The Carlyle Group, headquartered in Washington D.C., was established in 1987 as a "private global investment firm that originates, structures and acts as lead equity investor in management-led buyouts, strategic minority equity investments, equity private placements, consolidations and buildups, and growth capital financings," according to its website. [3] Cofounded by William Conway, Jr.
Carlyle states that its "mission is to become the premier global private equity firm and to generate extraordinary returns while maintaining our good name and the good name of our partners. Toward that end, we have established a family of funds in the Carlyle name and a network of offices around the world. We maintain the highest standards of ethical conduct and employ a conservative, proven and disciplined approach to investing."[4]
The collection of influential characters who now work, have worked, or have invested in the group would make the most convinced conspiracy theorists incredulous. They include among others, John Major, former British Prime Minister; Fidel Ramos, former Philippines President; Park Tae Joon, former South Korean Prime Minister; Saudi Prince Al-Walid; Colin Powell, former Secretary of State; James Baker III, former Secretary of State; Caspar Weinberger, former Defense Secretary; Richard Darman, former White House Budget Director; the billionaire George Soros, and even some bin Laden family members. You can add Alice Albright, daughter of Madeleine Albright, former Secretary of State; Arthur Lewitt, former SEC head; William Kennard, former head of the FCC, to this list. Finally, add in the Europeans: Karl Otto Poehl, former Bundesbank president; the now-deceased Henri Martre, who was president of Aerospatiale; and Etienne Davignon, former president of the Belgian Generale Holding Company.
Hoover's Online describes the Carlyle Group as a military-industrial complex. The Carlyle Group, Hoover's continues,
takes part in management-led buyouts (MBOs), acquires minority stakes, and provides other investment capital for companies. It is particularly hawkish on the aerospace and defense industries, putting to good use the experience of its chairman emeritus Frank Carlucci, a former Secretary of Defense. Firms in this arena make up a significant share of the portfolio at Carlyle, one of the world's largest private equity firms. The company has also engineered MBOs and other capital deals for firms in such industries as consumer products, energy, health care, information technology, real estate, beverages, and telecommunications. Carlyle's directorship reads like George Walker Bush's inaugural ball invite list. Reagan Secretary of the Treasury James Baker serves as a senior counselor, and Richard G. Darman, former director of the Office of Management and Budget under George Herbert Walker Bush, is a managing director. Former President George Bush has served with Carlyle and Colin L. Powell, before becoming Secretary of State, made an appearance on behalf of the firm.[5] The company has more than $13 billion in assets under management and has invested in such names as: United Defense Industries, of Crusader artillery and Bradley Fighting Vehicle fame; Dr Pepper/Seven Up Bottling Group; and MedPointe Inc..[6] Carlyle owns about 90% of Voight Aircraft Industries, Inc.. Although the majority of the firm's money is in North America, it is also pushing more intensely overseas, launching funds aimed at Asia, Europe, Latin America, and Russia. The firm (along with [[[Apax Partners]] and UK-based Cinven) bought a 28% share of France-based health care and business publisher Vivendi Universal Publishing. One of the company's larger moves overseas is the purchase of the transportation business of The Daiei, Japan's #2 retailer in which the company has a 90 percent stake, worth $28 million.[7] Its moves overseas haven't all been as easy as picking up the phone or as lucrative, however. Carlyle, along with investment firm Welsh, Carson, Anderson & Stowe, are planning to buy the yellow pages business of the financially strapped Qwest Communications while navigating the lawsuit filed by Milberg Weiss Bershad Hynes & Lerach LLP. The firm also returned portions of its European venture capital group funds to investors after the values of its investments lessened and the availability of target acquisitions decreased.[8] Carlyle is keeping an eye on the transportation and healthcare industries as possible candidates for deal making, but the maturing buy-out market creates fewer prize deals and more competitors.[9]California Public Employees' Retirement System, or CalPERS, owns more than 5% of Carlyle.[10] History
In March 2008, "Carlyle Capital, an affiliate of the private equity firm the Carlyle Group, said that its negotiations with lenders had broken down and that it was in default on $16.6 billion in loans. Carlyle had borrowed the money to buy mortgage securities backed by Fannie Mae and Freddie Mac. All appeared well until the prices of those bonds declined and the lenders made a margin call — a demand that Carlyle put up more collateral to cover the loans." [1]
The following is taken from Hoover's Online:
In 1987 T. Rowe Price director Edward Mathias brought together David Rubenstein, a former President Carter aide; Stephen Norris and Daniel D'Aniello, both executives with Marriott Corp.; William Conway, Jr., the CFO of MCI; and Greg Rosenbaum, a VP with a New York investment firm. They pooled their experience along with a load of money from T. Rowe Price Associates, Alex. Brown & Sons (now Deutsche Banc Alex. Brown), First Interstate (now part of Wells Fargo), and Pittsburgh's Mellon family to form a buyout firm. Named after the Carlyle Hotel in New York, the firm opted to make Washington, DC, its headquarters so it wouldn't get lost in the crowd of New York investment firms. The company spent its first years investing in a mish-mash of companies, using Norris' and D'Aniello's Marriott experience to focus primarily on restaurant and food service companies (including Mexican restaurant chain Chi-Chi's). In 1989 it wooed the well-connected Frank Carlucci, who had served as President Reagan's secretary of defense, to join the group. Soon thereafter, Carlyle began making more high-profile deals. That year it acquired Coldwell Banker's commercial real estate operations (sold 1996) and Caterair International, Marriott's airline food services (sold 1995). Carlucci helped redirect the firm's focus to the downsizing defense industry. Among its targets were Harsco Corp. (1990), BDM International (1991), and LTV Corp.'s missile and aircraft units (1992). Carlyle helped overhaul their operations and make them attractive (for the right price) to the industry's elite, including Boeing and Lockheed Martin. As the company's reputation grew, so did its cast of players. Among its new backers were James Baker and Richard Darman (both Reagan and Bush administration alums) and investor George Soros, who chipped in some $100 million into the Carlyle Partners L.P. buyout fund. With the help of its 'access capitalists' such as Baker and Saudi Prince al-Waleed bin Talal (whom the firm helped add to his fortune in a 1991 Citicorp stock transaction), Carlyle made deals in the Middle East and Western Europe (including a bailout of Euro Disney) in the mid-1990s. While the firm continued to be a side in the iron triangle, acquiring such defense companies as aircraft castings maker Howmet in 1995, it picked up a grab bag of holdings, such as natural food grocer Fresh Fields Markets (1994; sold 1996); the quick turnaround helped build Carlyle's war chest. The firm also began investing in industrial-cleanup companies, seeing increased government spending as a major opportunity for profit. As Carlyle's esteem rose, so did the number of its investors. In the late 1990s the firm launched buyout funds targeting Asia (closed 1999), Europe (closed 1998), Russia, and Latin America. At home, it faced a dwindling number of opportunities as the long-running bull market drove up prices and more investors chased fewer deals. Among those was its partnership with Cadbury Schweppes to buy the Dr Pepper Bottling Co. of Texas and merge it with its own American Bottling Co. Carlyle began the new century by launching Carlyle Asset Management Group, selling its stake in Le Figaro to Socpresse, acquiring Rexnord and a majority stake in CSX Lines. Extending its reach, the company partnered with GMT Communications Partners and acquired Casema in 2003. Carlyle Funds
The Carlyle Funds include: U.S. Buyout Funds group; U.S. Venture Funds group; U.S. Real Estate Funds group; U.S. High Yield Funds group; Europe Buyout Fund; Europe Venture Fund; Asia Buyout Fund; Asia Venture Fund; and Carlyle/Riverstone Global Energy and Power Funds.
right after the 2007 Presidential elections in France, the State purchased the Imprimerie Nationale building in Paris back from the fund. Carlyle paid 85 million euros back in 2003 plus about 120 millions in the rehabilitation of this monument. The net gain was over 171 million euros. [3]
Nicolas Sarkozy, the French president, honored Paul Desmarais, an eminent Canadian member of the board, with the prestigious Grand' Croix de la Legion d'Honneur on February the 18th, 2008. On March the 3rd, 2008, Pierre-Olivier Sarkozy, half brother of Nicolas, joins the Company [4]...
Connections Helped United Defense Business, Bloomberg News Service, 5 August 2003; "Carlyle Group Inc. has turned a $180-million 1997 investment in United Defense Industries Inc. into $1.2 billion. ... United Defense has acknowledged Carlyle's connections helped its business. 'Our board of directors consists of members who have served in senior positions within the U.S. government, such as secretary of defense, chairman of the Joint Chiefs of Staff and commander-in-chief of the United States Central Command,' it said in its October 2001 prospectus. The management and board's 'unique insights into the U.S. Department of Defense and allied militaries is one of our key assets.'"
11 December 2003: "Carlyle Group in $350 million Asia plan", Business Standard.
19 April 2004: "Pipeline plan leads back to high-profile investing group" by Robert Trigaux, St. Petersburg Times.
"The philosophers have only interpreted the world, in various ways. The point, however, is to change it." Karl Marx
"He would, wouldn't he?" Mandy Rice-Davies. When asked in court whether she knew that Lord Astor had denied having sex with her.
“I think it would be a good idea” Ghandi, when asked about Western Civilisation.
48:04 - 3 years ago
The Bush family, the Saudi Royal family, Osama Bin Laden's family and Donald Rumsfeld's inner circle - these are just some of the high profile figures who have played a direct role in the rise of one of the most powerful and influential and secretive firms in Washington. The company is called The Carlyle Group. And in the wake of the events of September 11th and the invasion of Iraq, its power and influence have become significantly stronger. The company operates within the so-called iron-triangle of industry, government and the military. Its list of former and current advisers and associates includes a vast array of some of the most powerful men in America and indeed around the world. This program exposes the history of the Carlyle Group, from it's inception as a private equity firm to it's precent status as one of the largest defence contractors in the world.
"The philosophers have only interpreted the world, in various ways. The point, however, is to change it." Karl Marx
"He would, wouldn't he?" Mandy Rice-Davies. When asked in court whether she knew that Lord Astor had denied having sex with her.
“I think it would be a good idea” Ghandi, when asked about Western Civilisation.
[URL="http://en.wikipedia.org/wiki/History_of_private_equity_and_venture_capital"]History of private equity
and venture capital Carlyle was founded in 1987 by Stephen L. Norris and David M. Rubenstein.[2] As they wanted the firm to outlive them, Norris and Rubenstein named the firm after the Upper East Side area hotel in New York City, the Carlyle Hotel, where they first met to discuss the idea.
Norris and Rubenstein later hired Dan D'Aniello, William E. Conway, Jr. and Greg Rosenbaum.[3] Rosenbaum left in 1987[4]; Norris left in 1995[5]. The three remaining founders are reported to collectively own around a 50% interest in the group's general partnership. The rest of Carlyle is owned by a group of individuals, most of whom serve as managing directors, and by two institutional investors.
Carlyle Group Historical Logo
In 2001, the California Public Employees' Retirement System (CalPERS) acquired a 5.5% holding in Carlyle's management company for $175 million in 2001. The investment was valued at approximately $1 billion by 2007 at the height of the 2000s buyout boom.[6] Lou Gerstner, former chairman and CEO of IBM and Nabisco, was appointed chairman of Carlyle in January 2003 and served in that position through October 2008. Gerstener remains with Carlyle as a senior advisor.
In September 2007, Mubadala Development Company, an investment vehicle for the government of Abu Dhabi of the United Arab Emirates, purchased a 7.5% stake for $1.35 billion.[6]
In November 2008, The Carlyle Group was named Private Equity firm of the year in the U.S. at the Financial Times-Mergermarket 2008 M&A Awards. [7]
In March 2009, New York State and federal authorities began an investigation into payments made to placement agents allegedly made in exchange for investments from the New York State Common Retirement System, the state's pension fund. It was alleged that these payments were in fact bribes or kickbacks, made to pension officials who have been under investigation by New York State Attorney General, Andrew Cuomo.[8] In May 2009, Carlyle agreed to pay $20 million in a settlement with Cuomo and accepted changes to its fundraising practices.[9]
Current portfolio and major acquisitions
Carlyle has investments spread out over several different industries, with about 22% of their investments in energy and power, 19% in real estate, 15% in technology and business services, 8% in consumer and retail, 8% in industrial, 6% in telecommunications and media, 6% in transportation, 6% in healthcare, 5% in aerospace, and 4% devoted to other industries, according to their 2008 annual report. Noted portfolio companies are Dex Media, the former directories business of Qwest Communications; Willcom, a Japanese wireless company; Casema, a Dutch cable company; and Insight Communications, the ninth largest cable company in the U.S. The Carlyle Group was once a major investor in US Investigations Services, which is the privatized arm of the United States Office of Personnel Management's Office of Federal Investigations, but has since divested itself, selling its stake to Providence Equity Partners in 2007.[citation needed] Brand-name companies that Carlyle owns include: Dunkin' Brands, which owns Dunkin' Donuts and Baskin-Robbins, and oral hygiene company Water Pik. Carlyle, in a consortium of investors, recently acquired the Hertz, the world's largest rental car corporation.
In October 1997 Carlyle acquired United Defense Industries , bringing in over 60% of Carlyle's defense business. United Defense went public on the New York Stock Exchange in December 2001 with Carlyle retaining a stock ownership position. Carlyle completed the sale of all of its United Defense stock and exited the investment in April 2004.[10] (One major United Defense program was the XM2001 Crusader self-propelled howitzer which was canceled by Defense Secretary Donald Rumsfeld in early 2002 causing United Defense stock prices to fall 27 percent.[11]) Since then, The Carlyle Group has divested the majority of its interest from the defense industry.
On January 29, 2007, Carlyle announced that it would acquire Synagro Technologies, Inc, which according to Synagro's website is "the largest recycler of biosolids and other organic residuals in the United States". The total enterprise value of the transaction, including the assumption of debt, is $772 million.[12]
On June 28, 2007, Carlyle announced that it would partner with Onex Corporation to buy the Allison Transmission unit from General Motors for $5.6 billion.[13]
In June 2007, Carlyle agrees to acquire HD Supply for $10.3 billion, along with Bain Capital and Clayton, Dubilier & Rice (with each agreeing to buy a one-third stake in the division). Home Depot sold their wholesale construction supply business to fund a stock repurchase estimated at $40 billion
On July 28, 2007, Carlyle announced the acquisition of Applus+ from its shareholders Agbar, Unión Fenosa and Caja Madrid for an enterprise value of €1,480 million.[14]
On December 18, 2007, David Rubenstein, representing the Carlyle Group, purchased the Magna Carta (one of seventeen copies) at Sotheby's Auction House in New York City. He paid the Perot Foundation $21.3 million. Mr. Rubenstein expressed his intent for it to be returned to the National Archives for display.
