the Old Bush Team,
Star Power and Connections
Are Paying Off for Ex-Officials
Leslie Wayne New York Times Service (International Herald Tribune, Tuesday, March 6, 2001)
Mr. Bush went as an ambassador of sorts but not for his government.
In the same way, Mr. Bush's secretary of state, James Baker
3d, recently met with a group of wealthy people at the elegant
Lanesborough Hotel in London to explain the Florida vote count.
Traveling with the fanfare of dignitaries, Mr. Bush and Mr.
Baker were using their extensive government contacts to further
their business interests as representatives of the Carlyle
Group, a $12 billion private-equity company.
Based in Washington, the Carlyle Group has parlayed a roster
of former top-level government officials, largely from the
Bush and Reagan administrations, into a money-making machine.
In a new spin on Washington's revolving door between business
and government, where lobbying by former officials is restricted
but soliciting investments is not, Carlyle has upped the ante
and taken the practice global.
Mr. Bush and Mr. Baker were accompanied on their trips by
former Prime Minister John Major of Britain, another of Carlyle's
With door-openers of this caliber, along with shrewd investment
skills, Carlyle has gone from an unknown in the world of private
equity to one of its biggest players.
Private equity, which involves buying up companies in private
deals and reselling them, is a high-end business open only
to the very rich.
Over the last decade, the Carlyle empire has grown to span
three continents and includes investments in most corners
of the world. It owns so many companies that it is now in
effect one of the biggest U.S. defense contractors and a force
in global telecommunications. Its blue-chip investors include
major banks and insurance companies, billion-dollar pension
funds and wealthy investors from Abu Dhabi to Singapore.
In getting business for Carlyle, Mr. Bush has been impressive.
His meeting with the crown prince was followed by a yacht
cruise and private dinners with Saudi officials, including
King Fahd, all on behalf of Carlyle, which has extensive interests
in the Middle East.
And Mr. Bush led Carlyle's successful entry into South Korea,
the fastest-growing economy in Asia. After his meetings with
the prime minister and other government and business leaders,
Carlyle won a tough competition for control of KorAm Bank,
one of the few healthy Korean banks.
The steady flow of politicians to lucrative private-sector
jobs based on their government contacts is a familiar Washington
tale. But in this case, it is being played out for more dollars,
on a global stage, and in the world of private finance, where
the minimal government rules prohibiting lobbying by former
officials for a given period are not a factor.
These rules say nothing about potential conflicts when former
government officials use their connections and insights for
financial gain. They may attract more notice now that George
W. Bush is president.
Many of those involved with Carlyle, which invests largely
in companies that do business with the government or are affected
by government regulations, have ties to the Oval Office.
For instance, Frank Carlucci, a secretary of defense under
President Ronald Reagan, who as much as anyone is responsible
for Carlyle's success, said he met in February with his old
college classmate, Donald Rumsfeld, the new secretary of defense.
He also met with Vice President Dick Cheney, himself a defense
secretary under former President Bush, to talk about military
matters - at a time when Carlyle has several billion-dollar
defense projects under consideration.
Carlyle officials contend that the company's activities do
not present any potential conflicts. They say that former
President Bush, Mr. Baker and other former Republican officials
now at Carlyle - including Mr. Carlucci, who is Carlyle's
chairman, and Richard Darman, who was Mr. Bush's budget director
- do not lobby the federal government.
Carlyle executives point out that many corporations have former
government officials as board members.
"Mr. Bush gives us no advice on what do with the federal government,"
said David Rubenstein, the company founder and a former aide
in the Carter White House. "We've gone over backwards to make
sure that we do no lobbying."
Others, however, see little difference between potential conflicts
involving lobbying and those involving investments.
"Carlyle is as deeply wired into the current administration
as they can possibly be," said Charles Lewis, executive director
of the Center for Public Integrity, a nonprofit public interest
group based in Washington. "George Bush is getting money from
private interests that have business before the government,
while his son is president.
And, in a really peculiar way, George W. Bush could, some
day, benefit financially from his own administration's decisions,
through his father's investments. "The average American doesn't
know that," he said, "and, to me, that's a jaw-dropper."
