The Iron Triangle E-Book

Dan Briody

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 324

Veröffentlichungsjahr: 2011

Beschreibung

A penetrating look at the company at the nexus of big business,government, and defense The Carlyle Group is one of the largest private equity firms inthe world with over $13 billion in funds. Carlyle's investmentsinclude everything from defense contractors to telecommunicationsand aerospace companies. But there is more to this company thanmeets the eye. Carlyle's executives include heavyweights from theworlds of business and politics, such as former secretary ofdefense and CIA deputy director Frank Carlucci, former secretary ofstate James Baker III, former President George Bush, former UKPrime Minister John Major, and former chairman of the SEC ArthurLevitt. Osama Bin Laden's estranged family was personally investedin the group until recently. In The Iron Triangle, journalist DanBriody examines a company at the nexus of big business, government,and defense that, according to some sources, epitomizes corporatecronyism, conflicts of interest, and war profiteering. Thisfascinating examination leads readers into a w orld that few canimagine-full of clandestine meetings, quid pro quo deals, bitterironies, and pettyjealousies. And the cast of characters includessome of the most powerful men in the world. Strap in, because thisride could get a little bumpy. Dan Briody (New York, NY) is an award-winning businessjournalist whose Red Herring article "Carlyle's Way" broke thestory on the inner workings of the Carlyle Group. Briody hasappeared on numerous radio and television programs covering theCarlyle Group and has become a primary source for other journalistscovering this story. Briody's articles have appeared in Forbes, RedHerring, and the Industry Standard.

Leseprobe

Table of Contents

Title Page

Copyright Page

Foreword

TIME LINE

CAST OF CHARACTERS

PROLOGUE

Chapter 1 - THE POLITICIAN, THE BUSINESSMAN, AND THE UNLUCKY ESKIMOS

Rubenstein: Carlyle’s Beating Heart

Goin’ Legit

Counting the Jews

Chapter 2 - CRATERAIR

Malek’s Triangle Trade

Norris’ Self-Destruction

Chapter 3 - MR. CLEAN

Cold War Operative to Career Politician

Secret Arms Deals

A Farewell to Arms?

Chapter 4 - CARLUCCI’S CONNECTIONS

A New Friend

Chapter 5 - GETTING DEFENSIVE

An Arsenal of Democracy

More Ill Wind

Bill’s Will

Chapter 6 - AN ARABIAN WHITE KNIGHT

A Saudi Savior

Media Misteps

A Source Emerges

Chapter 7 - VINNELL’S EXECUTIVE MERCENARIES

A Company with No Past

Going Dark

Hate Boils Over

Chapter 8 - OUT OF THE SHADOWS

A Trophy Hire

A Chasm of Character

Norris’ Last Stand

Chapter 9 - BREAKING THE BANK

Soros’ Millions

The Rich Get Richer

Globalization

Chapter 10 - BUYING BUSH

A Bush Bonanza

Close Call in Connecticut

More Money, More Problems

Baker’s Battle

Chapter 11 - FAMILY BUSINESS

Money: A Bi-Partisan Goal

Papa’s Got a Brand New Gig

Sowing Carlyle’s Seeds in Korea

A Foreign Policy Flop

Bush of Arabia

Chapter 12 - BIG GUNS

Crusader’s Crusade

Slimming Down

Documenting Carlyle’s Access

Chapter 13 - 9/11/01

An Extraordinary Day

A Chance Meeting

Cashing in on Tragedy

Bin Laden’s Business

A Congresswoman’s Accusations

Beyond Big Guns

Crusader Denouement

EPILOGUE

AFTERWORD

Appendix A - COMPANY CAPSULES

Appendix B - CARLYLE CORRESPONDENCES

Acknowledgments

NOTES

BIBLIOGRAPHY

INDEX

Copyright © 2003 by Dan Briody. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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ISBN 0 - 471-28108 - 5

FOREWORD

At the dawn of the third millennium, while the nation prepared for its second war in the Persian Gulf in little more than 10 years, the same debate raged in this country that has defined it for the last three centuries: What exactly does it mean to be an American? Is America a place or a state of mind?

The British may love their language, and the French may love their gold, but Americans love more than anything to argue over who they really are. And in all that time, and all that arguing—from the dueling essays of Jefferson and Hamilton, to the confused politics of the Reform Party and Pat Buchanan—the American story has ultimately never strayed very far from the plotline that has energized it from the start.