On May 16, 2008, Booz Allen Hamilton announced that it would selling a majority stake in the US government business to The Carlyle Group for $2.54 billion. The transaction was expected to be complete July 31, 2008.[15]
On August 2008, Carlyle Group bought IRIS Unified Ag through FRS Global.
Carlyle Capital Corporation
In March 2008, Carlyle Capital Corporation, established in August 2006[16] for the purpose of making investments in U.S. mortgage-backed securities, defaulted on about US$ 16.6 billion of debt as the global credit crunch brought about by the subprime mortgage crisis worsened for leveraged investors. The Guernsey-based affiliate of Carlyle was very heavily leveraged , up to 32 times by some accounts, and it expects its creditors to seize its remaining assets.[17] Tremors in the mortgage markets induced several of Carlyle's 13 lenders to make margin calls or to declare Carlyle in default on its loans.[18] In response to the forced liquidation of mortgage-backed assets caused by the Carlyle margin calls and other similar developments in credit markets, on March 11, 2008, the Federal Reserve gave Wall Street's primary dealers the right to post mortgaged-back securities as collateral for loans of up to $200 billion in higher-grade, U.S. government-backed securities. [19] On March 12, 2008, BBC News Online reported that "instead of underpinning the mortgage-backed securities market, it seems to have had the opposite effect, giving lenders an opportunity to dump the risky asset" and that Carlyle Capital Corp. "will collapse if, as expected, its lenders seize its remaining assets."[20] On March 16, 2008, Carlyle Capital announced that its Class A Shareholders had voted unanimously in favor of the Corporation filing a petition under Part XVI, Sec. 96, of the Companies Law (1994) of Guernsey[21] for a "compulsory winding up proceeding" to permit all its remaining assets to be liquidated by a court appointed liquidator.[22]
The losses to the Carlyle Group due to the collapse of Carlyle Capital is reported to be "minimal from a financial standpoint".[23]
Documentaries
Carlyle has been profiled in two notable documentaries, Michael Moore's Fahrenheit 911 and William Karel's The World According to Bush.
In the documentary film Fahrenheit 911, Michael Moore makes nine allegations concerning the Carlyle Group, including: That the Bin Laden and Bush families were both connected to the Group; that following the attacks on September 11, the bin Laden family’s investments in the Carlyle Group became an embarrassment to the Carlyle Group and the family was forced to liquidate their assets with the firm; that the Carlyle group was, in essence, the 11th largest defense contractor in the United States.[24] Moore focused on Carlyle's connections with George H. W. Bush and his Secretary of State James A. Baker III, both of whom had at times served as advisors to the firm.
A Carlyle spokesman noted in 2003 that its 7% interest in defense industries was far less than several other Private equity firms.[25] Carlyle also has provided detail on its links with the Bin Laden family, specifically the relatively minor investments by an estranged half brother.[26]
In his documentary The World According to Bush (May 2004), William Karel interviewed Frank Carlucci to discuss the presence of Shafiq bin Laden, Osama bin Laden's estranged brother at Carlyle's annual investor conference while the September 11 attacks were occurring.[26][27]
Controversial Legislation
In February 2008, a US Senate bill was introduced that would increase the regulation of nursing homes such as those run by HCR Manor Care which Carlyle purchased in December 2007.[28]
Furthermore in February 2008, a bill was introduced in California that would have barred CalPERS from investing money "with private-equity firms that are partly owned by countries with poor records on human rights," which would include Carlyle because Mubadala Development is owned by part of the United Arab Emirates. The California bill was later withdrawn.[29]
Olivier Sarkozy (half-brother of Nicolas Sarkozy, President of France) - co-head and managing director of its recently launched global financial services division, since March 2008 [30].
George H. W. Bush, former U.S. President, Senior Advisor to the Carlyle Asia Advisory Board from April 1998 to October 2003.
George W. Bush, former U.S. President. Was appointed in 1990 to the Board of Directors of one of Carlyle's first acquisitions, an airline food business called Caterair, which Carlyle eventually sold at a loss. Bush left the board in 1992 to run for Governor of Texas.
Luis Téllez Kuenzler, Mexican economist, former Secretary of Communications and Transportation under the Felipe Calderón administration and former Secretary of Energy under the Zedillo administration.
Mack McLarty, Carlyle Group Senior Advisor (from 2003), White House Chief of Staff to President Bill Clinton from 1993 to 1994.
Randal K. Quarles, former Under Secretary of the U.S. Treasury under President George W. Bush, now a Carlyle managing director
Anand Panyarachun, former Prime Minister of Thailand (twice), former member of the Carlyle Asia Advisory Board until the board was disbanded in 2004
Fidel V. Ramos, former president of the Philippines, Carlyle Asia Advisor Board Member until the board was disbanded in 2004
Peter Chung, former associate at Carlyle Group Korea, who resigned in 2001 after 2 weeks on the job after his infamous email scandal
Thaksin Shinawatra, former Prime Minister of Thailand (twice), former member of the Carlyle Asia Advisory Board until 2001 when he resigned upon being elected Prime Minister. [31]
Media
Norman Pearlstine - editor-in-chief of Time magazine from (1995-2005), senior advisor telecommunications and media group 2006-
Factual Back-Up for Fahrenheit 9/11: Section Four
THE FOLLOWING IS THE LINE BY LINE FACTUAL BACKUP FOR 'FAHRENHEIT 9/11' Section Four covers the facts in Fahrenheit 9/11 regarding the Carlyle Group and Saudi money in the United States and its connection to the Bush family, their friends and associates. FAHRENHEIT 9/11: “The Carlyle group is a multinational conglomerate that invests in heavily government-regulated industries like telecommunications, healthcare and, particularly, defense.”
“The Carlyle Group is one of the world’s largest private equity firms, with more than $18.3 billion under management. With 23 funds across five investment disciplines (management-led buyouts, real estate, leveraged finance, venture capital and turnaround), Carlyle combines global vision with local insight, relying on a top-flight team of nearly 300 investment professionals operating out of offices in 14 countries to uncover superior opportunities in North America, Europe, and Asia. Carlyle focuses on sectors in which it has demonstrated expertise: aerospace & defense, automotive & transportation, consumer, energy & power, healthcare, industrial, real estate, technology & business services, and telecommunications & media.” Carlyle Group web site, http://www.thecarlylegroup.com/eng/company/index.html
FAHRENHEIT 9/11: The Bin Laden and Bush families were both connected to the Carlyle Group, as were many of the Bush family’s friends and associates.
In the early 1990s, George W. Bush served on the board of directors for CaterAir, an airline catering company. CaterAir was owned by the Carlyle Group. Kenneth N. Gilpin, “Little-Known Carlyle Scores Big,” The New York Times, March 26, 1991. “George W. Bush left the company in 1994, a year after his father’s presidency ended.” Ross Ramsey, et al., “Campaign ’94 Fisher’s Staff Slips Up On Spanish,” The Houston Chronicle, September 17, 1994.
In the mid-1990s, George H.W. Bush joined up with the Carlyle Group. “Under the leadership of ex-officials like Baker and former Defense Secretary Frank C. Carlucci, Carlyle developed a specialty in buying defense companies and doubling or quadrupling their value. The ex-president not only became an investor in Carlyle, but a member of the company's Asia Advisory Board and a rainmaker who drummed up investors. Twelve rich Saudi families, including the Bin Ladens, were among them. In 2002, the Washington Post reported, ‘Saudis close to Prince Sultan, the Saudi defense minister ... were encouraged to put money into Carlyle as a favor to the elder Bush.’ Bush retired from the company last October, and Baker, who lobbied U.S. allies last month to forgive Iraq's debt, remains a Carlyle senior counselor. Kevin Phillips, “The Barreling Bushes; Four Generations of the Dynasty Have Chased Profits Through Cozy Ties with Mideast Leaders, Spinning Webs of Conflicts of Interest,” Los Angeles Times, January 11, 2004.
The bin Laden family first invested in Carlyle in 1994. Representing Carlyle’s Asia Board, George H.W. Bush visited the bin laden family's headquarters in Jeddah, Saudi Arabia. Kurt Eichenwald, “Bin Laden Family Liquidates Holdings With Carlyle Group,” The New York Times, October 26, 2001.
James Baker was a Carlyle Senior Counselor beginning in 1993. Carlyle Group web site, [URL="http://www.thecarlylegroup.com/eng/team/l5-team391.html"] http://www.thecarlylegroup.com/eng/team/
l5-team391.html[/URL].
Bush's OMB chief, Richard Darman, was with Carlyle by 1994. Bob Cook, Mergers & Acquisitions Report, December 12, 1994.
George W. Bush was with Caterair -- owned by Carlyle -- until 1994, after Fred Malek, a senior advisor to Carlyle, who also served as the director of the 1988 Republican Convention, suggested to Carlyle that the President’s eldest son would “be a positive addition to Caterair’s board.” Kenneth N. Gilpin, “Little-Known Carlyle Scores Big,” New York Times, March 26, 1991.
FAHRENHEIT 9/11: “Carlyle Group was holding its annual investor conference on the morning of September 11th in the Ritz Carlton Hotel in Washington, D.C.At that meeting were all of the Carlyle regulars, James Baker, likely John Major, definitely George H. W. Bush, though he left the morning of September 11th. Shafiq bin Ladin, who is Osama bin Laden’s half-brother, and was in town to look after his family’s investments in the Carlyle Group. All of them, together in one room, watching as the uh the planes hit the towers.”
On the morning of September 11, 2001, “in the plush setting of the Ritz-Carlton hotel in Washington, DC, the Carlyle Group was holding its annual international investor conference. Frank Carlucci, James Baker III, David Rubenstein, William Conway, and Dan D’Aniellow were together, along with a host of former world leaders, former defense experts, wealthy Arabs from the Middle East, and major international investors as they terror played out on television. There with them, looking after the investments of his family was Shafiq bin Laden, Osama bin Laden’s estranged half-brother. George Bush Sr. was also at the conference, but Carlyle’s spokesperson says the former president left before the terror attacks, and was on an airplane over the Midwest when flights across the country were grounded on the morning of September 11. In any circumstance, a confluence of such politically complex and globally connected people would have been curious, even newsworthy. But in the context of the terrorist attacks being waged against the United States by a group of Saudi nationals led by Osama bin Laden, the group assembled at the Ritz-Carlton that day was a disconcerting and freakish coincidence.” Dan Briody, The Iron Triangle, John Wiley & Sons, Inc., 2003, p. 139-140. See also, Melanie Warner, “What do George Bush, Arthur Levitt, Jim Baker, Dick Darman, and John Major Have in Common? (They All Work for the Carlyle Group),” Fortune, March 18, 2002,
FAHRENHEIT 9/11: “With all the weapons companies it owned, The Carlyle Group was in essence, the 11th largest defense contractor in the United States.”
“By virtue of its holdings in companies like U.S. Marine Repair and United Defense Industries, Carlyle is the equivalent of the eleventh-largest defense contractor in the nation. It has $16.2 billion under management and claims an average annual return of 35%.” Phyllis Berman, “Lucky Twice,” Forbes, December 8, 2003.
FAHRENHEIT 9/11: “It owned United Defense, makers of the Bradley armored fighting vehicle. September 11th guaranteed that United Defense was going to have a very good year. Just 6 weeks after 9-11 Carlyle filed to take United Defense public and in December made a one day profit of $237 million dollars.”
“On a single day last month, Carlyle earned $237 million selling shares in United Defense Industries, the Army's fifth-largest contractor. The stock offering was well timed: Carlyle officials say they decided to take the company public only after the Sept. 11 attacks. … On Sept. 26, [2001], the Army signed a $665-million modified contract with United Defense through April 2003 to complete the Crusader's development phase. In October, the company listed the Crusader, and the attacks themselves, as selling points for its stock offering. Mark Fineman, “Arms Buildup is a Boon to Firm Run by Big Guns,” Los Angeles Times, January 10, 2002.
"Still, in its annual report for 2001, United announced that it had been awarded a three-year, $697 million contract to complete full upgrading of 389 Bradley units and had added a $ 655 million contract modification to complete the Crusader's 'definition and risk-reduction phase contract,' which would be worth $ 1.7 billion through 2003. Together, the Crusader and Bradley programs contributed 41 percent of United sales in 2001, the report said. With Crusader and the Bradley upgrade in hand, a decision was made to sell United stock to the public in late 2001." Walter Pincus, “Crusader a Boon to Carlyle Group Even if Pentagon Scraps Project,” Washington Post, May 14, 2002.
FAHRENHEIT 9/11: “With so much attention focused on the bin Laden family being important Carlyle investors, the bin Ladens eventually had to withdraw.”
"Following the attacks on September 11, the bin Laden family’s investments in the Carlyle Group became an embarrassment to the Carlyle Group and the family was forced to liquidate their assets with the firm." Kurt Eichenwald, “Bin Laden Family Liquidates Holdings with Carlyle Group,” The New York Times, October 26, 2001.
FAHRENHEIT 9/11: “Bush’s dad stayed on as Senior Advisor to Carlyle’s Asia Board for another 2 years.”
“Former President Bush was at one time the Senior Advisor to the Carlyle Asia Advisory Board but retired from that position in October 2003. He holds no other positions at Carlyle.” [URL="http://www.thecarlylegroup.com/eng/news/l4-presskit681.html#8"] http://www.thecarlylegroup.com/eng/news/
l4-presskit681.html#8[/URL]
“The former president is no longer a company adviser, but he still has investments there, Mr. Ullman (vice president for corporate communications) said.” Dallas Morning News, "Michael Moore keeps heat on at premiere", May 18, 2004
FAHRENHEIT 9/11: George H. W. Bush receives daily CIA briefings.
"One of the people who corresponded with [former ambassador Joseph] Wilson is George H. W. Bush, the only president to have been head of the C.I.A.-- he still receives regular briefings from Langley." Vicky Ward, “Double Exposure,” Vanity Fair, January 2004.
