, Giuliani Partners is a small firm of 35 staff members, many of them top aides from Giuliani's City Hall administration, including the city's former police and fire commissioners.

The firm is advising Merrill Lynch in addressing a state investigation into alleged conflicts of interest by Wall Street analysts, and is working with Purdue Pharma in protecting its inventory of the pain medication OxyContin against abuse. Giuliani also is traveling to Mexico City to tour its violent neighborhoods and advise officials on how to reduce crime.

This week, his firm agreed to oversee the National Thoroughbred Racing Association's industry wagering system after a series of betting scams culminated in a fraudulent $3-million win at the Breeders' Cup.

Andrew Kirtzman, a WCBS-TV political reporter who wrote a biography of Giuliani, said it is clear why organizations with credibility problems are seeking out Giuliani.

"He's got a reputation for probity, for honesty and he's kind of a saint in the eyes of the American public since 9/11," Kirtzman said.

If he is successful in turning around WorldCom, Giuliani could earn millions for a political campaign and position himself for a run for higher office, said Douglas Muzzio, a public affairs professor who has followed the ex-mayor's career.

Giuliani aborted a Senate campaign against Hillary Rodham Clinton in 2000 after he was diagnosed with prostate cancer and his marriage to actor Donna Hanover began to unravel. The couple divorced this year after months of acrimony; Giuliani and Judith Nathan plan to marry soon. In his divorce settlement, he agreed to pay his ex-wife more than $6.8-million.

He recently said he would consider a campaign someday for Senate, the presidency or governor, but would not run for mayor again. This fall, he traveled extensively in support of Republican candidates, collecting an enviable pile of political chits.

If he succeeds at WorldCom, "he can now say not only was he a great prosecutor and America's mayor, but he knows the inside of corporate America," Muzzio said. He added: "That could be a potent message in a gubernatorial or presidential race."