Independent journalist Wendy Siegelman appears to have been the first to report both the company and the loan.
According to government records, the loan, which was part of the Small Business Administration's Payroll Protection Program coronavirus relief package, was awarded on April 28 to a company called World Capital Payroll Corp., a registered "S Corp" headquartered at 445 Park Avenue in Manhattan. Those records show that the company received between $150,000 and $350,000 in taxpayer-backed federal funds, which can be fully forgiven by the government if the company proves they were put toward payroll and related expenses. (Giuliani's new private law firm is registered at that same address.)
Importantly, in order to receive a loan amount in that range, a company was required to prove that it spent between $720,000 and $1.68 million on payroll and employee benefits. Because the SBA caps eligible salary amounts at $100,000, this means that World Capital Payroll would have had to directly employ between seven and 16 people, roughly speaking, in 2019 — and paid them all $100,000 or more for their services.
In order to prove eligibility to their lender, applicants must submit official tax and payroll forms.
According to PPP databases, however, World Capital Payroll did not report having any employees or any jobs saved. That in itself is not entirely uncommon. It is unclear, however, who else the company may directly employ other than Giuliani himself, who did not reply when asked that question several times over several days through various points of contact.
Multiple financial experts and PPP lenders told Salon that business owners cannot use PPP money to pay employees of separate businesses they own. Owners would need to submit separate applications for each entity that has its own tax ID. It is not clear whether WorldCapital Payroll Corp has any subsidiaries with employees, and if so, it is not clear why Giuliani would not recall such a company.
World Capital acquired its loan through Signature Bank, which at one point came under scrutiny from financial officials for loans made while it had ties to the Trump family as well as the family of Jared Kushner, the president's son-in-law.
World Capital Payroll classified itself under "other financial vehicle" on its loan application, even though PPP applications offer "payroll services" as an option. That choice puzzled financial experts who spoke with Salon, and one SBA official described it as "weird."
(About three out of every 10,000 companies that applied for a PPP loan categorized themselves under "other financial vehicle.")
New York state's business registry lists WorldCapital Payroll Corp, with no space between the first two words, with Giuliani as CEO. In a call with Salon, Giuliani confirmed that it was the same company. The reason for the discrepancy in spelling was not immediately clear. The company lists different addresses on its official New York registry and its PPP loan: its New York address is at an office of Giuliani Partners; the PPP address is the office of Giuliani's personal law firm.
Giuliani incorporated WorldCapital Payroll Corp in Delaware on Jan. 8, 2002, the same day he registered Giuliani Partners and Giuliani Safety & Security in New York, and just over a week after entering the private sector following two terms as mayor of New York City. Before that, Giuliani had worked at the Justice Department under Ronald Reagan for eight years, including more than five years as U.S. attorney for the Southern District of New York, where he became famous for prosecuting the mob and white collar crime.
Two days after incorporating in Delaware, on Jan. 10, 2002, Giuliani registered WorldCapital in the state of New York. According to the Delaware listing, WorldCapital Payroll is a stock corporation authorized for 1,000 shares.
Asked what he used the PPP loan for, Giuliani told Salon in a text message, "get lost."
"Write whatever lie you want to it's a waste of time to communicate with you," he added. Salon, he said, "hates the president," and he, Giuliani, was "just collateral target."
"No need to discuss this. I am comfortable that I follow the law and ethical rules. Knock yourself out," he wrote.
According to multiple reports and individuals familiar with the case, Giuliani's business dealings have been under investigation as part of a broad federal probe led by the FBI and the Southern District of New York, the office Giuliani once led. Last October his former business associates Lev Parnas and Igor Fruman were arrested at Dulles International Airport outside Washington as they waited to board an overseas flight, leading to the investigation into Giuliani. Those arrests were on unrelated campaign finance charges, but came just one day after the duo met Giuliani for drinks, and just as impeachment hearings were heating up in Congress.
Giuliani later called Salon back to offer more information, saying that he had in the meantime asked a corporate bookkeeper about WorldCapital.