Former President Bush has made efforts to keep abreast of foreign affairs, partly by exercising his right to be briefed by CIA personnel about developments around the globe. Ha'aretz, “George Bush Sr. Vouches for Son's Support of Israel to the Saudis”, July 16, 2001.
FAHRENHEIT 9/11: “They are benefiting from the confusion that arises when George H. W. Bush visits Saudi Arabi[B]a[/B], on behalf of Carlyle, and meets with the royal family and meets with the bin Laden family. Is he representing the [B]United States of America, or is he representing an investment firm in the United States of America or is he representing both?”[/B]
Few firms could have rivaled the Carlyle Group for its array of high-powered friends. The Washington-based venture capital house had been likened to a retirement home for Gulf War veterans, and the likes of George Bush Sr, James Baker, and John Major ‘can take credit for its rapid rise.’ The Observer noted in a profile, “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.’” … Carlyle had sponsored visits by Bush Sr. to South Korea and China, and his clout with the Saudi government – perhaps Carlyle’s most important customer – is also likely to be valued. Conal Walsh, “The Carlyle Controversy: With Friends in High Places: Former World Leaders Give Carlyle Group Unrivalled Prowess in Lobbying for Business,” The Observer, September 15, 2002.
“’It should be a deep cause for concern that a closely held company like Carlyle can simultaneously have directors and advisers that are doing business and making money and also advising the president of the United States,’ says Peter Eisner, managing director of the Center for Public Integrity, a non-profit-making Washington think-tank. ‘The problem comes when private business and public policy blend together. What hat is former president Bush wearing when he tells Crown Prince Abdullah not to worry about US policy in the Middle East? What hat does he use when he deals with South Korea, and causes policy changes there? Or when James Baker helps argue the presidential election in the younger Bush's favour? It's a kitchen-cabinet situation, and the informality involved is precisely a mark of Carlyle's success.’" Oliver Burkeman Julian Borger, “The Winners: The Ex-Presidents' Club,” The Guardian, October 31, 2001.
“The Saudi family of Osama bin Laden is severing its financial ties with the Carlyle Group, a private investment firm known for its connections to influential Washington political figures… In recent years, Frank C. Carlucci, the chairman of Carlyle and a former secretary of defense, has visited the family's headquarters in Jeddah, Saudi Arabia, as have former President George Bush and James A. Baker III, the former secretary of state. Mr. Bush works as an adviser to Carlyle, and Mr. Baker is a partner in the firm.” Kurt Eichenwald, “Bin Laden Family Liquidates Holdings With Carlyle Group,” New York Times, October 26, 2001.
FAHRENHEIT 9/11: “Another group of people invest in you, your friends, and their related businesses $1.4 billion over a number of years.”
“In all, at least $1.46 billion had made its way from the Saudis to the House of Bush and its allied companies and institutions.” Craig Unger, House of Bush, House of Saud, p. 200, (Scribner: New York, 2004). For a complete breakdown of the investments, see Unger’s Appendix C, pp. 295-298.
This number includes investments made and contracts awarded at the time that Bush’s friends were involved in the Carlyle Group:
James Baker was a Carlyle Senior Counselor beginning in 1993. Carlyle Group web site, [URL="http://www.thecarlylegroup.com/eng/team/l5-team391.html"] http://www.thecarlylegroup.com/eng/team/
l5-team391.html[/URL].
Bush's OMB chief, Richard Darman, was with Carlyle by 1994. Bob Cook, Mergers & Acquisitions Report, December 12, 1994.
George W. Bush was with Caterair -- owned by Carlyle -- until 1994, after Fred Malek, a senior advisor to Carlyle, who also served as the director of the 1988 Republican Convention, suggested to Carlyle that the President’s eldest son would “be a positive addition to Caterair’s board.” Kenneth N. Gilpin, “Little-Known CarlyleScores Big,” New York Times, March 26, 1991
Bush Sr. was first involved in Carlyle by the mid-1990s and no later than 1997.Kevin Phillips, “The Barreling Bushes; Four Generations of the Dynasty Have Chased Profits Through Cozy Ties with Mideast Leaders, Spinning Webs of Conflicts of Interest,” Los Angeles Times, January 11 , 2004; Dan Briody, The Iron Triangle, John Wiley & Sons, Inc., 2003.
Additional back up for these numbers is as follows:
Saudi investments in the Carlyle Group worth $80,000,000. Craig Unger, “Saving the Saudis,” Vanity Fair, October 2003. The number was reported to Unger by the head of Carlyle, David Rubenstein, in an interview.
In 1994, Carlyle owned military contractor BDM was “awarded a contract to provide technical assistance and logistics support to the Royal Saudi Air Force.” Worth: $46,200,000. PR Newswire, “BDM Federal Awarded $46 Million Contract To Support Royal Saudi Air Force,” October 27, 1994.
During the 1990s, the Vinnell Corporation (a BDM subsidiary) held contracts to train the Saudi Arabian National Guard, worth $819,000,000.Robert Burns, “US Advises Saudi Military On Range Of Threats—Including Terrorism,” Associated Press, November 13, 1995.
In 1995, BDM collected a contract to “augment Royal Saudi Air Force staff in developing, implementing, and maintaining logistics and engineering plans and programs.” Worth: $32,500,000. Defense Daily, “Defense Contracts,” June 23, 1995, as cited by Craig Unger.
In 1996, BDM was awarded a contract “to provide construction of 110 housing units at the MK-1 Compound, Khamis Mushayt, Saudi Arabia, for Technical Support Program personnel assisting the Royal Saudi Air Force…. This effort supports foreign military sales to Saudi Arabia.” Worth: $44,397,800. Department of Defense News Release, “BDM Federal, Incorporated,” April 1, 1996.
During the late 1990s, Vinnell was awarded a contract “for the Saudi Arabian National Guard (SANG) Modernization Program. The three-year contract, awarded competitively, calls on Vinnell to continue to support SANG training operations and related activities.” Worth: $163,300,000 . PR Newswire, “Vinnell Selected for Award of $163.3 Million Contract for Saudi Arabian National Guard Modernization Program,” May 3, 1995. Kashim Al-An, “Saudi Guard Gets Quiet Help from US Firm with Connections,” Associated Press, March 22, 1997.
In 1997, BDM was awarded a contract “to provide for 400 contractor personnel to support the Royal Saudi Air Force in developing, implementing, and maintaining logistics, supply, computer, reconnaissance, intelligence and engineering plans and programs.” Worth: $18,728,682 (note: this is a “face value increase to a firm fixed price contract). Defense Daily, “Defense Contracts,” February 4, 1997.
Note: Carlyle purchased BDM and its subsidiary Vinnell in 1992 and sold it to TRW in Dec, 1997.
In November 2001, Dick Cheney’s former company Halliburton was awarded “a contract to provide services for the Saudi Arabian Oil Company’s (Saudi Aramco) Qatif Field development project in the eastern province of Saudi Arabia.” Worth: $140 million. Halliburton press release, “Halliburton Awarded $140 Million Contract by Saudi Aramco,” November 14, 2001.
The same month, a consortium of three companies led by Halliburton subsidiary KBR won a “contract for engineering, procurement, and construction of an ethylene plant for Jubail United Petrochemcial Company, a wholly owned company of Saudi Basic Industries Corporation.” Worth: $40 million. MaggieMulvihill, et al., “Bush Advisers Cashed in on Saudi Gravy Train,” Boston Herald, December 11, 2001 ; Halliburton press release, “Halliburton KBR, Chiyoda, and Mitsubishi Win SaudiArabian Ethylene Project,” November 19, 2001. (Note: The $40 million figure cited for this contractin all likelihood is much too low. Three separate energy industry journals place the value of the contract at $350 million. While there are two other companies involved, all reports point out that Halliburton KBR led the consortium and thus, if the contract were $350 million, it is likely that their cut would be—as lead contractor—significantly more than $40 million. See, Petroleum Economist, “News in Brief,” January 14, 2002; Chemical Week, “KBR, Chiyoda, Mitsubishi Win Jubail Ethylene Contract,” December 5, 2001; Middle East Economic Digest, “Projects Update: Petrochemicals,” March 7, 2000.
Soon after Harken bought out George W. Bush’s company Spectrum 7 in 1986 and placed Bush on their board of directors, a Saudi sheik swooped in to save the troubled Harken. Abdullah Taha Bakhsh purchased a 17% stake in the company. Worth: $25,000,000. Thomas Petzinger Jr., et al., “Family Ties: How Oil Firm Linked to a Son of Bush Won Bahrain Drilling Pact; Harken Energy Had a Web of Mideast Connections; In the Background: BCCI; Entrée at the White House,” Wall Street Journal, December 6, 1991.
In 1989 Saudi Arabias King Fahd donated money to the Barbara Bush Foundation for Family Literacy. At the time, Ms. Bush was the First Lady of the United States. The King’s contribution represented almost half the amount the organization was able to raise that year. Worth: $1,000,000. Thomas Ferraro, “Saudi King also Contributed to Barbara Bush’s Foundation,” United Press International, March 13, 1990.
Following George H. W. Bush’s departure from office, Saudi Ambassador to the United States, Prince Bandar, donated money to the Bush Sr. Presidential Library fund. Worth: At least $1,000,000. Dave Montgomery, “Hail to a Former Chief,” Fort Worth Star-Telegram, November 7, 1997.
Both George H. W. Bush and George W. Bush attended the elite Phillips Andover Academy in Massachusetts. In the summer of 2002 the Academy announced it had established a scholarship in Bush Sr.’s name. Saudi Prince Alwaleed binTalal bin Adul Aziz Alsaud -- the same Prince who bailed out EuroDisney in the mid-Nineties -- was among the donors to the scholarship. Worth $500,000. Phillips Academy-Andover press release, “A Statement from Phillips Academy-Andover Regarding the Bush Scholars Program,” December 31, 2002.
Among the many presents George W. Bush has received from foreign leaders and dignitaries during his term as President, perhaps none is grander than the one Prince Bandar bestowed upon him. Bandar gave the current president a “C.M. Russell oil canvas painting of a native American buffalo hunt….” Worth: $1,000,000. Siobhan McDonough, “Gifts to President are Gratefully Received, Quickly Carted into Storage,” Associated Press, July 14, 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 per cent of its funds are invested in defence companies, far less than several other venture capital groups.
'Peel away the layers of factual errors and self-righteousness and all you're left with is baseless innuendo. This book should be exposed for what it is: a compilation of recycled conspiracy theories masquerading as investigative journalism,' said Chris Ullman, Carlyle's spokesman.
But Briody's account of how an upstart venture capi tal firm went from nothing to managing funds of nearly $14 billion in just 15 years, earning investors returns of around 36 per cent, 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.
Interestingly though, Briody's book chronicles how Carlyle was founded by two relative unknowns - Stephen Norris, a former executive with the Marriott hotels group, and David Rubenstein, a Washington lawyer and former policy assistant to Jimmy Carter. The two men saved Marriott millions by spotting a tax loophole that the company exploited to great effect. Buoyed by their success, Norris and Ruben stein struck out on their own and recruited two other co-founders, Marriott executive Dan D'Aniello and corporate financier William Conway.
Initially the group - named after New York's Carlyle hotel - shied away from the defence sector and its early investment record was spectacularly unsuccessful. It backed a management-led buyout of Caterair and appointed George W Bush to the board. The company bombed and was quickly branded Crater Air by Wall Street. Norris, who presided over the deal, jumped ship, followed by Bush Jr shortly before the company's woes became public in 1994.
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.
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 $665m 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 $240m. Months later the Crusader programme was scrapped while United Defense was handed a new contract to build a lighter gun.
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 $2m, 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 per cent 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.
Carlyle - whose high-profile investors include George Soros and Saudi Arabia's Prince Alwaleed bin Talal - refutes suggestions it profits from war. Co-founder William Conway even went on record saying 'no one wants to be a beneficiary of 11 September.'
This may be true, but unfortunately for the Carlyle Group its investments are beneficiaries of this new era of multilateral conflict. Indeed, a case can be made that even those companies Carlyle wouldn't class as defence investments - and which aren't examined by Briody - have benefited.
Last month it bought CSX Lines, an ocean carrier firm that specialises in shipping heavy equipment. One of its biggest customers is the US military. Late last year it bought Firth Rixson, a specialist engineering firm that makes aerospace parts. It also has a 33 per cent stake in Qinetiq, the government's Defence Evaluation and Research Agency.
Whatever Carlyle says, its image as being at the apex of what Eisenhower termed the 'military industrial complex' endures.
The biggest private investor in the world, deeply entrenched in the weapons' sector, is a discreet group that cultivates dealings with influential men, including Bush father and son.
