Fortune magazine had a warm and fuzzy piece on the Carlyle Group. It started out nicely and had some good stuff, but ultimately was more of a public relations profile:
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Are you the sort of person who believes in conspiracies–the Trilateral Commission secretly runs the world, that sort of thing? Well, then, here’s a company for you. The Carlyle Group, a Washington, D.C., buyout firm, is one of the nation’s largest defense contractors. It has billions of dollars at its disposal and employs a few important people. Maybe you’ve heard of them: former Secretary of State Jim Baker, former Secretary of Defense Frank Carlucci, and former White House budget director Dick Darman. Wait, we’re just getting warmed up. William Kennard, who recently headed the FCC, and Arthur Levitt, who just left the SEC, also work for Carlyle. As do former British Prime Minister John Major and former Philippines President Fidel Ramos. Let’s see, are we forgetting anyone? Oh, right, former President George Herbert Walker Bush is on the payroll too.
The firm also has about a dozen investors from Saudi Arabia, including, until recently, the bin Laden family. Yes, those bin Ladens. Is it any wonder that Internet sites with names like paranoiamagazine.com are rife with stories about Carlyle’s shadowy, corrupt global network? And it’s not just wackos. “Be careful,” a tech entrepreneur in Silicon Valley wrote in an e-mail when he learned I was doing a story on Carlyle. “The rabbit hole runs really deep on this one.” …
Unlike other private-equity groups, Carlyle concentrates on companies funded by the government, such as defense contractors, or those affected by government regulation, such as telecommunications firms, and then hires people with relevant government experience. As the company once put it in a brochure, “We invest in niche opportunities created in industries heavily affected by changes in governmental policies.” Doing so, of course, raises the ultimate rabbit-hole question: Is Carlyle’s approach just a smart twist on good old business networking or a step over the line into an ethical twilight zone in which the public trust is broken? …
Half a mile from the White House, inside nondescript offices sparsely adorned with generic depictions of ships and ducks, co-founder Rubenstein sits with his hands folded on a table so shiny you can see your reflection. Next to him sits Chris Ullman, Carlyle’s first-ever full-time PR person. Habitually wary of media attention, Rubenstein and his partners agreed to rare interviews with FORTUNE. That’s because since Sept. 11 the firm has been under unusual fire. First there was the bin Laden thing. Shafig bin Laden, one of Osama’s many brothers and a Carlyle investor, was in attendance at a Carlyle conference at a Washington hotel on that infamous day. As the media were quick to point out, this meant that George H.W. Bush was working for a firm that was helping to make the bin Ladens money. Even though the wealthy Saudi family has reportedly cut all ties to Osama, the press lambasted Carlyle.
The firm has since given the bin Ladens back their money, some $2 million, but controversy lingers. Sept. 11 and its aftermath also created the appearance of further conflicts of interest–namely, that while his son is in the Oval Office directing the war effort and proposing the largest increase in defense spending since Ronald Reagan, Bush is working for a firm that, through various investments, has become the nation’s 14th-largest defense contractor. “It destroys the office of the presidency no less, in my view, than having sex with an intern,” says Larry Klayman, director of the watchdog group Judicial Watch. On top of all that, there’s the unfolding Enron saga and the likely passage of the campaign-finance-reform bill, which suddenly make it look bad for businesses to have too many friends in Washington