In Giuliani's telling, his bookkeeper had just explained to him the function of WorldCapital. This seems implausible, since Giuliani created and owns the company, and appears to have used it to process payroll to employees of a number of his global firms for the last 18 years. As stated above, to receive a PPP loan in the reported amount, the company was required to prove that directly employed between seven and 16 U.S. employees, at a minimum.
"It's what's called a 'paymaster,'" Giuliani said, invoking a common term for a company that handles payrolls for multiple entities. Giuliani's main known entity is his consulting firm, Giuliani Partners.
"We have three or four different companies," he said. "A client will pay Giuliani Partners a fee and we'd keep it and run the business with it, and then we pay our employees with it, through the payroll company."
WorldCapital "has no clients other than my companies or the people we subcontract with," Giuliani said.
"I don't take a salary from Giuliani Partners," he added, explaining that he takes a cut of that firm's profits after he pays his employees. His payments also go through WorldCapital Payroll, he said.
Giuliani may not draw a regular salary from Giuliani Partners LLC — which multiple reports have said has been the subject of federal investigation — but the law requires him to take one from WorldCapital Payroll. According to the SBA's loan database, WorldCapital registered as an "S Corp" and is therefore required to pay all employees a "reasonable" salary tied to industry norms.
It's unclear what salary Giuliani pays himself as CEO of WorldCapital Payroll. The PPP salary cap is $100,000 — any salary in excess of that amount must be reduced back to $100,000.
New York records show that the former LifeLock spokesman has a few active companies registered in the state: Giuliani Partners LLC and Giuliani Group LLC (both registered in January of 2002, around the same time as WorldCapital Payroll), Giuliani Security & Safety LLC (registered later that year) and two newer companies he formed last year, Giuliani Communications LLC (registered in November 2019) and what he described in a call as his personal law firm, Rudolph W. Giuliani PLLC (June 2019).
Giuliani said that he had established his personal law firm last year because a client at the time wanted money put in escrow. "I didn't want Giuliani Partners to do it, because I know the ethical rules," Giuliani said, declining to name the client or explain why it would be otherwise unethical.
"I'm just a country lawyer," he added.
The Wall Street Journal and the Washington Post have independently reported that federal investigators have sought documents and correspondence in connection with Giuliani Partners — which Giuliani registered the same day he incorporated WorldCapital in Delaware — or "any related person or entity." The Journal reported in November 2019 that a subpoena had targeted documents "related to any actual or potential payments, or agreements" with Giuliani. In May, Giuliani's defense attorney, Robert Costello, told Rolling Stone he had seen "more than one subpoena with Giuliani's name on it," dismissing them as pressure tactics.
Giuliani denies any wrongdoing.
Giuliani also recalled to Salon, after the discussion with the bookkeeper, that his own paychecks are also processed through WorldCapital — the company he created and owns and has apparently used to process payments for a number of employees for nearly two decades. It's unclear how Giuliani's statements about WorldCapital, which he allegedly did not know much about, square with the fact that, as outlined above, the company would have had to prove to its lender that it had payroll expenses between $720,000 and $1.68 million in 2019 to qualify for the PPP loan it received.
Giuliani said last year that he had to borrow $100,000 from former colleague Marc Mukasey, because he needed help paying his taxes. He also settled an expensive divorce.
Brett Kappel, a top authority on lobbying and government ethics laws, told Salon that payroll companies often serve as a way to consolidate payments.
"An individual who owns multiple companies frequently sets up a separate payroll company to handle payments to individuals who may be employed by more than one company, particularly if the employees are overseas," Kappel said.
He added that Giuliani's setup struck him as unusual. "I see a couple of problems here," Kappel said. "First, why this company is an S Corp, and not an LLC. And second, why the payroll company is the direct recipient of the loans when it might only have the one legally required employee."
Another financial expert expressed surprise at the decision to register an S Corp in New York City, which uniquely puts an additional tax on those entities. "There aren't many S Corps in the city," he said.
S Corps, Kappel explained, are frequently sole proprietorships that offer revenue flexibility and income tax benefits. S Corps do not pay income tax — income and losses are divided among and passed along to shareholders, who report them individually on their personal tax returns. The arrangement provides an owner a number of "sliders" to manipulate when calculating annual tax liability.