One year ago, May 1, 2003, George Bush, strapped up in a fighter pilot's suit, landed on the deck of the aircraft carrier USS Abraham-Lincoln along the coast of California. The image became famous. Under a banner proclaiming "Mission Accomplished", the president prematurely announced the end of military operations in Iraq and his victory. Back on dry land the next day, he made another martial speech, not far from San Diego, in a United Defense Industries' weapons factory. This company is one of the Pentagon's main suppliers. It manufactures, among other things, missiles, transport vehicles, and the light Bradley armored vehicle. Its main shareholder is the biggest private investor in the world, a discreet group, called Carlyle. It's not listed on the stock market and doesn't have to show its accounts to any but its 550 investors- billionaires or pension funds. Carlyle manages eighteen billion dollars today, invested in defense and high tech (notably biotech), space, security-linked information technology, nanotechnologies, and telecommunications. The companies it controls share the characteristic that their main customers are governments and administrations. As the company wrote in its brochure: "We invest in the opportunities created in industries strongly affected by changes in government policy." Carlyle is a unique model, assembled at the planetary level on the capitalism of relationships or "capitalism of access" to use the 1993 expression of the American magazine New Republic. Today, in spite of its denials, the group incarnates the "military-industrial complex" against which Republican President Dwight Eisenhower warned the American people when he left office in 1961. That didn't prevent George Bush senior from occupying a position as consultant to Carlyle for the ten years ending October 2003. It was the first time in United States' 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: administrator for Caterair, a Texas company specialized in aerial catering. The episode does not figure in the president's official biography. When George W. Bush left Caterair in 1994, before becoming Governor of Texas, the company was in bad shape. "It's not possible to get closer to the administration than Carlyle is," asserts Charles Lewis, Director of the Center for Public Integrity, a non-partisan organization in Washington. "George Bush senior earned money from private interests that worked for the government of which his son was president. You could even say that the president could one day profit financially, through his father's investments, from the political decisions he himself took," he adds. The collection of influential characters who now work, have worked, or have invested in the group would make the most convinced conspiracy theorists incredulous. They include among others, John Major, former British Prime Minister; Fidel Ramos, former Philippines President; Park Tae Joon, former South Korean Prime Minister; Saudi Prince Al-Walid; Colin Powell, the present Secretary of State; James Baker III, former Secretary of State; Caspar Weinberger, former Defense Secretary; Richard Darman, former White House Budget Director; the billionaire George Soros, and even some bin Laden family members. You can add Alice Albright, daughter of Madeleine Albright, former Secretary of State; Arthur Lewitt, former SEC head; William Kennard, former head of the FCC, to this list. Finally, add in the Europeans: Karl Otto Poehl, former Bundesbank president; the now-deceased Henri Martre, who was president of Aerospatiale; and Etienne Davignon, former president of the Belgian Generale Holding Company. Carlyle isn't only a collection of power people. It maintains holdings in close to 200 companies and, above all, provides returns on its investments that have exceeded 30 % for a decade. "Compared to the five hundred people we employ in the world, the number of former statesmen is quite small, a dozen at most," explains Christopher Ullmann, Carlyle Vice-President for communication. "We're accused of every wrong, but no one has ever brought proof of any kind of misappropriation. No legal proceeding has ever been brought against us. We're a handy target for whoever wants to take shots at the American government and the president." Carlyle was created in 1987 in the salons of the New York eponymous palace, with five million dollars. Its founders, four lawyers, including David Rubenstein (a former Jimmy Carter advisor), had the -limited- ambition at the time of profiting from a flaw in fiscal legislation that authorized companies owned by Eskimos in Alaska to give their losses to profitable companies that would thus pay reduced taxes. The group vegetated until January 1989 and the arrival at its helm of the man who would invent the Carlyle system, Frank Carlucci. Former Assistant Director of the CIA, National Security Advisor, then Ronald Reagan's Defense Secretary, Mr. Carlucci counted in Washington. He is one of current Defense Secretary Donald Rumsfeld's closest friends. They were roommates as students at Princeton together. Later, their paths crossed in several administrations and they even worked for a time at the same company, Sears Roebuck. Six days after officially quitting the Pentagon, January 6, 1989, Frank Carlucci became Carlyle's Director General. He brought trusted lieutenants from the CIA, the State Department, and the Defense Department with him. Nicknamed "Mr. Clean", Frank Carlucci has a sulfurous reputation. This diplomat was posted during the 1970s to countries such as South Africa, the Congo, Tanzania, and Portugal, where the United States and the CIA had played a questionable political role. He was the number two at the American embassy in the Belgian Congo in 1961 and was suspected of being implicated in the assassination of Patrice Lumumba. He has always firmly denied it. The American press has also accused him of being implicated in several cases of arms trafficking in the 1980s, but he has never been prosecuted. For a while, he directed Wackenhut, a security company with a hateful reputation, implicated in one of the biggest espionage scandals ever, the hijacking of Promise software. Frank Carlucci had the mission of cleaning up after the Iran-Contra affair in the Reagan administration and he succeeded John Pointdexter as National Security Advisor. As he took over his new position, he chose a young general to be his assistant... Colin Powell. Frank Carlucci's name attracted capital to Carlyle. In October 1990, the group took over BDM International, which participated in the "Star Wars" Program and constituted a bridgehead to it. In 1992, Frank Carlucci allied himself with the French group Thomson-CSF to take over LTV's aerospace division. The operation failed, Congress opposing the sale to a foreign group. Carlyle found other associates, Loral and Northrop, and got hold of LTV Aerospace, quickly renamed Vought Aircraft, which contributed to the manufacture of the B1 and B2 bombers. At the same time, the fund was multiplying its strategic acquisitions, such as Magnavox Electronic Systems, a pioneer in radar imagery, and DGE, which owns the technology for cruise missile electronic relief maps. Three companies specializing in nuclear, chemical, and biological decontamination (Magnetek, IT Group and EG & G Technical Services) followed. Then, through BDM International, a firm linked to the CIA, Carlyle acquired Vinnell, which was among the first companies to supply the American army and its allies with private contractors, i.e. mercenaries. Vinnell's mercenaries train the Saudi armed forces and protect King Fahd. During the first Gulf War, they fought alongside Saudi troops. In 1997, Carlyle sold BDM and Vinnell, which had become too dangerous. The group didn't need it any more. It had become the Pentagon's eleventh biggest supplier by gaining control of United Defense Industries that same year. Carlyle emerged from the shadows in spite of itself on September 11, 2001. That day, the group had organized a meeting at Washington's Ritz Carlton Hotel with five hundred of its largest investors. Frank Carlucci and James Baker III played masters of ceremony. George Bush senior made a lightning appearance at the beginning of the day. The presentation was quickly interrupted, but one detail escaped no one. One of the guests wore the name bin Laden on his badge. It was Shafiq bin Laden, one of Osama's many brothers. The American media discovered Carlyle. One journalist, Dan Briody, wrote a book about the group's hidden side, "The Iron Triangle", and takes an interest in the close relations between the Bush clan and the Saudi leadership. Some ask about George Bush senior's influence on American foreign policy. In January 2001, while George Bush junior was breaking off negotiations over missiles with North Korea, the dismayed South Koreans intervened with his father. Carlyle has important interests in Seoul. In June 2001, Washington resumed discussions with Pyongyang. Another example: in July 2001, according to the New York Times, George Bush senior telephoned Saudi Prince Abdullah who was unhappy with the positions the president took on the Israeli-Palestinian conflict. George Bush senior reassured the prince that his son "is doing good things" and "has his heart in the right place." Larry Klayman, Director of Judicial Watch, a resolutely conservative organization, demands that "the president's father resign from Carlyle. The group has conflicts of interest that can create problems for American foreign policy." Finally, in October 2003, George Bush senior leaves Carlyle, officially because he's nearing eighty years old. It doesn't matter that Carlyle put an end to all relations with the bin Laden family in October 2001; the evil was already done. The group, along with Halliburton, has become the target of Bush administration opponents. "Carlyle has replaced the Trilateral Commission in conspiracy theories," David Rubenstein acknowledged in a 2003 Washington Post interview. For the first time, the group put someone in charge of communications and changed its boss. Frank Carlucci became honorary president and Lou Gerstner, a respected executive who saved IBM, officially took the reins. That operation seems mostly cosmetic. Mr. Gerstner doesn't spend much time in his office; but Carlyle wants to become respectable. The Group has created an Internet site. It has opened certain funds to investors bringing "only" 250,000 dollars (210,000 euros). It will have reduced its holdings in United Defense Industries, and asserts that defense and aeronautics represent no more than 15 % of its investments. However, Carlyle continues to make intensive use of fiscal havens and it's difficult to know the names of the companies it controls or its perimeter. Carlyle is also increasing its efforts in Europe. In September 2001, it took control of the Swedish weapons manufacturer Bofors through United Defense. Subsequently, it tried, unsuccessfully, to take over Thales Information Systems and, in the beginning of 2003, to acquire those parts of France Telecom that are in Eutelsat, which plays an important role in the European Positioning System by Galileo satellite - a competitor of the American GPS. From 1999 to 2002, it managed a holding in Le Figaro. In Italy, it made a breakthrough, by taking up Fiat's aeronautics subsidiary, Fiat Avio. This company is a supplier to Arianespace and allows Carlyle to be part of the European Rocket Council. In another coup in December 2002, Carlyle bought a third of Qinetic, the private subsidiary of the British military's Research and Development Center. Qinetic occupies a unique advisory role with the British government. "To anticipate the technologies of the future and the enterprises which will develop them is our first role as an investor. Pension funds bring us their money for that. You can't blame us for trying to take strategic positions," Mr. Ullmann stresses. Translation: t r u t h o u t French language correspondent Leslie Thatcher.
"The philosophers have only interpreted the world, in various ways. The point, however, is to change it." Karl Marx
"He would, wouldn't he?" Mandy Rice-Davies. When asked in court whether she knew that Lord Astor had denied having sex with her.
“I think it would be a good idea” Ghandi, when asked about Western Civilisation.
Last November Frank Carlucci, chairman of the Carlyle Group, spoke to a conference on national security sponsored by the Pentagon and the Institute for Foreign Policy Analysis, a conservative think tank where he sits on the board of directors. His topic, "Employing the Instruments of National Power in a Complex Environment," was a perfect metaphor for Carlucci's career, which has taken him from the CIA to the highest ranks of the defense and national security establishment and, finally, to the top of one of the world's largest private equity funds.
Typically, Carlucci was introduced to his panel not as one of the country's wealthiest executives but as National Security Adviser and Defense Secretary during the Reagan Administration. Carlucci began by praising the Bush Administration's conduct of the war. He didn't mention that Carlyle's biggest defense company, United Defense Industries, decided in the wake of September 11 to go public, a deal that would raise the value of Carlucci's stake in that company to $1.2 million by mid-March. Then he launched into a subject he holds dear: the weakening of US intelligence capabilities. The CIA, he lamented, "has been used as a political football since the days of the Church committee. They've overlaid the process with regulations. We've forced the CIA to disgorge information threatening the protection of sources and methods. We've created in effect a risk-averse atmosphere; we've indicted CIA officers for implementing policy." As a result, "we have no covert action capability."
Carlucci should know. After a brief stint in the 1950s as an executive with the Jantzen swimsuit company, he joined the foreign service, serving in Congo, Brazil and several other countries where US intelligence played a key role during the cold war. President Carter later recognized Carlucci's service by appointing him deputy director of the CIA.
Although he is one of Washington's most powerful financiers, Carlucci avoids the limelight. But his facade cracked slightly last year, when Haitian director Raoul Peck released Lumumba, a dramatic account of the life and times of Patrice Lumumba, Congo's first prime minister, who was brutally murdered in 1961. In one scene of the film, a group of Belgian and Congolese officials holding Lumumba prisoner vote to kill him. One of the Belgians turns to a gentleman sitting off to the side. "Carlucci?" he asks. The American mumbles something about the US government never involving itself in the internal affairs of other countries, and abstains.
Carlucci, who was the second secretary of the US Embassy in Congo from 1960 to 1962, has vehemently denied that he played any role in Lumumba's demise. When Lumumba was shown at the Visions Theater in Washington last July, Carlucci made a personal appearance to address Peck's charges. "The scene is tendentious, false, libelous; it never happened and it is a cheap shot," he said. But he didn't stop there. When HBO aired the film in February, lawyers for Carlucci managed to convince the company to delete the scene.
There is plenty of documentation of Carlucci's role in the US intervention in postcolonial Congo, including an account, partly verified by Carlucci, of his role in seeking Lumumba's overthrow in Jonathan Kwitny's 1984 book on US foreign policy, Endless Enemies (see also Francis Shore's recent article in CounterPunch, "The Strange Career of Frank Carlucci,"). Nation contributor Lucy Komisar, a journalist who spent time in Zaire in the early 1990s, wrote an incisive analysis for Pacific News Service in February.
The most famous story about Carlucci involves a visit to President John F. Kennedy of Cyrille Adoula, the Congolese prime minister who succeeded Lumumba. As recounted by former Director of Central Intelligence James Schlesinger at a recent New York dinner of US business and labor leaders honoring the Carlyle chairman, the prime minister opened a meeting at the White House by asking, "Where is Carlucci?" Said Schlesinger: "This caused some consternation on the part of President Kennedy, who said 'Who the hell is Carlucci?'" JFK quickly dispatched Dean Rusk to find him, thus beginning Carlucci's rise as what Schlesinger called "an itinerant laborer of the executive branch."
Carlucci was brought into the Nixon Administration by Donald Rumsfeld, his roommate and wrestling partner at Princeton, and quickly make his way into senior positions at the Office of Economic Opportunity (where he worked with Dick Cheney), the Department of Health, Education and Welfare (where he was mentored by Caspar Weinberger) and the White House Office of Management and Budget (where he hired an up-and-coming Army officer named Colin Powell). In the mid-1970s Carlucci was ambassador to Portugal, at a time of revolutionary ferment that led to the dismantling of the country's empire in Asia and Africa. Carlucci, following long-established CIA practice of working with the left when it was convenient, decided to back a faction of moderate socialists after a group of pro-Communist military officers seized power in Lisbon. Back home, recalled Schlesinger, "I had to listen to Henry Kissinger suggesting that Carlucci was giving away Portugal to the Communists." Carlucci's background as an intelligence operative came to public light in 1977, when Carter appointed him to the number-two spot at the CIA. His work for a Democratic administration led some conservatives to question Carlucci's credentials when he was appointed Weinberger's deputy at the Pentagon in 1981. But Carlucci's record in reforming the Pentagon's procurement process and his use of lie detectors to crack down on leakers erased any doubts about the CIA man from Princeton.
In 1982 Carlucci left the Pentagon to run Sears World Trade, which was designed to replicate a Japanese-style trading company. Fortune, citing international traders, speculated that SWT "was providing cover jobs for US intelligence operations," an accusation that gained credence when the Washington Post revealed that SWT operated a secret subsidiary that advised US and foreign companies on selling arms overseas (Carlucci denied the story). SWT went bankrupt in 1986, but Carlucci walked away with a $735,722 termination settlement.
Since leaving government, Carlucci has spent much of his time as a director for the most powerful multinational corporations in North America, including General Dynamics, Westinghouse Electric, Bell Atlantic, Nortel, Quaker Oats, CB Commercial Real Estate Group and BDM International, a military consulting company with extensive operations in Saudi Arabia that Carlyle sold to TRW in 1998.
Carlucci is currently chairman of the board of Neurogen, the Connecticut pharmaceutical giant, and Infraworks, an Austin, Texas, company that sells e-mail software to intelligence agencies and the private sector (the e-mail disappears after a second reading). In addition, Carlucci is a member of corporate boards at United Defense, Ashland, Kaman (another big military contractor), Pharmacia (which was created by a merger between Monsanto and Pharmacia-Upjohn), Texas Biotechnology and Sun Resorts, a South African hotel chain based in Mauritius.
