Bush Sr’s Carlyle Group Profits On War

February 22nd, 2004 - by admin

by Jamie Doward / The Observer – UK –


LONDON (Match 25, 2003) — It is the sort of thing they really could have done without. For 15 years one of America’s most powerful venture capital groups has tried to play down suggestions that its multi-billion dollar funds get fat on the back of global conflict. But now, with the invasion of Iraq under way, a new book chronicling the relatively short history of the Carlyle Group threatens to draw attention to the company’s close links with the Pentagon.

Dan Briody, author of the Iron Triangle, Inside the Secret World of the Carlyle Group, alleges the company’s executives were so worried about his book they told staff not to talk to him. The Carlyle Group rejects this and argues the book is little more than a cuttings job based around some of the more crazy conspiracy theories found on the internet. It also points out that only around 7 percent of its funds are invested in defence companies, far less than several other venture capital groups. ..

The Carlyle Group AKA the ‘Ex-President’s Club’
But Briody’s account of how an upstart venture capital firm went from nothing to managing funds of nearly $14 billion in just 15 years, earning investors returns of around 36 percent, is likely to reinforce the controversial image of the Carlyle Group and raise concerns about its influence in Washington and beyond.

Sometimes called the Ex-Presidents Club, Carlyle has a glittering array of ex-politicians and big league bankers on its board. Former secretary of state James Baker is managing director while ex-secretary of defence Frank Carlucci is chairman. George Bush senior is an adviser. John Major heads up its European operations.

To give the conspiracy theorists plenty of ammunition, US newspapers have also highlighted the fact that current Defense Secretary Donald Rumsfeld was a wrestling partner of Carlucci’s at Princeton and the two have remained close friends ever since…

The appointment of Carlucci to the company board marked a new phase in Carlyle’s history. It was Carlucci who spearheaded the $130 million acquisition of BDM Consulting in 1990. The company was a specialist in the defence contracting business and had a formidable network of contacts thanks to its CEO, Earle Williams, a close friend of Carlucci. It was a good time for the Carlyle Group. Defence contracts were being slashed as the Cold War ended and cheap buyout opportunities were everywhere.

Buying In on the Post-Cold-War Slump
Carlyle identified a key target: Vinnell. Few people have heard of Vinnell. It started life building airstrips, but by the 1970s was training Saudi troops to protect oil fields. Unlike other US firms it stayed in Saudi Arabia during the first Gulf War and by the time Carlyle snapped the firm up in 1992 it had built up the country’s national guard from 26,000 to 70,000 troops. Carlyle sold its interest in Vinnell in 1997.

But perhaps Carlyle’s most famous acquisition was United Defense in 1997. The company had developed a huge 40-tonne howitzer, the Crusader, which, despite widespread opposition from the army, was commissioned by the Pentagon. The $665 million contract was signed just two weeks after the attacks on the twin towers and less than a month later Carlyle decided to take the company public in a move that was to earn the group nearly $240 million. Months later, the Crusader programme was scrapped while United Defense was handed a new contract to build a lighter gun.

The Bushes and the Bin Ladens
At the same time it emerged that the bin Laden family — estranged from their terrorist son — was an investor in the Carlyle fund that owned United Defense. The backlash was ferocious.

Carlyle hired a PR firm but the group was under siege. In an astonishing move, Democrat Representative Cynthia McKinney cited the Carlyle Group as an example of an organisation “close to this administration poised to make huge profits off America’s new war.” The bin Laden family sold their stakes in the fund. A spokesman said their investment was valued at ‘only’ around $2 million, although Briody quotes insiders who say the family’s investment had been significantly greater in the past.

In the wake of 11 September came a fear of anthrax attack. One company that benefited was Pittsburgh-based IT Group, which won a number of contracts to clean up anthrax-infected buildings, including the Hart Senate Office Building. Carlyle owned 25 percent of the firm, which it subsequently sold on. Likewise its investment in US Investigation Services, a company that specialises in checking the background of employees, saw business improve dramatically.

‘I do not exaggerate when I say that Carlyle is taking over the world in government contract work, particularly defence work,’ one employee told Briody. Other Carlyle companies also benefited, including EC&G which makes X-ray scanners, Composite Structures, a maker of metal-bond structures in fighter jets and missiles, and Lier Siegler Services Inc, a major military contractor, providing logistics support. ..

Whatever Carlyle says, its image as being at the apex of what Eisenhower termed the ‘military industrial complex’ endures.