"An S Corp is a pass-through entity — income passes through, typically to a single person, and it doesn't give you the same level of liability protections as an LLC," Kappel said.
Kappel's second question — why Giuliani's payroll company directly received a PPP loan — appears important. An SBA official and multiple financial experts told Salon that because PPP loans are allocated to a company by its tax identification number, a company can only put those funds toward paying its own employees. In other words, Giuliani could not legally use a loan received by WorldCapital to pay employees of his other companies.
Asked whether it would be feasible to misrepresent payroll information, a PPP expert at a national lender told Salon that "pretty much anything" was possible in the program's first weeks.
"At the beginning, it was like a free-for-all," the expert told Salon. "They tightened it up later, but in those early days you could basically just write your information down on a napkin and send it in."
While it would be difficult for business owners to fraudulently represent themselves to a national lender, the employee said, such a scheme would be easier if they approached a small lender, especially one they were familiar with. That would be fraud, the expert said, a conclusion shared by all government and private financial experts consulted for this article.
For one example of known fraud, the employee pointed to federal prosecutions where PPP borrowers tried to defraud the government by creating fictitious companies out of thin air. It is unclear whether the spelling discrepancy between WorldCapital Payroll and World Capital Payroll is material or a mistake, though both companies share addresses with Giuliani entities. There is no World Capital Payroll in New York state records.
Giuliani did not respond to questions about how WorldCapital distributed its taxpayer-backed PPP money. If Giuliani does employ other individuals or contractors through WorldCapital, he did not divulge who those people or entities were, what payroll-processing services they provided for him, or what their salaries were.
When the SBA official was told that WorldCapital Payroll had categorized itself as "other financial vehicle," not as a "payroll services" company, but as an "other financial vehicle," the official called the decision "weird" and suggested a review of the lender.
(Of the 645,220 small businesses to receive PPP loans of $150,000 or higher, only 210 of them were classified as "other financial vehicles." Most of those appear to be either erroneous classifications or financial services companies such as investment firms and fund managers. Companies that engage in speculation, lending, investment or rental real estate are ineligible for PPP loans.)
WorldCapital Payroll's lender was Signature Bank, established in 2001, which lists 31 offices in the New York metropolitan area, Connecticut and California. It is a small institution, not listed among the SBA's top 100 most active lenders as of June 30, 2020.
Signature was featured in a lengthy 2018 New York Times article as the Trump family's "go-to" bank, however. When Michael Cohen, the president's former personal attorney, needed $17 million to purchase a Manhattan apartment building in 2015, he turned to Signature. Signature also backed Trump's Florida golf course and lent money to Jared Kushner and his father, real estate developer Charles Kushner. Trump's daughter, Ivanka Trump (who is married to Jared Kushner), sat on the bank's board of directors when those loans were extended.
Notably, none of Giuliani's other companies mentioned above received a federal PPP loan. It's unclear why only WorldCapital — the one company he owns that does not have "Giuliani" in its name — applied for and received federal funds. (A number of websites allow you to search the PPP database by company name.)
Giuliani Partners, which is reportedly the subject of a federal criminal inquiry, has had several foreign clients over the years, including in Ukraine, as well as a gold trader connected to a Justice Department investigation into a Turkish bank.
"One of the things that Russians and other foreign actors are good at is moving money into the United States," Naveed Jamali, national security expert and author of the book "How to Catch a Russian Spy," told Salon in a call. "They can pay sole proprietor companies or send money to investment funds which can then hire or pay individuals."
"It's an indirect payment that skirts the line of legality. But while the illegality of that payment is questionable, the ethics isn't," Jamali continued. "Even if it's legal for somebody like Rudy to have a company that does business with foreign actors, it's unethical for the president's personal lawyer to be doing that. But Trump, and we see this again and again, has created an incentive for people around him to put their hand out and sell their access to him."
Another person familiar with Giuliani's business dealings suggested to Salon that Giuliani might use WorldCapital not just to handle payroll expenses for Giuliani Partners and his other entities, but possibly to cover other payments as well.