It is difficult to determine exactly how much money the senior
Mr. Bush and Mr. Baker have made. Mr. Baker is a Carlyle partner,
and Mr. Bush has the title of senior adviser to its Asian
With a current market value of about $3.5 billion on Carlyle's
equity and with the firm owned by 18 partners and one outside
investor, Mr. Baker's Carlyle stake would be worth about $180
million if each partner held an equal stake. It is not known
whether he has more or less than the other partners.
Unlike Mr. Baker, Mr. Bush has no ownership stake in Carlyle;
as an adviser and an investor, he is compensated by obtaining
stakes in Carlyle investments.
Carlyle executives cited, for example, Mr. Bush's being allowed
to put money he earns giving speeches for Carlyle into its
investment funds. Mr. Bush generally receives $80,000 to $100,000
for a speech. He sits on no corporate boards other than Carlyle's.
Carlyle also gave the Bush family a hand in 1990 by putting
George W. Bush, who was then struggling to find a career,
on the board of a Carlyle subsidiary, Caterair, an airline-catering
From Carlyle's point of view, the involvement of Mr. Baker
and the former president is invaluable.
"It punches up the brand awareness for us globally," said
Daniel D'Aniello, a Carlyle managing director. "We are greatly
assisted by Baker and Bush. It shows that we are associated
with people of the highest ethical standards."
With $12 billion from investors, Carlyle claims to be the
largest U.S. private-equity fund and makes money by investing
in undervalued companies and reselling at a profit.
These numbers put Carlyle in the same league as better-known
private equity firms like Kohlberg Kravis Roberts Co. and
The California state pension fund invested $305 million with
Carlyle, and the Texas teachers pension fund - whose board
was appointed when George W. Bush was governor - gave Carlyle
$100 million to invest in November. Carlyle also works as
a financial adviser to the Saudi government.
"Let's say Carlyle is going fund-raising in the Middle East
and they bring Bush along," said David Snow, editor of Private
Equity Central, a trade publication. "He led the U.S. Army
into that region." That will catch the attention of very wealthy
investors in Saudi Arabia and Kuwait. The fact that Mr. Bush
is involved does not mean that Carlyle will make great investment
decisions. But it will get them access to certain deals and
certain countries that they might otherwise not have."
A former Carlyle employee said, "The firm understands that
having Bush and Major around is like having movie stars around."
Yet Carlyle's success is not just because of its high-powered
connections. Carlyle has done well for its investors, returning
an average of 34 percent a year over the last decade, in line
with other private equity funds.
It has done this by buying what it knows best - companies
that are regulated by government. Nearly two-thirds of its
investments are in defense and telecommunications companies,
which are affected by shifts in government spending and policy.
Carlyle has become the nation's 11th largest defense contractor,
owning companies that make tanks, aircraft wings and a broad
array of other military equipment. It also owns health care
companies, real estate, Internet companies, a bottling company
and even Le Figaro, the Paris newspaper.
In Europe, Carlyle has assembled an advisory board that besides
Mr. Major includes Karl Otto Poehl, former president of Germany's
Bundesbank, and the past or present chairmen of BMW, Hoffman-LaRoche,
Nestle, LVMH-Moet Hennessy Louis Vuitton, and Aerospatiale,
the French Airbus partner.
Carlyle's Asia advisory board, which helps raise money and
finds and reviews deals, includes former President Fidel Ramos
of the Philippines; a former prime minister of Thailand, Anand
Panyarachun, and the executive director of the Abu Dhabi Investment
Authority. A former South Korean prime minister, Park Tae
Joon, was also an adviser to Carlyle.
This star power is a source of great pride for Carlyle and
part of an acknowledged long-term strategy to associate the
firm with brand-name politicians and business executives in
order to attract more of the same - along with their money,
insights and connections.
That said, Carlyle partners bristle at any suggestion that
the company's success is based only on high-powered schmoozing.
"If our track record was not good, people would not invest
with us," said Mr. Rubenstein, the founding partner. "No one
would gives us money just because Bush is one of our advisers."