Carlyle Empire
The Carlyle Empire
Article published in Le Monde, April 30, 2004
The world's largest private investor, well established in the arms sector, is a discreet group that cultivates relationships with influential men, including the Bushes, father and son. One year ago, on May 1, 2003, George Bush landed, strapped in a fighter pilot's suit, on the USS Abraham-Lincoln aircraft carrier off the coast of California. The image became famous. Under a banner proclaiming "Mission accomplished" (mission accomplished), the president prematurely announced the end of military operations in Iraq and his victory.
The next day, back on solid ground, he gave another martial speech, not far from San Diego, in an arms factory of United Defense Industries.
This company is one of the main Pentagon suppliers. It produces, among other things, missiles, transport vehicles, and in California, the light armored Bradley. Its main shareholder is the world's largest private investor. A discreet group called Carlyle.
It is not listed on the stock exchange and is accountable only to its 550 investors - billionaires or pension funds. Carlyle currently manages 18 billion dollars, invested in the defense and high technology sectors (including biology), space, security-related computer technology, nanotechnology, and telecommunications. The companies it controls have in common the fact that their main clients are governments and administrations. As the company wrote in a brochure: "We invest in opportunities created in industries strongly affected by changes in government policy."
Carlyle is a unique model, built on a global scale on relationship capitalism or "access capitalism," to use the expression of the American magazine New Republic in 1993. The group today, despite its denials, embodies the "military-industrial complex" against which the Republican president Dwight Eisenhower warned the American people when leaving his office in 1961.
This did not prevent George Bush Sr. from holding a position as a Carlyle advisor for ten years, until October 2003. It was the first time in U.S. history that a former president worked for a Pentagon supplier. His son, George W. Bush, also knows Carlyle well. The group found him a job in February 1990, while his father occupied the White House: as an administrator of Caterair, a Texas company specializing in air catering. This episode no longer appears in the official biography of the president. When George W. Bush left Caterair in 1994, before becoming governor of Texas, the company was in trouble.
"It is not possible to be closer to the administration than Carlyle," says Charles Lewis, director of the Center for Public Integrity, a nonpartisan Washington organization. "George Bush Sr. has made money from private interests that work for the government whose president is his son. One could even say that the president may one day benefit financially, through his father's investments, from political decisions he has made," he adds.
The collection of influential people who work, have worked or invested in the group would astonish even the most convinced followers of the conspiracy theory. Among them are: John Major, former British prime minister, Fidel Ramos, former Philippine president, Park Tae Joon, former South Korean prime minister, Saudi prince Al-Walid, Colin Powell, current secretary of state, James Baker III, former secretary of state, Caspar Weinberger, former secretary of defense, Richard Darman, former budget director at the White House, billionaire George Soros, and even members of the Bin Laden family. One can add to this list Alice Albright, daughter of Madeleine Albright, former secretary of state, Arthur Levitt, former chairman of the SEC (the Wall Street watchdog), William Kennard, former head of the telecommunications authority (FCC). Finally, among Europeans, Karl Otto Pöhl, former president of the Bundesbank, the late Henri Martre, who was president of Aerospatiale, and Etienne Davignon, former president of the Générale de Belgique.
Carlyle is not just a collection of power figures. It has stakes in nearly 200 companies and, above all, the annual profitability of its funds has exceeded 30% for a decade. "Compared to the five hundred people we employ worldwide, the number of former government officials is very low, no more than a dozen," explains Christopher Ullmann, vice president of Carlyle, in charge of communications. "We are accused of all evils. But no one has ever proven any misconduct. No legal proceedings have ever been brought against us. We are an easy target for those who want to attack the American government and the president."
Carlyle was created in 1987, with 5 million dollars, in the salons of the New York palace of the same name. Its founders, four lawyers, including David Rubenstein (former advisor to Jimmy Carter), had then a limited ambition: to take advantage of a loophole in the tax legislation. It allowed companies owned by Eskimos in Alaska to transfer their losses to profitable companies, thus paying less taxes. The group languished until January 1989 and the arrival at its head of the man who would invent the Carlyle system, Frank Carlucci. Former deputy director of the CIA, national security advisor, and then defense secretary of Ronald Reagan, Mr. Carlucci counts in Washington. He is one of the closest friends of Donald Rumsfeld, current defense minister. They shared a room when they were students at Princeton. They later crossed paths in many administrations and even worked, for a time, for the same company, Sears Robuck.
Six days after officially leaving the Pentagon, on January 6, 1989, Frank Carlucci became CEO of Carlyle. He brought with him trusted men, former CIA, State Department, and Defense Department officials. Nicknamed "Mr. Clean," Frank Carlucci has a shady reputation.