In fact, Giuliani himself once provided a roadmap for how such a scheme would work during a live television appearance.
In a May 2018 Fox News interview, shortly after Giuliani took on President Trump as a client, he explained that Trump's payments to porn actress Stormy Daniels did not qualify as a campaign finance violations because they went through a side channel.
"It's not campaign money. No campaign finance violation," Giuliani told Hannity, who then suggested, "They funneled it through the law firm."
Giuliani concurred. "Funneled it through the law firm, and then the president repaid it," he said.
"That was money that was paid by his lawyer, the way I would do, out of his law firm funds," Giuliani continued.
Giuliani elaborated on his personal experience with such an arrangement: "Michael [Cohen] would take care of things like this, like I take care of this with my clients. I don't burden them with every single thing that comes along. These are busy people."
Cohen later went to prison for those payments, which were campaign finance violations he committed on behalf of his client, who is now the president. Cohen is now out on house arrest.
This June, Giuliani brought the Stormy Daniels payments up again.
"That crime was complete bullshit," he told the New York Daily News when discussing the sudden ouster of Geoffrey Berman as U.S. attorney for the Southern District of New York. At the time, Berman was apparently investigating Giuliani, until he was forced out at Attorney General Bill Barr's request.
"We don't prosecute people for personal sex things — you don't do that shit," Giuliani said, dismissing speculation that Trump would be tried for the same crime as Cohen after he leaves office.
Around the time of his 2018 remarks to Hannity, after which Giuliani abruptly left his position at the prestigious New York law firm Greenberg Traurig, Giuliani met Ukrainian-born entrepreneur Lev Parnas. That connection was apparently made through Jon Sale, a South Florida attorney and former Justice Department colleague of Giuliani. Sale told Salon that he believed the connection happened in April or May 2018.
(Sale, who shares with Giuliani a Venezuelan client who is under investigation in a billion-dollar federal money laundering probe, briefly represented Giuliani during President Trump's impeachment proceedings. He stepped aside shortly after Parnas and his business partner Igor Fruman were arrested at Dulles airport last October.)
Giuliani, who sustains a remarkably lavish lifestyle — and who last August hired a personal communications aide, Christianné Allen — says that he has represented Trump free of charge after leaving Greenberg. He also claims to have borrowed money to pay taxes, and concluded an extended, expensive and openly bitter divorce last December, shortly before Trump was impeached by the House of Representatives.
There are only a few known data points for Giuliani's income. One is the PPP loan; another is a mysterious $500,000 investment he received in 2018.
Not long after Giuliani left his job at the Greenberg gig, he received $500,000 related to a vague business arrangement with Fraud Guarantee LLC, an identity-protection business created by Parnas and Fruman, the two men currently under federal indictment.
Giuliani claims that he was contracted to act as the face of Fraud Guarantee, as he did in his previous role with identity protection firm LifeLock. For this service Giuliani supposedly charged Parnas and Fruman half a million dollars, which he received — but not through Fraud Guarantee.
Instead, a New York attorney paid Giuliani the $500,000 in September 2018, purportedly as a loan or investment on behalf of Fraud Guarantee, according to public reports and people involved, with the understanding that the money would be recouped in funds or stock in the company upon its success.
A lawyer and associate of Giuliani's told Salon that around the time Giuliani accepted the money, he was warned in writing, and with evidence, that Fraud Guarantee — a company that essentially had never existed — should be vetted carefully. He took the money anyway.
Two months later, Parnas and Fruman began running political errands in Ukraine on Giuliani's behalf. It is not clear whether or how Giuliani was paying them. His own $500,000 payment appears to have kicked off a series of events, many of them masterminded by Giuliani, that over the next year ultimately led to Trump's impeachment.
All parties involved agree that Giuliani was not paid the $500,000 directly, but indirectly through his firm, Giuliani Partners. Those funds — if Giuliani claimed them — would then have been routed to him through WorldCapital Payroll.
Giuliani has not been charged with any crime. A lawyer for Lev Parnas did not reply to Salon's request for comment. Jon Sale did not reply to Salon's request for comment. Igor Fruman could not immediately be reached for comment.