You may devote a lifetime to peeling back the onion skins of the American Experience, as so many scholars have done, and no matter where you stop you will always encounter the same basic question that frames our history: In a democracy, what are the limits to legitimate power?

At its core, that is the question that informs The Iron Triangle: Inside the Secret World of the Carlyle Group—just as it eventually seems to inform our understanding of everything that ever happens in American public life, from the XYZ Affair to the Pentagon Papers. It is why one generation of Americans enacts the Sherman Antitrust Act, and a later generation eviscerates it. At the start of the 1950s, a screenwriter named Ring Lardner, Jr. was imprisoned as a Communist sympathizer; a generation later he was lionized in Hollywood as the screenwriter of M*A*S*H.

Of such moments is the history of this country eventually told, as Americans engage in the ceaseless pursuit of midcourse corrections to get where we want to go as a nation without becoming a tyranny in the process. When Richard Nixon lamented the nation’s seeming obsession with “ wallowing in Watergate,” he missed the key point: As a nation and a people, we really had no other choice.

Now, in the winter of 2003, with America’s wrath having once again struck down Iraq, a palpable sense is abroad in the land—not shared by all, but shared by enough—that we have somehow drawn a line in the sand where we never really intended to stand. How did we get to this moment anyway? In the visible mechanism of political cause and effect, part of what’s happening feels hidden from view. We see the cause, and we see the effect. But the assembly of gears that transmits the power seems off somewhere else, in another room.

It is the work of scholarship—and in particular, of that uniquely American kind of contemporary scholarship that we call investigative journalism—to enter those darkened rooms and switch on the light so that all may see what is actually taking place. When the work is done well, and the message is true, we find ourselves in a diorama we never imaged could exist. One thinks in that regard of Jacob A. Riis’s How the Other Half Lives, or more recently, and on a different stage entirely, Wise and Ross’s Invisible Government. At other times, the exposés connect invisible dots, and in fairly short order are deservedly consigned to the ash bin of history as conspiracy theory. (Want to find yourself standing alone at a cocktail party? Then try suggesting that you have it on good authority that the Trilateral Commission actually runs the world.)

Briody’s scholarship will meet no such fate, for not only are the facts of The Iron Triangle accurate, but the picture they present is also true. And just as Invisible Government in 1964 helped bring depth to our understanding of some of the missing gears that soon drove America into the jungles and highlands of Indochina, so too does The Iron Triangle introduce us to the men (and they are mostly just that) whose role in the geopolitics of the Middle East is now only glimpsed fleetingly, and never by design.

In the foreign policy apparatus of Washington, the Carlyle Group inhabits one of the most darkened rooms of all—hiding in plain sight in offices a mere five minutes’ walk down Pennsylvania Avenue from the White House. Into this room, Briody has wandered uninvited and flipped on the light, to reveal the entire spincycle apparatus of post-public-sector employment that keeps the top men of successive administrations still gainfully employed in the fields they know best (typically aerospace and defense) once the boss has vacated the White House and returned to private life.

In this room, you’l l meet the crude and brashly entertaining original founder of the Carlyle Group, Stephen Norris, a one-time hotel executive for the Marriott Corporation, who figured out how to exploit a late-1980s tax break passed for some Eskimos whose businesses kept failing, and parlayed it into a gimmick for monetizing the value of failure itself, and then marketing it as tax loss carry-forwards.

From this gimmick sprang the Carlyle Group—named by Norris and some chums after an organizing meeting they’d held in New York’s Carlyle Hotel, as if the Group were nothing more than a piece of faux Regency furniture in need of a credential.

In these pages, you’ll meet the relentlessly over-achieving David Rubenstein, now no longer the boy wonder bullet-biter of the Carter White House, where he held the title of Deputy Domestic Policy Assistant at the age of 27, and was said to have eaten three squares a day, for the entire four years, on junk food from White House vending machines.

You’ll also come face-to-face with hatchet-faced Frank Carlucci (“Spooky Frank”), a man with a shadowy past including allegations that he began his career in the CIA with a foiled attempt to assassinate Patr ice Lumumba in the Eisenhower years—something that Spooky Frank denies. You’ll see him rise to deputy director of the CIA late in the Carter years, then “retire” early in the first term of Ronald Reagan’s administration to become head of Sears World Trade—a company with a business that consisted, intriguingly, of neither deals nor revenues. Then, drawn back to Washington by the Great Revolving Door of government, Carlucci took a seat on the National Security Council, once again for Ronald Reagan, then hopped over to Defense, finally spinning back through the door and into the private sector. At the end of Reagan’s second term, he was settling behind his desk at the Carlyle Group.