Carlucci's extraordinary reach in the corporate world is an obvious boon to Carlyle. "Carlucci is most handy at picking up the phone and making a call, not to people in the government but people in the commercial world," said William Conway, one of Carlyle's founding partners, who recruited Carlucci in 1989.
Carlucci also sits on the boards of numerous think tanks and associations, including the RAND Corporation, the National Endowment for Democracy and the Middle East Policy Council. He is chairman of the national advisory board of the Private Sector Council, which advises the government on privatization and procurement policies. And he exerts considerable clout as chairman of the US-Taiwan Business Council, which represents US multinationals doing business in both Taiwan and mainland China, including Boeing, General Electric, Honeywell and Babcock & Wilcox. In March the council and several US military contractors--including Carlyle's United Defense--sponsored a three-day, closed-door summit of US and Taiwanese defense officials. During the conference, at Carlucci's invitation, Tang Yao-Ming, Taiwan's Defense Minister, met with Deputy Defense Secretary Paul Wolfowitz in the highest-level defense contact since diplomatic relations between the two countries were severed in 1979. But Carlucci's record as a corporate director is spotty at best. When he was chairman of Nortel, the company experienced what the Toronto Star recently described as a "disaster of epic proportions," losing more than $360 billion worth of shareholder value. "The company has fired almost 50,000 employees, a record in Canadian business," the Star reported. "Nortel's $19.2 billion loss in the second quarter [of 2000] exceeded the GNP of El Salvador." It charged that Carlucci, who sat on eight other corporate boards during his tenure at Nortel, wasn't "paying attention."
In 1996 Carlucci was the worst offender in a Teamsters union survey of "America's Least Valuable Directors." The survey criticized twenty-three executives for earning huge salaries while serving on multiple boards and at problem companies. A year earlier Carlucci was number two on a BusinessWeek survey of "directors with the least-distinguished track records." Ironically, that survey drew heavily on research on shareholder value conducted by the California Public Employees Retirement System, which has invested $475 million in the Carlyle Group.
"Does that mean that we tacitly approve of Frank Carlucci's multiple board memberships?" asked Pat Macht, a CalPERS spokeswoman. "The answer is, absolutely--that we don't approve, because it is contrary to what our corporate governance actions are about." But CalPERS, she said, "can't have a personal bone to pick with Carlucci as it relates to Carlyle, because it has been a very good performer for us." Carlucci did not agree to be interviewed for this article.
In December Carlucci granted his first press interviews since the war began. Not surprisingly, the topic was his old pal at the Pentagon, Donald Rumsfeld. "The military likes a leader--and has got one," he told the Baltimore Sun.
Just as this issue went to press, Carlyle announced another defense IPO: This time it will sell $160 million worth of its controlling shares in United States Marine Repair, the country's largest nonnuclear ship repair company, which does 75 percent of its business with the US Navy. Carlucci, not surprisingly, sits on its board of directors. What's good for America, it seems, is good for Carlyle--and Frank Carlucci.
Carlyle Group May Buy Major CIA Contractor: Booz Allen Hamilton
by Tim Shorrock , Special to CorpWatch
March 8th, 2008
Cartoon by Khalil BendibThe Carlyle Group, one of the world’s largest private equity funds, may soon acquire the $2 billion government contracting business of consulting giant Booz Allen Hamilton, one of the biggest suppliers of technology and personnel to the U.S. government’s spy agencies. Carlyle manages more than $75 billion in assets and has bought and sold a long string of military contractors since the early 1990s. But in recent years it has significantly reduced its investments in that industry. If it goes ahead with the widely reported plan to buy Booz Allen, it will re-emerge as the owner of one of America’s largest private intelligence armies.
Reports of a potential Carlyle acquisition of Booz Allen’s government unit began circulating among U.S. military contractors in December 2007, after Booz Allen’s senior partners and board members – a group of 300 vice presidents who own the privately-held firm – gathered at company headquarters in McLean, Virginia, for an extraordinary two-day meeting.
According to a December 15 letter to Booz Allen employees from CEO Ralph W. Shrader that was released by the firm, the vice presidents signed off on a “new strategic direction” that would involve separating the company’s commercial and government units and operating them as separate companies. That was widely seen, both inside and outside the company, as a sign that a sale of one or both of the units was imminent. Shrader said the company hoped to come to a resolution of the issues involved by March 31, 2008.
In January 2008, major newspapers – each quoting unnamed people close to the situation – reported that discussions between Booz Allen and Carlyle about the sale of the government unit were underway. According to the Wall Street Journal, the deal will be “centered on Booz Allen’s influence in defense and intelligence contracting. If an agreement is reached the sale price will likely be around $2 billion.”
Christopher Ullman, Carlyle’s chief spokesman, could neither confirm nor deny that a deal was in the works, and declined to comment to CorpWatch about the reports. Because of Carlyle’s long experience in the defense sector, he added, such companies “would be a priority for us when the price is right and it’s the right fit for us.” George Farrar, a Booz Allen spokesman, said his company “has refused to discuss particulars of any ongoing discussions” and would not comment beyond what Shrader wrote in his December 15 missive to Booz Allen’s workforce.
In 2006, Booz Allen Hamilton, a privately held company based in McLean, Virginia, had a global staff of 18,000 and annual revenues of $3.7 billion. Its work for U.S. government agencies accounts for more than 50 percent of its business. Notably Booz Allen is a key adviser and prime contractor to all of the major U.S. intelligence agencies – the Central Intelligence Agency (CIA), the Defense Intelligence Agency (DIA), the National Geospatial-Intelligence Agency (NGA), the National Reconnaissance Office (NRO), the National Security Agency (NSA), and – as well as the Department of Homeland Security (DHS), the National Counterterrorism Center, the Department of Defense and most of the Pentagon’s combatant commands. Shadow Intelligence Agency
Booz Allen prides itself on the long-term personal relationships it has forged between its personnel and their government clients. “We stay for a lifetime,” Mark J. Gerencser, the senior vice president in charge of Booz Allen’s government contracting division, remarked in 2006. A quick study of their biographies posted on Booz Allen’s Website suggests that this is indeed true – the senior management have shuttled back and forth between the company and the government for their entire lives.
As the director of Booz Allen’s U.S. government business, for example, Gerencser serves in “several broad-based roles,” including “representing industry” to the Office of the Secretary of Defense and the Joint Chiefs of Staff, which manage the Pentagon’s vast intelligence operations. He is also a member of Booz Allen’s leadership team that sets the strategic direction of the company, and has run many of the war games staged by Booz Allen for its government clients.
Just below him in the company’s intelligence hierarchy is Ken Wiegand, another senior vice president. Weigand came to Booz Allen in 1983 after working for a decade in Air Force intelligence, and now leads the firm’s work for national intelligence and law enforcement agencies and the Department of Homeland Security. His specialty, the Website says, includes imagery intelligence operations, which are managed by the NGA, one of Booz Allen’s most important clients.
Senior vice president Joseph W. Mahaffee, a veteran of naval intelligence, is the leader of Booz Allen’s Maryland procurement office business, which puts him in charge of the company’s contracts with the NSA in Fort Meade. He focuses on “meeting the Information Assurance mission objectives” of the NSA with various technology services, including systems engineering, software development and “advanced telecommunications analysis.”
Another key Booz Allen figure at the NSA is Marty Hill, who came to the company after a 35-year career in signals intelligence and electronic warfare and previously served as an expert on “information operations capabilities and policy” for Donald Rumsfeld’s Pentagon. He leads of team of 1,200 professionals engaged in all aspects of “signals intelligence” including technical analysis, systems development and operations.
Vice President Pamela Lentz is a former cryptology officer with the Navy and once worked as a program manager for TRW, one of the nation’s oldest intelligence contractors (it is now owned by Northrop Grumman). She is Booz Allen’s “client service officer” for the DIA and other military intelligence markets, which includes intelligence units within the Navy, Air Force, Army, the unified combatant commands and the undersecretary of defense for intelligence. Among other tasks, Lentz manages a 120-person Booz Allen team that supports the NRO, the Pentagon agency that manages the nation’s military spy satellites. She also runs a task force that supports human intelligence collection efforts at the DIA.
Vice President Laurene Gallo, a former intelligence analyst at the NSA, leads a Booz Allen “intelligence research and analysis” team that support several agencies, including the CIA, the DNI and the National Counterterrrorism Center. Vice President Richard Wilhelm, whose job at Booz Allen is to work with the CIA and the ODNI, came to the company after a long career in U.S. intelligence that included stints directing the Joint Intelligence Center for Iraq during Operation Desert Storm and the NSA’s first director of information warfare.
Vice President William Wansley, a former Army intelligence officer, leads a team of experts in “strategic and business planning” who support the CIA’s National Clandestine Service, the part of the CIA that conducts covert operations and recruits foreign spies, as well as the DNI. Another vice president Robert W. Noonan, a retired Army lieutenant general who once served as the Army’s deputy chief of staff for intelligence and the commanding general of the U.S. Army’s Intelligence and Security Command, is in charge of expanding Booz Allen’s military intelligence business within all the armed services, the combatant commands, the DIA and the Office of the Secretary of Defense.
It is each of these vice presidents who are poised to personally profit from a corporate takeover by the Carlyle Group.
On its website, Booz Allen describes its intelligence work as part of its broader expertise in information technology. “Whether dealing with homeland security, peacekeeping operations, or the battlefield, success depend on the ability to collect, safeguard, store, distribute, fuse, and share information – on getting the right information to the right place at the right time,” it says. “Our security professionals work in partnership with clients to develop capabilities … for protecting information and networks against cyber and physical threats.”
That has not always been the case: Booz Allen Hamilton was founded as a management consultancy in 1914 in Chicago by three businessmen whose surnames gave the firm its name. In 1940, after more than three decades of giving advice to top ranking companies in America’s manufacturing and service economy, such as Montgomery Ward, Goodyear Tire and the Illinois State Railroad, Booz Allen started working for the U.S. military, where its clients included the Army, the Navy, and, after the war, the Air Force and the Pentagon.
Its initial contracts with the Navy in 1940 set the pace for its military work: as a management consultant, Booz Allen helped the Navy restructure for World War II and permeated its ranks with contractors (“Each Navy bureau had a Booz rep,” Investors Daily reported in a 2005 profile of the firm). That relationship served as a template for Booz Allen’s later work in intelligence and national security where its personnel worked inside government agencies alongside public employees.
Since the late-1990s, Booz Allen has forged a particularly close relationship with the NSA, the spy agency that monitors global telephone, e-mail and Internet traffic for the U.S. military and political leaders, which hired Booz Allen as its chief outside consultant on Project Groundbreaker. This $4 billion project outsourced the NSA’s internal communications and networking systems to a consortium led by Computer Sciences Corporation (CSC) and the IT subsidiary of Northrop Grumman.
Today, among the many services Booz Allen provides to intelligence agencies, according to its Website, are war-gaming – simulated drills in which military and intelligence officials test their response to potential threats like terrorist attacks – as well as data-mining and analysis of imagery and intelligence picked up by U.S. spy satellites, the design of cryptographic, or code-breaking, systems (an NSA specialty) and “outsourcing/privatization strategy and planning.” The company’s 2007 annual report spells out several other areas of expertise, including “all source analysis,” an intelligence specialty managed by the CIA and the Office of the Director of National Intelligence (DNI) that draws on public sources of information, such as foreign newspapers and textbooks, to add texture to data gathered by spies and electronic surveillance.
According to the company’s annual report, Booz Allen is also working on one of the most important spy initiatives launched in recent years: the Cryptographic Modernization Program. Air Force General John C. Koziol, the commander of the Air Force Intelligence, Surveillance and Reconnaissance Agency, described this program as an attempt to combine a variety of intelligence technologies to pick up tell-tale signs of chemicals and other substances – into a single electronic package that can be used by combat and special operations commanders to track the enemy.
Booz Allen is a full partner in the project, according to General Koziol, an idea that has been “fully endorsed” by the Director of National Intelligence Michael McConnell, the nation’s spy chief – himself a Booz Allen alumnus (see box).
Revolving Door
To carry out its tasks at the intelligence agencies, Booz Allen has hired a dazzling array of former national security officials and foot-soldiers. In 2002, Information Week reported that Booz Allen had more than 1,000 former intelligence officers on its payroll. In 2007, as this reporter was researching a chapter about Booz Allen for his forthcoming book, he asked the company if it could confirm that number or provide a more accurate one, and received an e-mail reply from spokesman George Farrar: “It is certainly possible, but as a privately held corporation we consider that information to be proprietary and do not disclose.”
Buried deep on the company's Web site, however, a much larger number is confirmed in an explanation of a Booz Allen information technology contract with the DIA, which carries out intelligence for the Joint Chiefs of Staff and the Office of the Secretary of Defense. It stated that the Booz Allen team “employs more than 10,000 TS/SCI cleared personnel.” TS/SCI stands for top secret-sensitive compartmented intelligence, one of the highest possible security ratings, which would make Booz Allen one of the largest employers of cleared personnel in the United States.
Many of these former intelligence officers at Booz Allen, do the same jobs as they did for the government. For example, Keith Hall, a Booz Allen vice president initially worked in Army intelligence and on one of the congressional intelligence committees. In the early 1990s, he was hired by the CIA to manage budgets and policy development for then-Director of Central Intelligence Robert Gates. During that time, he played an instrumental role in creating the National Imagery and Mapping Agency, which was later renamed the National Geospatial-Intelligence Agency. During the Clinton administration, Hall was named Assistant Secretary of the Air Force for space programs and, simultaneously, director of the NRO, the agency that manages the nation’s military satellite program.
Now, as a Booz Allen executive, Hall leads a “strategic intelligence initiative” that integrates the company’s extensive contracting activities for the NRO and the NGA. Recently, one of his most important tasks involved chairing a 2005 homeland security study group that recommended a major expansion of information and data-sharing between U.S. spy agencies that work outside the country and domestic law enforcement, like the Federal Bureau of Investigation (FBI). “The study’s findings have become a road map for the government in making decisions related to critical information sharing in support of homeland security,” Booz Allen boasts in its 2007 annual report. (See our article, Domestic Spying, Inc.)
Who is the Carlyle Group?