This diplomat was stationed in the 1970s in countries such as South Africa, Congo, Tanzania, Brazil, and Portugal, where the United States and the CIA played a dubious political role. He was second in command at the American embassy in the Belgian Congo in 1961 and was suspected of being involved in the assassination of Patrice Lumumba. He has always firmly denied it. The American press also accused him of being involved in several arms deals in the 1980s, but he was never prosecuted. He once led Wackenhut, a security company with a terrible reputation, involved in one of the biggest espionage scandals, the diversion of the Promis software. Frank Carlucci was tasked with cleaning up the Reagan administration during the Iran-Contra affair and then succeeded John Pointdexter as national security advisor. Upon taking office, he appointed a young general as his assistant... Colin Powell.
With his name, Frank Carlucci attracts capital to Carlyle. In October 1990, the group acquired BDM International, which participates in the "Star Wars" program, and made it a foothold. In 1992, Frank Carlucci partnered with the French group Thomson-CSF to take over the aerospace division of LTV. The operation failed, the Congress opposed the sale to a foreign group. Carlyle found other partners, Loral and Northrop, and took over LTV Aerospace, quickly renamed Vought Aircraft, which participates in the production of B1 and B2 bombers.
At the same time, the fund made several strategic acquisitions, such as Magnavox Electronic Systems, a pioneer in radar imaging, and DGE, which holds the technology for electronic terrain maps for cruise missiles. Then came three companies specializing in nuclear, chemical, and bacteriological decontamination (Magnetek, IT Group, and EG G Technical Services). Then, via BDM International, a company linked to the CIA, Vinnell, which was among the first to provide the U.S. Army and its allies with private contractors. That is, mercenaries. Those of Vinnell supervised the Saudi armed forces and protected King Fahd. They fought in the first Gulf War alongside Saudi troops. In 1997, Carlyle sold BDM and especially Vinnell, too dangerous. The group no longer needed them. It became the eleventh supplier of the Pentagon by acquiring United Defense Industries the same year.
Carlyle came out of the shadows by itself on September 11, 2001. That day, the group organized a meeting at the Washington Ritz Carlton with five hundred of its most important investors. Frank Carlucci and James Baker III played the hosts. George Bush Sr. made a brief appearance in the morning. The presentation was quickly interrupted, but one detail did not escape anyone. One of the guests had on his badge the name of Ben Laden. It was Shafiq Ben Laden, one of the many half-brothers of Osama. American media discovered Carlyle. A journalist, Dan Briody, wrote a book on the hidden side of the group, The Iron Triangle, and was particularly interested in the close relationships between the Bush family and Saudi leaders.
Some question the influence of George Bush Sr. on U.S. foreign policy. In January 2001, when George Bush Jr. broke negotiations with North Korea over missiles, the South Koreans, shocked, approached his father. Carlyle has significant interests in Seoul. In June 2001, Washington resumed talks with Pyongyang.
Another example, in July 2001, according to the New York Times, George Bush Sr. called the Saudi prince Abdullah, upset about the president's positions on the Israeli-Palestinian conflict. George Bush Sr. assured the prince that his son "was doing good things" and that "his heart was on the right side." Larry Klayman, director of Judicial Watch, a staunchly conservative organization, asked the "father of the president to resign from Carlyle. The group has conflicts of interest that could create problems for U.S. foreign policy." Finally, in October 2003, George Bush Sr. left Carlyle. Officially, because he was approaching 80 years old.
Although Carlyle ended all relations with the Bin Laden family in October 2001, the damage was done. The group became, along with Halliburton, a target for opponents of the Bush administration. "Carlyle has replaced the Trilateral Commission in conspiracy theories," admitted David Rubenstein in 2003, in an interview with the Washington Post. For the first time, the group appointed a communications director and changed its leader. Frank Carlucci became honorary president and Lou Gerstner, a respected leader who saved IBM, officially took over. The operation seems mainly cosmetic. Mr. Gerstner does not spend much time at his desk. But Carlyle wants to become respectable.
The group created a website. It opened some funds to investors bringing in "only" 250,000 dollars (210,000 euros). It would have reduced its stake in United Defense Industries and claims that defense and aerospace now represent only 15% of its investments. But Carlyle still makes intensive use of tax havens and it is difficult to know its scope and the names of the companies it controls.
Carlyle also multiplies its efforts in Europe. In September 2000, it took control of the Swedish arms group Bofors via United Defense. It then tried, without success, to take over Thales Information Systems and, at the beginning of 2003, the shares of France Télécom in Eutelsat, which plays an important role in the European satellite positioning system Galileo - a competitor to the American GPS. From 1999 to 2002, it managed a stake in Le Figaro. In Italy, it made a breakthrough by taking over the aerospace subsidiary of Fiat, Fiat Avio. This company supplies Arianespace and allows Carlyle to enter the European rocket council. Another move, in December 2002, Carlyle bought a third of Qinetic, the private subsidiary of the British military research and development center. Qinetic occupies a unique position as a government advisor in the United Kingdom.
"Anticipating future technologies and the companies that will develop them is our primary role as an investor. Pension funds bring us their money for this. We certainly cannot be blamed for trying to take strategic positions," says Mr. Ullmann.