You’ll meet such figures as George Bush, Sr.’s one-time secretary of state, James Baker, who also joined the team, and even the ex-president himself, now a senior advisor to the Group.

And, for the first time anywhere, you’ll go behind the scenes to see what this group really does as a “business.” How it nails down deals, whose arms get twisted, and why. On the light side, you’ll encounter comic relief figures like Prince Alwaleed bin Talal, who has promoted himself around the world as a top member of the Saudi royal family but has proved to be a spectacularly inept investor, pouring vast sums of Saudi money into dot-com stocks at the top of the boom.

More darkly, you’ll enter the astounding—and until now almost entirely hidden—world of the V innell Corporation, which has been training the Saudi Armed Forces in how to protect their country’s oil fields since the mid-1970s. There are now an almost unbelievable 45,000 private mercenaries working for Vinnell and outfits like it in place in the country. Vinnell was a Carlyle Group subsidiary from 1992 to 1997.

What is one to make of all this? Certainly enough to want to know more, which is why a book such as The Iron Triangle is such an important contribution: It puts the subject in play. A half century ago, Douglas MacArthur, having been summoned back to Washington from Korea by his Commander in Chief, Harry Truman, and relieved of his command over a dispute regarding his conduct of the war, stood before a joint session of Congress and declared, in one of the most memorable moments in American life, that “old soldiers never die, they just fade away . . .” after which he retired to the penthouse suite of the Waldorf Astoria Hotel in New York and was rarely seen in public again. Today, he would more likely have retired to the Carlyle Group, where he’d find a reporter named Dan Br iody dogging his every move.

—CHRISTOPHER BYRON

March 2003

TIME LINE

February 1975—Vinnell Corp., a construction contractor and future Carlyle company, signs a $77 million contract to train the Saudi Arabian National Guard. The news touches off a controversy that would dog Vinnell, and then later Carlyle, to the present day, even after Carlyle sold off Vinnell to TRW in the mid-1990s.

December 1986—Frank Carlucci is named national security advisor to President Ronald Reagan, succeeding John Poindexter, who resigned in disgrace following the Iran-Contra scandal. While waiting to assume his responsibilities as national security advisor, Carlucci is briefly embroiled in an arms scandal of his own, when the Washington Post reports that Sears World Trade was involved in clandestine international arms deals while Carlucci was chairman.

September 1987—After making millions brokering deals that exploited an obscure tax loophole, Stephen Norris and David Rubenstein form the Carlyle Group, named after the posh Carlyle Hotel on New York’s Upper East Side.

November 1987—Frank Carlucci is named secretary of defense by President Ronald Reagan. During his short tenure, Carlucci worked extensively on restructuring the Pentagon’s procurement system, a system he would later exploit as chairman of the Carlyle Group.

July 1988—BDM, soon to be a Carlyle company, is accused by rivals of currying favor with the Navy officer in charge of procurement, Melvyn Paisley, by hiring his wife. Paisley would go on to become the highest profile conviction of Operation Ill Wind, the years-long investigation into corruption at the Pentagon.

September 1988—Fred Malek resigns as chairman of the Republican National Committee after reports that while a Nixon aide, he compiled figures on the number of Jews working in the Bureau of Labor and Statistics. He immediately signs on with Carlyle.

January 1989—Six days after his term as secretary of defense ended, Frank Carlucci joins the Carlyle Group.

July 1989—Marriott Corp. sells its In-Flite Services catering business to Marriott’s upper management. Carlyle invests in the deal, renames the company Caterair, and loses millions when the airline catering business evaporates in the early 1990s.

February 1990—George W. Bush joins Caterair board at the behest of Fred Malek, a good friend of his father’s. Bush would later drop his disastrous experience with Caterair from his resume when he runs for governor of Texas in 1994.

September 1990—Carlyle Group buys BDM Consulting, one of the largest and most successful defense consultancies in the world. Carlyle would use the $130 million purchase to evaluate future buyouts in the defense industry.