The Carlyle Group is a private equity fund – a group of financial advisers that invests large sums of money from pension funds, large corporations, wealthy individuals and foreign banks into privately held companies in many different industries, and then run those companies until the market is right to sell them at a substantial profit. During the early years of the George W. Bush administration, it gained attention – and some notoriety – because of the large number of former high-ranking political figures it had attracted as advisers and managers. They included former President George H.W. Bush, former Secretary of State James Baker and former British Prime Minister John Major.
Shortly after the September 11, 2001, attacks on New York and Washington, Carlyle was in the news again when newspapers revealed that Osama Bin Laden’s family in Saudi Arabia – which owns one of the world’s largest construction companies – held a stake in the fund. The stake was quickly liquidated after the news broke.
Until the recent slowdown in the financial markets, the private equity industry, with over $160 billion under its control, was widely seen as one of the most important drivers of the global economy, pumping venture capital into high-tech startups and buy-out capital into corporate reorganizations worldwide. They are extremely active in Britain, where more than 20 percent of the private sector workforce is employed by companies that are, or have been, the targets of private equity investments. Business magazines credit them with breaking up some of America’s worst-run conglomerates and bringing competition to Japan’s highly regulated and incestuous banking industry.
“Private equity funds now wield much of the transformational power at the heart of the capitalist system,” The Economist magazine recently observed. In addition to Carlyle, which has more than $75 billion under management, industry leaders include the Blackstone Group ($30 billion), Bain Capital ($27 billion), Kohlberg, Kravis, Roberts & Co. ($26 billion) and Texas Pacific Group ($20 billion).
Carlyle, the largest of the funds, is best-known for owning large military contractors and aerospace contractors, such as United Defense Industries, the maker of the Bradley Fighting Vehicle and other weapons systems, which it sold to BAE Systems in 2004, and Vought Aircraft Industries, a major producer of structural assemblies for commercial, military and business aircraft, which it still holds. Other military contractors that have gone through Carlyle’s hands include EG&G, LTV Aerospace and Magnavox Electronic Systems.
During the 1990s, when it made most of these acquisitions, the fund was led by former Secretary of Defense Frank Carlucci, who served during the Carter administration as deputy director of the CIA. During his tenure, Carlyle bought and sold nearly a dozen companies active in the intelligence industry. They include BDM International, an influential company that, during the 1990s, provided some of the U.S. Army’s first contract interpreters and, through a subsidiary known as Vinnell Corporation, once trained the Saudi National Guard. It was eventually sold to Northrop Grumman and is now part of that company’s huge intelligence division.
U.S. Investigative Service, which Carlyle bought in 1996 and sold in 2007, is the largest provider of security investigations for employees and contractors hired by the Pentagon, the National Security Agency and other agencies, and in recent months has been training Iraqi police commandoes under contract to the Pentagon. (See CorpWatch coverage of USIS.)
Another spectacular acquisition was QinetiQ, the privatized arm of Britain’s military research corporation. It was acquired by Carlyle in 2003, sold in 2007, and recently emerged as one of the premiere U.S. intelligence contractors – after netting a $470 million profit for Carlyle. (See our article “QinetiQ goes Kinetic”.)
Carlyle, however, has divested itself of most of its military holdings. “In our current U.S. portfolio, there’s none,” Carlyle’s Ullman told CorpWatch. Today, most of its investments are concentrated in commercial industries, such as real estate and banking. During a few months’ span in 2006, for instance, Carlyle did a “manufacturing deal, an education deal, a consumer products deal, and buildings deal, and a financial services deal,” according to an account in the Washingtonian magazine. Its holdings are extensive and pervasive: every time you rent a car from Hertz, catch a quick breakfast at Dunkin’ Donuts or get ice-cream at Baskin-Robbins, you’re sending money to Carlyle.
A $2 billion acquisition of Booz Allen’s contracting business would therefore put Carlyle back in the big leagues of military contractors. Other key executives who came to Booz Allen from the spy agencies include R. James Woolsey, the former director of the CIA, who was hired in 2003 to run Booz Allen’s “global resilience” division, which advises corporations on security issues, and Joan A. Dempsey, a career U.S. intelligence official and a former top aide to former CIA Director George Tenet, who was hired in 2005 as a Booz Allen vice president with responsibility to advise the DNI and other key intelligence agencies. (See box for list of other key corporate figures that previously worked in government intelligence agencies.)
It is these senior managers who would most likely benefit from a sale to Carlyle.
Unlike many of its competitors in the intelligence industry, Booz Allen is a privately held company whose shares are owned by its 300 vice presidents of whom “approximately 80 are in government support,” Booz Allen’s Farrar told CorpWatch. For these vice presidents, Carlyle’s infusion of capital, and its $2 billion buyout of their shares, will make them very rich men and women indeed. After all, $2 billion divided by 80 is $25 million; even if Booz Allen’s shares were divided equally, which is unlikely, that’s an astounding windfall for any executive.
Booz Allen CEO Ralph Shrader
The man most responsible for Booz Allen’s growth as an intelligence contractor is Ralph Shrader, who has been running the company as chairman and CEO since 1998. Shrader, an electrical engineer by training, came to Booz Allen in 1974 after serving at senior management levels of two prominent telecommunications companies – Western Union, where he was national director of advanced systems planning, and RCA, where he served in the company’s government communications system division. These positions prepared him well for his later work at Booz Allen as a consultant to the telecommunications industry. According to his official biography, he “led major assignments” for the industry as a Booz Allen consultant and was deeply involved in the company’s “landmark work for AT&T” when that company was broken up by the government.
In those assignments, Shrader may have been exposed to the telecommunications industry’s close ties to U.S. intelligence. During the years he worked for Western Union and RCA, those companies, along with ITT World Communications, were part of a secret surveillance program known as Minaret in which telecommunication companies, with the concurrence of a handful of high-ranking executives, handed over to the NSA information on all incoming and outgoing U.S. telephone calls and telegrams – an early version of the NSA’s warrantless surveillance program launched by the Bush administration after the September 11th attacks. Minaret, and the involvement of the private companies in NSA spying, was exposed by the congressional committees investigating intelligence abuse in the mid-1970s, and was the inspiration behind the 1978 Foreign Intelligence Surveillance Act (FISA), which set the rules – including the important requirement for warrants – for domestic surveillance of telephone traffic.
None of this is alluded to in Booz Allen’s official literature, of course; but Shrader, upon his appointment as CEO in 1998, mentioned in a rare press interview (with the Financial Times) that the most relevant background for his new position of chief executive was his experience working for telecommunications clients and doing classified military work for the U.S. government – “something of a Booz specialty,” the FT pointed out.
Booz Allen adds on its website that Shrader, as CEO, has also “led important programs for the U.S. National Communications System and the Defense Information Systems Agency,” two of the most important classified intelligence networks in use by the federal government. Under Shrader, Booz Allen also became the NSA’s most important outside consultant, culminating in its advisory role in Project Groundbreaker. That project, which awarded its first contracts in the summer of 2001, put Booz Allen in a prime position to capture NSA and other intelligence work in the aftermath of the September 11th attacks, when intelligence budgets, and NSA surveillance, increased substantially.
“War on Terror” Contracts
After September 11th, 2001, by Booz Allen’s own account, the firm helped the government reshape its spying capabilities to match the new era of counterinsurgencies and terrorist threats. “The nature of intelligence changed dramatically in the wake of 9/11,” Christopher Ling, a Booz Allen vice president, explains in the company’s most recent annual report. “An entire analytic production system geared to detect large-scale cold war adversarial capabilities was suddenly required to transform.” At Booz Allen, he added, “We are finding innovative ways to integrate intelligence and operations, enabled by advanced visualization and data management capabilities, which has allowed us to pioneer tactics, techniques, and procedures.”
In addition to serving as a prime contractor on Admiral John Poindexter’s controversial Total Information Awareness project (see box), Booz Allen was active on both the military and economic fronts on the “war on terror.” For the Pentagon, it helped develop the “blue force” tracking system that allows soldiers and commanders in Iraq and other battlegrounds the ability to electronically identify friendly troops. And in the weeks leading up to the invasion of Iraq, Booz Allen sponsored and organized several conferences aimed at helping U.S. corporations secure contracts in occupied Baghdad, with former CIA director Woolsey, one of the most ardent backers of the war, as a keynote speaker.
Michael McConnell
Booz Allen Hamilton’s most illustrious alumnus is Michael McConnell, the current Director of National Intelligence, the top spy job in the country, who epitomizes the term revolving door, spinning from government job to industry and back again.
McConnell was a senior Pentagon official during George Bush Senior’s administration and the first Gulf War, where he worked for Dick Cheney, then the Secretary of Defense, as the chief intelligence adviser to General Colin Powell, the chairman of the Joint Chiefs of Staff. Cheney was so impressed with McConnell’s work during the war that he appointed him to head the NSA in 1993 (he later intervened personally to convince McConnell to take the DNI job in 2007).
McConnell subsequently spent more than 10 years as a Booz Allen senior vice president in charge of the company’s extensive contracts in military intelligence and information operations for the Pentagon. In that job, his official biography states, McConnell provided intelligence support to "the U.S. Unified Combatant Commanders, the Director of National Intelligence Agencies, and the Military Service Intelligence Directors." That made him a close colleague of not only Donald Rumsfeld, who ran the Pentagon from 2001 to 2007, but of Vice President Cheney, who has served President Bush as a kind of intelligence godfather since the earliest days of the administration.
As Booz Allen’s chief intelligence liaison to the Pentagon, McConnell was at the center of action, both before and after the September 11 attacks. During the first six years of the Bush administration, Booz Allen’s contracts with the U.S. government rose dramatically, from $626,000 in 2000 to $1.6 billion in 2006. McConnell and his staff at Booz Allen were deeply involved in some of the Bush administration’s most controversial counterterrorism programs. They included the Pentagon’s infamous Total Information Awareness data-mining scheme run by former Navy Admiral John Poindexter, which was an attempt to collect information on potential terrorists in America from phone records, credit card receipts and other databases. (Congress cancelled the program over civil liberties concerns, but much of the work was transferred to the NSA, where Booz Allen continued to receive the contracts.)
In 2002, when the CIA launched a financial intelligence project to track terrorist financing with the secret cooperation of SWIFT, the Brussels-based international banking consortium, Booz Allen won a contract to serve as an “outside” auditor of the project.
In January 2007, McConnell resigned from Booz Allen after he was appointed by President George W. Bush to his current job. He now oversees all 16 U.S. intelligence agencies, and thus much of Booz Allen’s government business. (See this reporter's 2007 Salon article.)
Under Shrader’s leadership, Booz Allen played an instrumental role after September 11th in proselytizing for a greater corporate role in national and homeland security. This was important, the Booz Allen CEO said at a CEO summit he organized in 2002, because “business leaders cannot opt out of geopolitics and leave the job of security solely to government and the military.”
Deepening the corporate alliance with the Bush administration and its war on terror also had significant advantages for Booz Allen and its fellow corporations: on one hand, it drastically increased their contracts with military and intelligence agencies; and on the other, homeland security provided a convenient excuse for reducing government oversight and regulation. These dual interests were spelled out in unusual detail in 2004 by Richard Wilhelm, a former CIA and NSA officer who once served as national security adviser to former Vice President Al Gore and now leads Booz Allen’s business with the CIA and the Office of the DNI.
Speaking to a conference on information-sharing and counterterrorism, Wilhelm explained that the “right mix of policies” for business should include a wide range of “incentives” and “cooperative arrangements,” including “appropriate protections from Freedom of Information Act requirements and other unintended consequences of more open information sharing.” Government, he argued, should “help make the business case, and then sweeten it – because industry will share information when there is a business case to do so.” In other words, corporations were happy to participate in the exchange of information about terrorism and other security threats, but only if there were enough rewards. And for Booz Allen, those rewards have been sweet indeed, as a short list of their recent unclassified contracts attests. They include:
• A $6.3 million contract to provide research on 3-D facial recognition biometric software for the Information Assurance Technical Analysis Center at Offut Air Force Base in Nebraska, awarded in 2008.
• A $48 million contract with the U.S. Air Force to conduct research on “survivability and lethality implications” of an Air Force vehicle program, awarded in 2008.
• In a partnership with CACI International, EDS, Lockheed Martin, SAIC and SRA, the right to bid on $12.2 billion worth of contracts for telecom and IT services for the Defense Information Systems Agency (DISA), awarded in 2007.
• Participation in a consortium of seven companies that will bid on up to $20 billion worth of work in Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance – a mouthful of a term usually referred to as C4ISR – for the Army’s Communications Electronics Command, which is based in Fort Monmouth, New Jersey, awarded in 2006.
• A five-year, $25o million contract to provide “systems engineering technical assistance” to the Science and Technology Directorate of the Department of Homeland Security, signed in 2005.
Little Congressional Scrutiny?
In spite of its tremendous power as a contractor, Booz Allen has received very little criticism or even scrutiny from the U.S. Congress. In January 2007, the Senate had a rare opportunity to inquire about the company when it held hearings on Michael McConnell’s nomination as Director of National Intelligence (see box). Prior to the hearing, several senators said they would question McConnell about Booz Allen’s role as a contractor; but the hearing was a desultory affair, and few questions were asked of the new DNI about the high level of contracting among the spy agencies or the specific role of Booz Allen.
A month later, a Booz Allen contract with the Department of Homeland Security came under close scrutiny in the House. In February 2007, Henry Waxman, a Democratic Congressman from California, the chairman of the House Committee on Government Oversight and Reform, charged that Booz Allen had a significant conflict of interest over its contract to oversee an $8 billion contract with the DHS Secure Border Initiative known as SBI-Net. Under the contract, Boeing and other companies will build a “virtual fence” of cameras, radar and sensors that will transmit imagery and data to border patrol agents working along the U.S. borders with Canada and Mexico. (See CorpWatch's “Fencing the Border".)
The conflict arose, said Waxman, because Booz Allen had long-standing business partnerships with Boeing, the prime contractor for SBI-Net, and could therefore not provide objective oversight of the program. At the hearing, Waxman pointed out to DHS officials that they had hired 98 people to oversee the SBI-Net contract. “But the problem is that 65 of these people don’t work for the government. They work for the contractor,” he said. “You’re relying on them to do the function that a government ordinarily would do.” DHS officials responded that Booz Allen had been hired for advice, not for oversight.
