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The Iron Triangle: Inside The Secret World of the Carlyle Group

The Iron Triangle: Inside The Secret World of the Carlyle Group

By Dan Briody

The Iron Triangle: Inside The Secret World of the Carlyle Group by Dan Briody uncovers the dealings of the Carlyle Group, an international investment firm that specializes in companies in heavily-regulated industries.

Why start an investment fund which specializes in heavily-regulated industries? Because the Carlyle Group invests in the best politicians money can buy. Their cronyism style of business is called "access capitalism." Consider some of the people employed by the Carlyle Group—George H.W. Bush, former president of the United States, James Baker, III, (former Secretary of State under George H.W. Bush), and John Major, former Prime Minister of the United Kingdom.

In a typical mode of operation, a high-ranking government official directs a substantial amount of government business to the Carlyle Group or helps them in some other significant way. The taxpayer is often the source of this money. Then, the high-ranking official, upon leaving public service, joins the Carlyle Group and cashes in.

We learn that Afsaneh Mashayekhi Beschloss, the treasurer of the World Bank in charge of pension funds, invested with the Carlyle Group. Then, upon retirement, Beschloss took a job with Carlyle. We learn Carlyle paid Wayne Berman a $1 million "finder's fee" for securing a $100 million investment from the Connecticut State Pension Fund. Berman was one of the largest fundraisers in George Bush's campaign. Curiously, a fee of $2,971,945 was paid to the Carlyle Group by the Connecticut State Treasurer. So, it's really the Connecticut taxpayer who paid the "finder's fee."

Texas billionaire Thomas O. Hicks made a $25,000 contribution to George W. Bush's gubernatorial campaign, after Bush won that election. Bush helped Hicks get a seat on the University of Texas Board of Regents. Hicks then pushed for "privatization" of the University's assets, eventually creating the University of Texas Investment Management Company (UTIMCO). This meant the dealings wouldn't be public. Eventually, public pressure forced UTIMCO to reopen its holdings.

Briody writes: "Among the reams of Republican-friendly recipients of investments was, perhaps not surprisingly, the Carlyle Group. … It was a stunning example of how big business and politics are never far apart. Tom Hicks, an appointee of George W. Bush, had helped place $10 million of the University's money with a firm that not only had employed George W. Bush a year earlier (via Caterair), but at the same time was also considering employing George H. W. Bush. It was classic Carlyle, commingling business and politics to the point that the lines are blurred."

Politically-motivated investment is the power of Carlyle. Employing George H. W. Bush turned out to be a good financial move. In particular, with his son as President, Bush Senior has been able to influence U.S. foreign policy so that it benefits Carlyle. (The Bush family also benefits, because part of Bush Senior's pay is his stake in Carlyle funds.) For example, Briody documents how Bush Senior influenced policy toward North Korea while his son was President.

Amazingly, while working for a company with major foreign dealings, and helping these foreign companies achieve their goals, Bush Senior is still able to get daily CIA briefings. It raises the question: Why should a former President, who's tending to the interests of foreign nations and helping defense companies serve these nations, get CIA briefings?

Also, when a company essentially lobbies for destabilization around the world, at what point does a company become treasonous? Briody documents Carlyle's lobbying for Montenegro's independence.

Briody writes: "The move [Montenegro's independence] was widely opposed by the international community, including the United States, because of fears that the move toward independence would again destabilize the region, which had been at war for years and had finally reached some semblance of peace."

Because Carlyle invests primarily in defense companies, war helps Carlyle. Threats to America help Carlyle. In particular, Carlyle earned over a billion dollars after 9/11. The terrorist attacks on America made the founders (David Rubenstein, Dan D'Aniello, William Conway) of Carlyle very rich men.

Immediately after 9/11, a company (United Defense) owned by Carlyle went public earning Carlyle a billion dollars alone. When United Defense went public, its S-1 registration statement (filed 10/22) said: "The terrorist attacks of September 11, 2001 have generated strong congressional support for increased defense spending."

In particular, any congressperson who opposed any weapons system was called unpatriotic. Prior to 9/11, United Defense was struggling. Since at least 1997, its work on the Crusader artillery system was considered obsolete, because the piece was so heavy as to be undeployable. It was designed with the cold war in mind. Military experts said no nation would fight the U.S. in open field combat.

Yet, two weeks after the terrorist attacks, United Defense received a $665 million contract for the Crusader. The boosted earnings carried the company through 2003 and allowed the company to go public. Ultimately, $2 billion dollars of taxpayer money were diverted to the Crusader, a weapon which was never delivered. The project was eventually cancelled.

Briody writes: "After unrelenting bad press about the Crusader approval reached a fever pitch in Washington, Rumsfeld, at the behest of Deputy Secretary of Defense Paul Wolfowitz, finally gave the order to kill the gun once and for all, but only after United Defense had already made gobs of money from its public offering. … Carlyle had already taken its profits."

Incidentally, Secretary of Defense Donald Rumsfeld is a close personal friend of Frank Carulcci, chairman of the Carlyle Group. They were college roommates. Frank Carlucci was the Secretary of Defense in 1988, during which time massive scandal rocked the Pentagon, when a web of kickbacks, bribery, fraud, and corruption was uncovered.

Coincidentally, the morning of the terrorist attacks on 9/11, George Bush Senior was at a Carlyle meeting. So, was the bin Laden family representative to the Carlyle Group. Carlyle is regarded as the gatekeeper of U.S. investment into Saudi Arabia. And, the Saudi ruling family has relied upon Carlyle to help it secretly secure ownership of American companies.

The Iron Triangle: Inside The Secret World of the Carlyle Group should encourage Americans to demand accountability for the actions of the Carlyle Group. In particular, why have billions of dollars of taxpayers' money been diverted to support outdated weapons systems (especially at a time when U.S. troops lacked basic armor)? Why is an ex-President active in foreign companies still able to get daily CIA briefings? Why aren't members of the Carlyle Group forced to register as lobbyists, when they clearly lobby public officials? Why should more and more of America's national defense be outsourced to for-profit companies? What, if any, role does the Carlyle Group play in undermining America's military security so it can profit from the threat of conflict? And, most crucially, why aren't our elected officials demanding answers to these questions?

The Iron Triangle: Inside The Secret World of the Carlyle Group
The Iron Triangle: Inside The Secret World of the Carlyle Group

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