With friends in high places...
Former world leaders give Carlyle Group unrivalled prowess in lobbying for business, says Conal Walsh
Conal Walsh
Sunday September 15, 2002
The Observer
Few firms can rival the Carlyle Group for its array of high-powered friends.
The Washington-based venture capital house has been likened to a retirement home for Gulf War veterans, and the likes of George Bush Sr, former US Secretary of State James Baker, ex-Prime Minister John Major can take credit for its rapid rise.
It used to be fashionable to deride Carlyle as a second-rate influence-peddler and dismiss its stable of retired politicians as superannuated 'access capitalists'. These days, though, its figures tell another story.
In its 15-year history the firm has invested $6.6 billion, taking part in 240 transactions in the United States, Europe and Asia, and developing 21 funds. The returns on realised investments comfortably averaged more than 35 per cent a year.
Carlyle, which specialises in defence and property investments and runs a hedge-fund operation, has trebled in size since 1997 and now boasts 500 employees in 21 offices in 11 countries.
It was one of two firms responsible for the second-biggest buyout deal on record, the $7bn acquisition earlier this year of QwestDex, the yellow pages firm.
Carlyle has had Boeing, BMW and Nestl� executives on its board, and has done business with, among others, Li Ka-shing, the Chinese telecoms tycoon, and billionaire speculator George Soros. And it still has $7bn ready to invest.
Carlyle is a partnership run by three co-founders who keep close operational control. William Conway was chief financial officer of MCI Communications before Carlyle was founded in 1987. Daniel D'Aniello, Carlyle's operating partner, had been a senior executive at Marriott hotels.
The third partner, David Rubinstein, worked at a Washington law firm but was essentially a political animal, having been an adviser to Jimmy Carter's administration in the Seventies. It was thanks to Rubinstein that Carlyle developed its unrivalled lobbying prowess.
The firm set up on Pennsylvania Avenue, near the White House, and in 1989 hired ex-CIA director Frank Carlucci, Ronald Reagan's former Defence Secretary.
Carlucci, now Carlyle's chairman, appreciates the power of political glad-handing and well-placed phone calls. His most famous 'hire' is his friend, George Bush Senior, now a part-time 'ambassador' for the firm, advising on deals in Asia.
Visits by Bush to South Korea and China have been sponsored by Carlyle, and his clout with the Saudi government - perhaps Carlyle's most important customer - is also likely to be valued.
Others close to Bush have been recruited more permanently, notably Baker, who is now Carlyle's senior counsel, and Major. The former Tory Prime Minister chairs Carlyle Europe, a job believed to earn him hundreds of thousands of pounds a year. Advisers also include ex-Bundesbank president Karl Otto Pohl.
Former US military chiefs William Owens and John Shalikashvili work for Carlyle subsidiaries. Carlyle has recently recruited influential Clinton apparatchiks too, including Arthur Levitt, formerly chairman of the Securities and Exchange Commission, and federal communications regulator William Kennard.
In Asia, its advisers include Fidel Ramos, former Philippines President, and Anand Panyarachun, ex-prime minister of Thailand.
Carlyle plays down the significance of its political friends. They occasionally open doors, the firm admits, but do not get involved in deal-making.
Yet Carlyle's political interests steered its destiny from the first. In its early years, it snapped up defence companies going cheap in the dying days of the Cold War. These investments paid off as it became clear that military conflict was not, after all, a thing of the past.
Small wonder it hired a whole generation of hawkish politicians. Carlyle sinks money into a host of industries these days, but the defence business remains close to its heart.
Recently, it suffered the rare frustration of not getting what it wanted from a Republican administration. Its subsidiary, United Defense Industries, was forced to abandon Crusader, an anti-tank missile system judged by the Pentagon to be obsolete - but not before Carlyle had realised $400m from selling United Defense shares.
Carlyle's big investments
� The group and a partner firm purchased Qwest Communications' 'yellow pages' directories business last month in a $7 billion deal that was the largest US buyout since 1989
� Owns 47 per cent stake in United Defense Industries, the American arms company. Floated a large stake last year for $400m
� Big shareholder in US Marine Repair, a big military shipbuilder and owner of key US naval ports
� Owns Dr Pepper/Seven-Up Bottling Group with Cadbury-Schweppes
� Formed Taiwan Broadband Communications and is considering a bid for Asian assets of stricken telecoms giant Global Crossing
� Recently sold its stake in French newspaper Le Figaro but bought a host of publishing assets from Vivendi Universal
� Major shareholder in European industrial companies including Messer Cutting & Welding, Riello and Honsel
EducationGuardian.co.uk � Guardian Newspapers Limited 2002