Waxman’s criticism could be made of a myriad of contracts Booz Allen holds with intelligence agencies. At the NSA, for example, it has advised the agency about several contracts that involve companies that Booz Allen has close business ties with. That is also true at the NRO, the NGA and the CIA. So far, however, no reports of conflicts of interest have emerged from Congress, which in any case exercises little oversight over intelligence contracts.
In another damaging report issued in 2007, the General Accounting Office, the audit arm of the U.S. Congress, found that the Department of Homeland Security was spending nearly $16 billion a year on goods and services from the private sector, making it the third-largest employer of contractors in the federal government. Among the beneficiaries of DHS’ spending was Booz Allen Hamilton, which in 2006 was awarded a $43 million no-bid contract to provide services to the DHS intelligence unit. Upon reading the $16 billion DHS figures in the GAO report, Joseph Lieberman, an independent U.S. senator from Connecticut, angrily commented: “plainly put, we need to know who is in charge at DHS – its managers and workers, or the contractors.”
The Washington Post later found that Booz Allen’s no-bid intelligence contract with DHS had ballooned in value from $2 million in 2003 to over $30 million in 2006 – 15 times its original value. When DHS lawyers first examined the Booz Allen deal, the Post said, they found it was “grossly beyond the scope” of the original contract and had violated government procurement rules. An open competition was ordered by DHS lawyers, but delayed for a year. During that time, the Post said, “the payments to Booz Allen more than doubled again under a second no-bid arrangement, to $73 million.” Union Protests
So far, the only public criticism of the potential Carlyle-Booz Allen deal has come from the Service Employees International Union (SEIU), one of the country’s largest labor unions. Last year, the union launched a blistering attack on Carlyle and the private equity industry in a widely distributed report called “Behind the Buyouts: Inside the World of Private Equity.” The gist of the report was that Carlyle, Kohlberg, Kravis, Roberts (KKR) and other large private equity funds were undermining the U.S. economy by avoiding taxes and creating “harsh consequences,” such as layoffs, for workers and communities. In late 2007, when Carlyle acquired the assets of Manor Care, a chain of nursing homes where the SEIU is trying to organize workers, the union stepped up its campaign.
Of Unions, Pension Funds and the Carlyle Group
The SEIU’s campaign material on the Carlyle Group, including a 40-page white paper on private equity issued last year, fails to mention a salient fact: that many SEIU members are affiliated with a pension fund that holds a significant stake in the Carlyle Group.
That fund is the California Public Employees Retirement System, the world’s largest public pension fund, often known as CalPERS. It has held a five percent stake in Carlyle’s core management group since 2000, and therefore profits every time Carlyle makes money from one of its investments. Many of the California state officials who sit on CalPERS boards are also members of the SEIU, although they officially only represent their employer, not the union.
In 2001, this reporter attended a meeting of the CalPERS investment board where Carlyle’s three founding managers appeared as witnesses. The public meeting took place at a time when Carlyle was a hot media topic because of its close ties to the Bush administration and its prominence as the nation’s 11th largest military contractor. Several SEIU officials attended the meeting, and the questioning of Carlyle was led by a CalPERS official who belonged to the SEIU. However, the investment board didn’t ask about Carlyle’s military industry investments, and instead posed a single, softball question about Carlyle’s views on the U.S. investment climate.
Asked why the SEIU hasn’t mentioned CalPERS’ stake in Carlyle in any of its literature, Stephen Lerner, the director of SEIU’s Private Equity Project, replied that the union didn’t start investigating the pension fund’s role in Carlyle until 2007.
Until then, “we never really thought about CalPERS’ investment in Carlyle,” he said. “Now that we’re digging in deeper, we’re raising lots of questions.” Under SEIU’s initiative, a California lawmaker has introduced legislation that would prohibit CalPERS from investing in private equity funds owned in part by overseas funds from countries that don’t “generally respect human rights.” According to an SEIU handout, the legislation “is only applicable to private equity firms in which sovereign wealth funds have an ownership stake,” such as Carlyle.
Carlyle’s Ullman responded that the legislation could hurt the people it is supposed to protect. California lawmakers “should consider the detrimental impact on California pensioners who have benefited greatly from CalPERS’ investment in, and ownership of, the Carlyle Group,” he told CorpWatch. In January 2008, after rumors of a Carlyle takeover of Booz Allen surfaced in the press, SEIU issued a blistering press release denouncing the potential deal. The union’s criticism of the proposed acquisition didn’t focus on Booz Allen’s role in intelligence outsourcing but on Carlyle’s ties with the Mubadala Development fund of the Government of Abu Dhabi. In 2007, that fund paid $1.35 billion to buy a 7.5 percent ownership stake in Carlyle’s general partnership.
As a result of that investment, the SEIU charged, Carlyle was risking national security. “The potential for a Carlyle Group-Booz Allen buyout demands urgency on the part of lawmakers and regulators to examine the risks faced by the U.S. when foreign governments potentially have access to classified and other sensitive national security information through their stake in U.S. companies,” the union declared in a press release. In an interview with CorpWatch, Stephen Lerner, the director of SEIU’s Private Equity Project, said the union launched this nationalist campaign out of concern that classified information from Booz Allen could leak into the hands of the Abu Dhabi fund, thus compromising U.S. security interests.
“When you combine buyout firms, which have much less reporting requirements because they are private, with opaque sovereign wealth funds, you get a toxic stew of secrecy,” he said. Asked how or why Booz Allen executives might leak classified information to a foreign government, he replied: “The point is, you have no way of knowing if they would or wouldn’t.” He added that, while the SEIU has not taken a position on Booz Allen’s extensive role in intelligence outsourcing, the issue of “government jobs being done by private contractors” might emerge in the future for the union.
(The SEIU does not mention in its material that the California Public Employees Retirement System, the pension fund for California state retirees where the SEIU has significant influence, owns five percent of the Carlyle Group – see box.)
Carlyle’s Ullman, who recently discussed the union campaign with SEIU president Andrew Stern during a conference on private equity, rejected the SEIU’s claims. The charges that the Abu Dhabi investment could jeopardize national security “is really an obscene allegation,” he said. Ullman added that the Abu Dhabi fund was a “passive investor” in Carlyle and would have no role in the management of Carlyle companies. “Carlyle’s portfolio companies have a pristine track record in handling sensitive government data,” he said. “Giving top secret and classified data to foreign governments is known as treason, and is punishable by jail and worse. That would be a fairly strong impediment” to leaks.
In any case, there is virtually no evidence to suggest that any US intelligence contractor has leaked classified information, and it’s unlikely the union’s allegations will be a factor if the Carlyle Group does decide to acquire Booz Allen Hamilton.
Carlyle, Kissinger, SAIC and Halliburton: A 9/11 Convergence http://www.911blogger.com/node/22120
Submitted by Kevin Ryan on Sat, 12/12/2009 - 5:51am.
Halliburton | Henry Kissinger | SAIC | The Carlyle Group
Careful investigation leads one to notice that a number of intriguing groups of people and organizations converged on the events of September 11th, 2001. An example is the group of men who were members of Cornell University’s Quill & Dagger society. This included Paul Wolfowitz, National Security Advisors Sandy Berger and Stephen Hadley, Marsh & McLennan executive Stephen Friedman, and the founder of Kroll Associates, Jules Kroll. Another interconnected group of organizations is linked to these Cornell comrades, and is even more interesting in terms of its members being integral to the events of 9/11, and having benefited from those events.
After the 1993 bombing of the World Trade Center (WTC), a company called Stratesec (or Securacom) was responsible for the overall integration of the new security system designed by Kroll Associates. Stratesec had a small board of directors that included retired Air Force General James Abrahamson, Marvin Bush (the brother of George W. Bush) and Wirt Walker III, a cousin of the Bush brothers. Other directors included Charles Archer, former Assistant Director in charge of the FBI's Criminal Justice Information Services Division, and Yousef Saud Al Sabah, a member of the Kuwaiti royal family.[1]
Yousef Saud Al Sabah was also chairman of the Kuwait-American Corporation (KuwAm), which between 1993 and 1999 held a controlling share of Stratesec. The other owners of Stratesec were Walker and an entity controlled by Walker and Al Sabah, called Special Situation Investment Holdings (SSIH).[2] SSIH was said to form a group with KuwAm, and the group owned several other companies, including Commander Aircraft and Aviation General. In any case, the Kuwaiti royal family can be said to have benefited from 9/11 due to “The War on Terror” that removed Saddam Hussein from power. Of course, that was the second consecutive US war that Kuwait benefited from, the first being the 1991 Gulf War led by President George H.W. Bush.
Stratesec director James Abrahamson was President of Hughes Aircraft from 1989 to 1992, when Prescott Bush Jr. was helping Hughes lobby Bush’s brother, the US President, to lift sanctions on the Chinese government. Abrahamson became a director of Stratesec in December 1997.[3] He also co-founded a company called Crescent Investment Management (Crescent) with the Pakistani-American, Mansoor Ijaz. Crescent’s board of advisors included James Woolsey, the CIA Director for President Clinton who became a PNAC signatory and Booz Allen Hamilton executive.[4]
Mansoor Ijaz is the CEO of Crescent, and is a rare individual in that he claimed to have the ability to persuade several governments to extradite Osama bin Laden. After meetings with Clinton and his National Security Advisor Sandy Berger (who first introduced Woolsey to Clinton), Ijaz said that he could not convince them to work toward the extradition.[5] Additionally, Ijaz introduced the journalist Daniel Pearl, by way of a personal letter, to those in Pakistan who are believed to have been involved in his death.[6] Ijaz went on to become a Fox News correspondent, and he was a strong promoter of false claims leading up to the Iraq War, including WMDs and ties between Saddam Hussein and Al Qaeda.[7]
Stratesec had contracts to provide security services for United Airlines, and Dulles Airport, where American Airlines Flight 77 took off on 9/11. Another client was Los Alamos National Laboratory (LANL), where scientists were working on the development of nanothermite, a type of explosive material that has since been discovered in the WTC dust.[8,9]
The Carlyle Group
In 1998, Barry McDaniel came to Stratesec to become its Chief Operating Officer. McDaniel was therefore in charge of the security operation at the WTC in terms of what he called a “completion contract,” to provide services “up to the day the buildings fell down.”[10] McDaniel had previously worked for the United States Army Materiel Command (AMC), located at Fort Belvoir, Virginia. But McDaniel came to Stratesec directly from BDM International, where he had been Vice President for nine years. BDM was a major subsidiary of The Carlyle Group for most of that time. When Barry McDaniel started at BDM, the company began getting a large amount of government business “in an area the Navy called Black Projects,” or budgets that were kept secret.[11]
BDM has had an interesting history. In 1990 it was a subsidiary of Loral Corporation, a company owned by Bernard Schwartz that was related to WTC security company Ensec, and Ensec director Terry McAuliffe.[12] Loral sold BDM to The Carlyle Group in 1992, at which time Frank Carlucci became chairman of BDM. Carlucci was a covert operative in his early career, and got his start in national politics through his old college roommate, Donald Rumsfeld, becoming Rumsfeld’s assistant at the Office of Economic Opportunity in 1969. Carlucci went on to be named Deputy Director of the CIA and Ronald Reagan’s Secretary of Defense.
During his first few years at Carlyle, Carlucci asked his friend Norman Augustine, later CEO of Lockheed Martin, if Carlyle could be included in a deal to buy the defense contractor LTV Corp.[13] That deal did not happen, but LTV was among the companies whose stocks were flagged for insider trading related to 9/11.[14,15] The FBI also briefly considered investigating Stratesec for insider trading related to 9/11, due to an SEC referral of suspicious accounts. But since the people involved were considered to not have any “ties to terrorism or other negative information,” an investigation into Stratesec was not pursued.[16] Putnam Investments, a subsidiary of WTC impact zone tenant Marsh & McLennan, was one of Stratesec’s investors.
During the time that Stratesec executive McDaniel worked for them, the Caryle Group began to add some very powerful people to their leadership group. One such figure was James Baker, who went to Princeton with Rumsfeld and Carlucci, and who was White House Chief of Staff, and Secretary of the Treasury, for Reagan. Baker was also George H.W. Bush’s campaign manager and Secretary of State, and Bush’s White House Chief of Staff again in his last government position. Baker became a partner at Carlyle just two weeks after the February 1993 bombing of the WTC.
Earlier in his career, Baker had worked in President Ford’s department of Commerce, along with WTC impact zone tenant Joseph Kasputys. And Baker was a longtime, close friend of Raymond Hill, an elite Texan who owned the mafia and CIA-connected Mainland Savings. American taxpayers shelled out approximately $500 million when Mainland failed in 1986. Investigators have since discovered that Mainland, like a number of other savings and loans that failed in the late 1980s, was a vehicle for CIA and mafia activities.[17]
Baker is also remembered as the one person most responsible for changing the outcome of the 2000 presidential election, in favor of George W. Bush. As Congressman John Conyers wrote: “Mr. Baker will be forever remembered for his ultimately successful efforts to shut down the counting of votes in the 2000 Florida election.”[18]
On September 11, 2001, Baker was at the Ritz-Carlton in Washington DC, for the annual investor conference of the Carlyle Group. Also present with Baker was Carlucci, "representatives of the bin Laden family,” and George H. W. Bush.[19] Carlyle had been doing business with the bin Laden family since the early 1990s.
Baker’s grandfather started the law firm Baker Botts, which had offices in Saudi Arabia and which, after 9/11, represented the Saudi Arabian government in a lawsuit filed by families of those killed and injured in the attacks. The Saudi connection is interesting considering that Carlyle owned, through BDM International, the Vinnell Corporation, a mercenary operation that had extensive contracts in the Middle East since 1975, training the Saudi Arabian National Guard and also training Turkish security forces.
Vinnell was considered “by some experts to be a CIA front.”[20] Of course Frank Carlucci was Deputy Director of the CIA, and George H.W. Bush, who was Baker’s boss for many years, was in the CIA for a majority of his career.[21] Perhaps as a result, in 1995 Vinnell was reported to be one of the first targets of al Qaeda, in Saudi Arabia.
BDM, Vinnell’s parent company, was sold to TRW in 1997. Directors at BDM at the time included Carlyle Group executives and a former assistant to Henry Kissinger, Philip Odeen, who went on to become the CEO of TRW. Directors at TRW at the same time included Robert M. Gates, former Director of Central Intelligence and current Secretary of Defense. Arden Bement, who was appointed by George W. Bush to lead the National Institute of Standards and Technology (NIST) one month after the 9/11 attacks, had left his position as TRW Vice President in 1992, moving to Purdue University in the interim.
