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For Rudy, running concern

The former mayor's partnership with a law firm tied to oil industry clients could jeopardize his political ambitions

BY GLENN THRUSH | Newsday Washington Bureau

May 8, 2006

WASHINGTON - A year ago, Rudolph Giuliani added his name to the venerable Houston law firm Bracewell & Patterson in a deal that guaranteed the former mayor and his consulting company about $10 million, according to a person with knowledge of the transaction.

By re-christening the new entity Bracewell & Giuliani, the firm's partners created an instantly recognizable legal brand, banking on Giuliani's star power and rainmaker reputation to establish the Gulf Coast firm as a major New York player.

But as Bracewell & Giuliani celebrates its first anniversary this month, it's becoming clear the deal could cause Giuliani some serious political agita if he runs for president in 2008.

Giuliani's name is now literally linked to the firm's roster of Big Oil, refinery, natural gas and power-producer clients - not exactly the best buddies to have in $3-a-gallon America.

"In the current climate, people might identify Rudy Giuliani as connected to the oil and gas industry, and that could be a real problem for him," said Lee Miringoff, director of the Marist Institute for Public Opinion. "It's not insurmountable - we elected George Bush and Dick Cheney - but he would have a lot of explaining to do.

"It would be a political vulnerability."

Giuliani's mini-gas crisis isn't unique: As fuel and home heating prices rise, many Republicans are distancing themselves from an industry that has been among their biggest boosters for years. In 2004, the oil and gas industry gave $25 million to federal political candidates - 80 percent of which went to Republicans, according to the Center for Responsive Politics, a nonpartisan Washington think-tank.

"The Republican leadership is very closely tied to the oil industry, feeding the perception that they're not likely to take action to threaten those interests," said Alan Abramowitz, an Emory University professor who studies party politics.

Giuliani himself tried to capitalize on consumer anger over high gas prices in 2000 during his short-lived Senate campaign against Hillary Rodham Clinton.

At the time, the country was grappling with $2.50-a-gallon gas as a result of tightened production quotas by the Organization of Petroleum Exporting Countries. Giuliani ran ads ridiculing President Bill Clinton for not releasing strategic oil reserves to ease the shortage. Later, he decried the fact that America was "held hostage [by] oil companies."

As fate would have it, six years later, Bracewell & Giuliani's lobbyists have been quoted as defending the petroleum industry against Congress' attempts to tax oil companies' record profits, a top issue for congressional Democrats.

"Once the dust settles," the firm's Frank Maisano recently told Dow Jones Newswires, lawmakers will "realize the windfall profit tax is a bad idea."

The firm's legal and lobbying clients also fight to ease environmental regulations and are defending a client against claims that refiners knowingly polluted the environment with the gas additive MTBE.

Bracewell & Giuliani's Washington lobbying operation earned $1.5 million from refineries and electric companies in 2005 to lobby Congress and federal agencies on energy legislation and regulations, according to Senate lobbying records.

Top clients include the National Petrochemical and Refiners Association, which represents 450 oil companies, the Electric Reliability Coordinating Council and the Gas Processors Association.

Valero Energy Corp., which paid Bracewell & Giuliani $400,000 last year to lobby on issues ranging from the Clean Air Act to taxes, drew criticism in February by announcing it was cutting production at an Ohio refinery to bolster its profits. Valero, the nation's largest fuel producer, has enjoyed 10 straight quarters of record earnings, according to Reuters.

Giuliani himself does no lobbying for the firm and was retained primarily to establish its New York office, which will specialize in corporate representation and white-collar criminal defense. In recent months, he has overseen the opening of a 25,000-square-foot office in midtown, personally wooed former federal prosecutors and litigators and played a central role in settling a major corporate case in California.

But he hasn't sealed himself off from Bracewell's oil-and-gas clients.

He's developed a particularly good relationship with Royal Dutch Shell, the world's third-largest oil company. The company had already retained Giuliani Partners, the ex-mayor's consulting business, to perform a security assessment for Shell's proposed Brightwaters natural gas platform in the Long Island Sound. Since the creation of Bracewell & Giuliani, the former mayor has met with Shell executives in London as part of his role of "solidifying existing relationships" with the firm's clients, according to managing partner Patrick Oxford.

Howard Rubenstein, a spokesman for the firm, said Giuliani "doesn't lobby in any way," and emphasized that lobbying makes up about only 2 percent of the firm's earnings.