The Big Guns
With Board members like these, who needs lobbyists?
Uncovering the Bush connection to US defence giant the Carlyle
by Tim Shorrock
New Internationalist magazine, July 2002
ON 12 March 2002, Frank Carlucci, the former US Secretary
of Defense and chair of the Carlyle Group, presided over a closed-door
conference of US and Taiwanese defence officials. At Carlucci's
invitation, Taiwan's Defence Minister Tang Yao-Ming flew in from
Taipei and met with Deputy US Defense Secretary Paul Wolfowitz,
the Bush administration's leading hawk and a man with close ties
with conservative leaders in Asia.
The meeting turned out to be the highest-level defence contact
between the United States and Taiwan since diplomatic relations
were severed in 1979. It provided the Bush administration with
an opening to pursue its policies of expanding arms sales to Taiwan
outside the glare of the media. Wolfowitz promised to do 'whatever
it takes' to strengthen Taiwan's military capabilities against
China - a policy of great interest to Carlyle and its largest
defence subsidiary, United Defense Industries, which was one of
12 military contractors to sponsor the conference.
This incident illustrates the extraordinary reach of the Carlyle
Group and the man at its helm. Carlucci came to Carlyle in 1987
after a long career in the top ranks of the US national security
establishment, including stints as deputy director of the Central
Intelligence Agency and National Security Advisor to former President
Reagan. During the 1980s, he ran Sears World Trade, a company
that became deeply involved in shady arms deals and commodity
imports before going bankrupt.
Under Carlucci's leadership, Carlyle has become one of the
world's largest private equity funds, with over $13 billion worth
of investments in defence, manufacturing, telecommunications,
healthcare and finance.
As the eleventh largest US defence contractor, Carlyle is
involved in nearly every aspect of military production, including
making the big guns used on US naval destroyers, the Bradley Fighting
Vehicle used by US forces during the Gulf War and parts used in
most commercial and military aircraft. United Defense has joint
ventures in Saudi Arabia and Turkey, two of the United States'
closest military allies in the Middle East.
Carlyle's extraordinary investment strategy is what sets it apart.
It focuses on industries, such as defence and telecommunications,
where government spending, regulations and policies play critical
roles in defining the market. But unlike its competitors in the
military-industrial complex or investment banking, Carlyle doesn't
lobby Congress or the White House to pet projects or push for
legislation that would help its interests. It doesn't need to.
Instead, it has hired a stable of former statesmen and senior
officials, including former President George Bush, former Secretary
of State James Baker III and former British Prime Minister John
Major, to exploit their experience in government and diplomacy
to open doors and gather intelligence on investment opportunities.
Through their unbeatable high-level connections, Carlyle has
direct lines to government leaders in Asia, the Middle East and
Europe. And, not least, to George W Bush who once served as an
executive with Caterair, one of hundreds of companies Carlyle
has bought and sold over the past 15 years. In an unprecedented
twist of the Washington influence game, through Bush Senior's
ties to Carlyle and United Defense, President George W Bush's
family is making untold sums from the war he is directing against
terrorism. This fact is underscored by Carlyle's decision after
the opening salvoes of the war to go public with two of its defence
companies, including United Defense.
'We've never in the history of the republic had a former US
president working for arms manufacturers,' says Charles Lewis,
the executive director of the Center for Public Integrity, a Washington-
based research group that investigates the influence of money
s. and politics. 'What is most offensive to me is that we have
a former president of the United States with a substantial pension
from US taxpayers, and we cannot find out what he is doing for
the eleventh largest defence contractor.'
Since 1987 Carlyle has invested $6.4 billion in 233 transactions,
with a rate of return of 36 per cent on its completed investments.