In 1998, at the time that Barry McDaniel moved to Stratesec, TRW merged with Lockheed Martin, the company that sub-contracted the WTC security job to Ensec.[22] Stratesec and Ensec, along with E.J. Electric and Electronic Systems Associates, worked to build the security system that was in place at the WTC when the buildings were destroyed. All four of these companies had done significant work in Saudi Arabia before working at the WTC.[23]
Marvin Bush was a director of Stratesec from 1993 to 2000. It was during that time that Kroll and Stratesec planned and executed the extensive rebuilding of the security systems at the WTC complex. As his stint with Stratesec ended, Marvin Bush became a principal in the company HCC Insurance, one of the insurance carriers for the World Trade Center.
SAIC
Marvin Bush was the cofounder of Winston Partners in 1993, a company that benefited greatly from the War on Terror. In 2000, Winston Partners invested heavily in a defense contractor called AMSEC that was 55% owned by Science Applications International Corporation (SAIC). It has been noted that SAIC was not only a major contributor to the NIST WTC report, it was also a company that had expertise in nanothermites, explosive materials which were found in the WTC dust as mentioned earlier.[24]
Founded by a scientist from Los Alamos National Laboratory, SAIC had a long history at the WTC, having evaluated the basement levels of the buildings as a potential terrorist target in 1986.[25] Interestingly, the company was hired to investigate the 1993 bombing of the WTC, an event that was “remarkably like the one which” they had foreseen in 1986.[26] In fact, SAIC later boasted that -- “After the 1993 World Trade Center bombing, our blast analyses produced tangible results that helped identify those responsible.”[27]
After 9/11, SAIC supplied the largest contingent of non-governmental investigators to the WTC investigation conducted NIST. At the same time, “SAIC personnel were instrumental in pressing the case that weapons of mass destruction existed in Iraq under Saddam Hussein, and that war was the only way to get rid of them.”[28]
SAIC was also a pioneer in the intelligence contracting business, as a founding member of the Security Affairs Support Association in 1979, along with companies like TRW, Booz Allen Hamilton, Lockheed and Hughes Aircraft. A special taskforce of the Defense Science Board, which was led in 1993 by BDM’s Philip Odeen, recommended a vast increase in the outsourcing of intelligence, which all these companies ended up benefiting from greatly.
Today a majority of government intelligence work is outsourced, and SAIC is known first and foremost as an intelligence contractor. SAIC sells expertise about weapons, about homeland security, about surveillance, about computer systems, about “information dominance” and “information warfare,” and has been awarded more individual government contracts than any other private company in America. In fact, the company was paid huge sums to rebuild the NSA and FBI systems that supposedly failed before 9/11.[29]
SAIC is integral to the operations of all the major intelligence collection agencies, particularly the National Security Agency (NSA), the National Geospatial-Intelligence Agency (NGA) and the CIA. In fact, the CIA relies on SAIC to spy in its own workforce.[30] But SAIC has also played an integral role in the “War on Terror”, and was even responsible for capturing Khalid Sheikh Mohammed. It was SAIC staff and technology that “tease[ed] out crucial clues about Mohammed's activities from intercepted text messages that he sent to his al Qaeda operatives using as many as 20 different cell phones.”[31]
In an interesting coincidence, while the Carlyle/BDM subsidiary Vinnell Corp was training the Saudi Arabian National Guard, SAIC was training the Saudi Navy and bringing Saudi military personnel to company headquarters in San Diego for further study. Simultaneously, Booz Allen Hamilton was managing the Saudi Marine Corps and running the Saudi Armed Forces Staff College.[32] Vinnell now works with SAIC to train the Iraqi military.[33]
SAIC employees or board members have included Secretary of Defense Robert Gates, former Deputy Director of CIA Bobby Ray Inman, former NYC OEM director Jerome Hauer, anthrax attack suspect Stephen Hatfill, former CIA Director John Deutch, and Lawrence B. Prior, a military intelligence officer and former TRW executive. Also formerly with SAIC, during the time of the planning and implementation of the 9/11 attacks, was Dick Cheney’s undersecretary of defense, Duane Andrews.
Duane Andrews considered Dick Cheney to be his personal, lifelong hero.[34] While he worked for Cheney, Andrews supervised Stephen Cambone, who went on to become Donald Rumsfeld’s “special assistant.” When Andrews left the Pentagon in 1993, he became chief operating officer for SAIC, where he supervised “much of the company's work on secret projects with defense and national security agencies.”[35] Andrews and Cambone both later hired on to the British intelligence firm Qinetiq, along with George Tenet. Coincidentally, The Carlyle Group was a major shareholder in Qinetiq as of February 2003.
Halliburton and BCCI
When we examine who had the greatest motive for the attacks of 9/11, we need to look at who most benefited from those events. Certainly SAIC and other companies like Maurice Greenberg’s American International Group (AIG) are among those who profited the most after 9/11. But The Carlyle Group and oil companies like Halliburton led the field in terms of profiting from 9/11.
Dick Cheney was hired as CEO of Halliburton in 1995, despite having no practical business leadership experience. He quickly went on to add new directors that shared his political convictions, including Lawrence Eagleburger, the former Secretary of State under the first President George Bush. Eagleburger also served as a director of Kissinger Associates, and on the board of Dresser Industries, where George H.W. Bush got his start. Others Cheney added to his team included Ray Hunt, of Dallas-based Hunt Oil, a longtime supporter of the Bush clan.
Cheney named Charles DiBona as one of his first appointees to the board of Halliburton. DiBona had been the Deputy Director of the White House Policy Office and Special Assistant to President Nixon in the early 1970s. DiBona was also an associate of WTC south tower impact zone tenant Joseph Kasputys, at the Logistics Management Institute, and DiBona and Kasputys had previously worked together during the Arab Oil Embargo as representatives of the emerging US Department of Energy (DOE). In fact, DiBona was one of the first US “Energy Czars.”
Like DiBona, Joseph Kasputys was in the US Navy for 20 years, and both of them retired as Commanders. They then both worked for the predecessor agencies of the DOE, and Kasputys worked for the Department of Defense as well. In 1975, Kasputys was appointed by President Ford to be Assistant Secretary of Commerce. As stated in the review of tenants in the towers, Kasptuys went on to run a large corporation called Primark that had offices in both towers on 9/11. One of the subsidiaries of Primark, The Analytical Sciences Corporation (TASC), worked with “so-called 'black' or top secret programs.” TASC also worked closely with the National Institute of Standards and Technology.[36]
After his government service, DiBona went on to lead the American Petroleum Institute, the petroleum industry's national trade association, in a position he held for nineteen years. During that time, DiBona was also a director of First American Bancshares, the American bank secretly owned by the Bank of Credit and Commerce International (BCCI).
BCCI is significant relative to 9/11 because it was involved in funding terrorists in the late 1980s and was linked to the Pakistani intelligence network, from which several alleged 9/11 conspirators came, including Khalid Sheik Mohammed. In fact, Time magazine reported, relative to BCCI, that -- "You can't draw a line separating the bank's black operatives and Pakistan's intelligence services."[37]
BCCI was also clearly connected to the mafia. Munther Bilbeisi, a notorious BCCI representative who was finally indicted for tax fraud in 1991, was associated with several mafia families in New Jersey, including the DeCavalcante and Luchese crime families.[38]
More importantly, there were indications that the CIA was involved in the founding of BCCI.[39] There were also connections between George H. W. Bush, who was CIA director during BCCI’s heyday, and George W. Bush, through Harken Energy. But other US government representatives helped BCCI too, simply by not doing anything or allowing BCCI to make acquisitions in the US when they should have closed the operation down. For example, at the time that BCCI was first publicly suspected of wrongdoing, in 1988, both the US Department of Justice and the Federal Reserve Bank (Fed) were hesitant to investigate or prosecute, despite the fact that there were signs that both of these organizations already knew of BCCI’s fraud. When the Fed finally did take its first disciplinary action, it appeared that BCCI had a friend at the top, in that one member abstained from a critical vote. That member was the chairman, Alan Greenspan. Greenspan later explained that he had socialized with BCCI attorney and First American Bancshares President, Robert Altman.[40]
Kissinger and his associates
Henry Kissinger and his associates were also connected to BCCI in several ways, although he refused to share documents with the related Senate investigation. For example, Sergio Correa da Costa, who served as Brazil’s Ambassador to the US in the mid-1980s (note that Ensec was a Brazilian company), worked for Kissinger’s consulting company, Kissinger Associates, and was also a nominee shareholder for BCCI. And as early as 1971, Kissinger was linked to BCCI through the Pakistanis that arranged for his first visit to China.[41] At the time, Pakistrani agents who later became BCCI representatives were involved in fooling journalists into thinking Kissinger was in Pakistan instead of China. Kissinger returned to China many times and on occasion took very close friends and business associates along with him, most notably Maurice Greenberg of AIG, who traveled extensively with Kissinger.[42]
From 1985 to 1990, a client of Kissinger Associates, Banca Nazionale del Lavoro (BNL) provided $4 billion in unreported loans to Saddam Hussein and his government in Iraq. Henry Kissinger was on the International Advisory Board of BNL during that same time period. Kissinger and his leading assistants Brent Scowcroft and Lawrence Eagleburger were investigated in this matter by the House Banking Committee just as the first Gulf War was ending.[43]
But the numerous connections between assistants and associates of Kissinger, and the most significant events of 9/11, are astounding. To begin with, Kissinger, who is considered by some to be an international terrorist due to his bombing of Cambodia, his role in the 1973 coup in Chile, and other atrocities, was the Bush Administration’s first choice to lead the 9/11 Commission. Although he later resigned from the Commission to avoid exposing his client list, Kissinger’s closest friends and aides played significant roles with regard to 9/11.
L. Paul Bremer, the managing director at Kissinger Associates from 1989 to 2000, left there to take a job with WTC impact zone tenant Marsh & McLennan, and then played a leading role in establishing the official myth of 9/11.
Peter Rodman, PNAC member and Assistant Secretary of Defense on 9/11, hosted meetings with Pakistani ISI General Ahmed the week before 9/11, and had previously been a Special Assistant to Kissinger for eight years.[44]
Joseph Kasputys, south tower impact zone tenant, worked with Kissinger in the Ford Administration (along with Cheney, Greenspan, DiBona, and Rumsfeld).[45]
Kissinger is also closely associated with several 9/11 Commissioners, including his long-time National Security Council assistant John Lehman, and his fellow Hollinger board member James R. Thompson.
And Phillip Odeen of BDM, who was Barry McDaniel’s boss until McDaniel left to lead WTC security company Stratesec, was a Kissinger assistant for several years.
There was also Renato Ruggiero of Kissinger Associates. Mr. Ruggiero was present on 9/11 in the sense that he was on the International Advisory Board for Salomon Smith Barney (SSB), the company that occupied all but ten of the 47 floors in WTC building 7.[46] SSB even shared the all-important 23rd floor with the New York City OEM. More striking is the fact that Donald Rumsfeld was the chairman of that SSB board, and Dick Cheney was a board member as well. Rumsfeld served as chairman of the SSB International Advisory Board since its inception in 1999, but had to resign in 2001 when he was confirmed as George W. Bush’s Secretary of Defense, and Cheney resigned at the same time when he became Vice President.
Another interesting coincidence is that Global Crossing was brought public in 1998 by SSB. Global Crossing was the company that Ensec director McAuliffe made a fortune on, when he purchased $100,000 in stock before the company went public and cashed out several years later for $18 million. Richard Perle was a lobbyist for Global Crossing.
On 9/11/01, Salomon Smith Barney’s parent company was Citigroup. Citicorp was the nation’s largest bank in 1990, but dropped half of its value from the summer to the winter of that year due to the S&L scandal. The company was saved by Prince Alwaleed of Saudi Arabia, who pumped an initial $590 MM into the company in a deal brokered by The Carlyle Group. It is believed that the money, and more, came from BCCI as it was dissolving.[47]
Therefore, when Salomon Smith Barney was taken over by Citigroup in 1998, it was taken over in part by Saudi owners who were apparently redistributing the funding and networks of BCCI. Rumsfeld and Cheney entered the picture less than a year later, in May 1999. Jules Kroll, the founder of the WTC security design firm, and Rudy Giuliani, who was a former Department of Justice official, were responsible for investigating organized crime and BCCI, and were well aware of the extent of those networks ten years prior to that. Others like them, who brought the late indictments against BCCI, were leaders of the US Department of Justice.
Stratesec was at the WTC, and therefore, through Barry McDaniel and the Bush family, the influence of The Carlyle Group was present as well. In a sense, Rumsfeld and Cheney were also present at the WTC, because both of them were on the advisory board of Salomon Smith Barney. And SAIC was at the WTC on 9/11 too, as it was one of the first companies to show up at Ground Zero on that day. That fact will be discussed in the third installment of the essay series entitled Demolition Access to the WTC.
As for Kissinger, within hours of the events of 9/11 he was writing an opinion piece for the Washington Post. In it, he claimed to have thorough knowledge of what would be required to pull off such a coordinated set of attacks. Kissinger went on to inform the American public of what must happen next: “the destruction of the system that is responsible.”[48] No one can argue with that sentiment. But to this day, no one can accurately describe the terrorist system that was responsible for the 9/11 attacks, let alone destroy it.
What we can say today, with certainty, is that if we are to believe that al Qaeda orchestrated the events of 9/11 then we do not know much about al Qaeda. Alternatively, there was a far more powerful and highly connected system of intelligence and financial networks, represented by organizations like Carlyle, Kissinger, SAIC and Halliburton, that converged upon the events of 9/11. That other system continues to profit from the 9/11 attacks, and uses the fear and rage generated by al Qaeda-attributed terrorism to its own advantage. Understanding and destroying terrorism might simply be a matter of understanding and destroying the organizations that continue to profit from 9/11.
"Let me issue and control a nation's money and I care not who writes the laws. - Mayer Rothschild
"Civil disobedience is not our problem. Our problem is civil obedience! People are obedient in the face of poverty, starvation, stupidity, war, and cruelty. Our problem is that grand thieves are running the country. That's our problem!" - Howard Zinn
"If there is no struggle there is no progress. Power concedes nothing without a demand. It never did and never will" - Frederick Douglass
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