It invests on behalf of 435 pension funds, banks and investment
funds, 40 per cent of which are based overseas. During a recent
(and rare) public briefing on its investment strategies, one of
Carlyle's senior managers disclosed that the Group has $7 billion
in cash ready invest. That's not chump change: $7 billion is the
minimum amount the world community should invest every year to
fight AlDS and HIV, UN Secretary General Kofi Annan said last
The extraordinary connections with former high-level statesmen
has given Carlyle a great deal of expertise on tap. Bush Senior,
who was CIA director and US ambassador to China and the UN before
becoming president, is the senior adviser on Asia and makes his
money by giving speeches at Carlyle's investment conferences (Carlyle
won't disclose where he makes those speeches or how much he earns).
Baker, who also served as Treasury Secretary during the Reagan
administration and defended George W during the disputed 2000
election with Al Gore, is Carlyle's senior counsellor and a member
of the firm's Asia, Europe and Japan advisory boards. Since last
spring, John Major has been chair of Carlyle Europe and heads
meetings of its European advisory board.
Other recent hires include Arthur Levitt, the former chair
of the Securities and Exchange Commission (SEC), which regulates
the US stock market; William E Kennard, the former chair of the
Federal Communications Commission, which has jurisdiction over
the US telecom and wireless industries; and Afsaneh Beschloss,
the former chief investment officer of the World Bank, who runs
Carlyle's new asset management group. Carlyle's advisory boards
are peppered with corporate executives from Boeing, BMW, Toshiba
and other big transnationals, and influential characters like
former Bundesbank President Karl Otto Pohl, former Thai Prime
Minister Anand Panyarachun, former Philippines President Fidel
Ramos and former US Ambassador to Japan and former Speaker of
the House Thomas Foley.
The Saudi connection
After Bush was inaugurated in January 2001, Carlyle's Republican
connections - and the role of the President's father- became grist
for several press exposes, including a detailed article in the
New York Times that focused on Bush Senior and Baker's close ties
with the Saudi royal family.
But few took notice until shortly after September 11, when
the Wall Street Journal revealed that the bin Laden family, which
owns a major construction company in Saudi Arabia, had committed
at least $2 million to one of Carlyle's funds and entertained
Bush Senior, Baker and Carlucci at their family compound in Jeddah
during the l990s. Carlyle, deeply embarrassed, quickly severed
the investment ties. But a few months ago, The Washington Post
revealed that the bin Laden money had been solicited by members
of the Saudi royal family, who encouraged wealthy Saudi citizens
to invest in Carlyle as a sign of respect for Bush Senior and
Baker, their heroes from the Gulf War.
Judicial Watch, a conservative US legal group, seized on the
bin Laden connection to launch a vitriolic attack, urging Bush
Senior to resign from Carlyle. Charles Lewis of the Center for
Public Integrity believes the bin Laden connection may be the
tip of the iceberg of Carlyle's political relationships. 'I actually
think this is a potentially more serious scandal for the Bush
administration than Enron, because it's more personal,' he said.
Carlyle only tells the public what it wants. That makes information
about Bush Senior's meetings with heads of state and his other
activities on Carlyle's behalf almost impossible to obtain.
In April, Cynthia McKinney, an outspoken Democrat Representative
from Georgia, became the first public figure to criticize the
relationship between the Bush family and the Carlyle Group. In
a radio interview, McKinney accused the Bush administration of
'serving the interests' of Carlyle and said that 'persons close
to this administration are poised to make huge profits off America's
new war'. For that, she was vilified by her fellow lawmakers and
the White House, which said through a spokesperson that: 'The
American people know the facts, and they dismiss such ludicrous,
baseless views. The fact that she questions the President's legitimacy
shows a partisan mindset beyond all reason.'
Apparently it is out of bounds in American politics to question
the ethics of a former president who makes money from policies
pursued by his son in the White House. But without more voices
like McKinney's, the public is likely to remain in the dark about
the global reach of the Carlyle Group, which combines the public
and private interest in a form rarely seen in Washington.
Tim Shorrock (email@example.com) is an investigative
journalist based in Washington DC. He has been writing about US
foreign policy, globalization and East Asia for more than 20 years.