January 1991—After months of contentious negotiations, Carlyle snags a board seat at Harsco, a maker of military vehicles. The seat would eventually help Carlyle to obtain Harsco’s defense business, later known as United Defense.

February 1991—Pr ince Alwaleed of Saudi Arabia buys $590 million of stock in Citicorp, Amer ica’s largest bank. Carlyle brokers the deal and gains a reputation as the merchant bank of choice for wealthy Saudis.

March 1992—BDM, a Carlyle company, buys Vinnell, a privatized military training company that does extensive work with the Saudi Arabian National Guard.

August 1992—Carlyle wins a year-long struggle over control of LT V Corp.’s defense and aerospace division, paying $475 million in conjunction with Loral Corp. and Northrop Corp. The deal instantly legitimizes Carlyle as a serious player in defense buyouts.

September 1992—George Soros, a future Carlyle investor, brings the British economy to its knees by speculating on the demise of the British pound. When the value of the pound cratered on Black Wednesday, September 16, 1992, Soros pocketed a cool billion.

February 1993—A month after the Bush administration cleans out its desks at the White House, Richard Darman, the outgoing director of the Office of Management and Budget, joins the Carlyle Group in a package deal with James Baker III.

March 1993—After spending 12 straight years in the White House in various capacities under Reagan and Bush, James Baker III takes his considerable talents to the Carlyle Group, lending the firm instant international recognition and credibility.

September 1993—Carlyle snags its highest profile investor to date when George Soros invests $100 million in Carlyle Partners II, a fund that would go on to become the biggest and most successful of all Carlyle’s funds.

December 1994—A Washington Post article exposes a secret arms deal conducted by BDM, a Carlyle company. In the deal, BDM used the same arms broker from the Iran-Contra scandal to arrange the transfer of Russian military equipment to the United States.

January 1995—Co-founder Stephen Norris is forced out of the company, accused by his colleagues of erratic behavior and fiscal irresponsibility. Norris faults his former colleagues for waging a smear campaign against him, spreading rumors and undermining his credibility to the financial community.

March 1995—University of Texas Investment Management Company, UTIMCO, weeks after George W. Bush became governor of Texas, places a $10 million investment into the Carlyle Group, which up until 1994, employed the young Bush.

September 1995—Onex Food Services buys Caterair from Carlyle for $500 million, nearly $150 million less than Carlyle had originally paid for the company.

November 1995—A car bomb attack on Americans living in Saudi Arabia puts a spotlight on Vinnell, BDM, and the presence of the Carlyle Group in Saudi Arabia. Three spouses of BDM workers are injured in the attack.

September 1996—Carlyle closes Carlyle Partners II at a total of $1.33 billion, more than twice its original target for the fund, and 13 times as much as the company had ever raised for a single fund. The defense-oriented fund would go on to produce returns of better than 35 percent.

September 1997—Carlyle buys United Defense for $850 million, one of the company’s largest buyouts ever. United Defense has plans to build the Army a 60-ton mobile howitzer called Crusader.

March 1998—John Major, former prime minister of the United Kingdom, joins Carlyle as European advisor. He would later become chairman of Carlyle Europe in May 2001.

April 1998—Carlyle closes another $1.1 billion fund, called Carlyle European Capital Partners, at double its initial target. The company was able to raise the money in just under a year.

May 1999—Former President George Herbert Walker Bush visits South Korea on behalf of Carlyle, cultivating business and political ties that result in Carlyle’s investing more than $1 billion in South Korea’s struggling economy.

July 1999—Former Connecticut State Treasurer Paul Silvester is forced to resign his new position at Park Strategies after the FBI begins an investigation into a series of investments he made with Connecticut State Pension funds before he left office. Among the investments is a $50 million placement with Carlyle Asia.

September 1999—Silvester pleads guilty to corruption. Court documents are sealed, and the identities of the private equity firms involved are kept secret by the state, awaiting Silvester’s sentencing, which is ongoing.

January 2001—SBC Communications, a Carlyle client, wins FCC approval to offer long-distance phone service in Texas, Oklahoma, and Kansas, after the Justice Department had rejected the company’s request. The approval is given on the last day of FCC Chairman William Kennard’s tenure. Three months later, Kennard is given a job at Carlyle.

February 2001—George W. Bush, a month into his presidency, reverses America’s policy of diplomacy toward North Korea, angering North and South Koreans alike, and threatening Carlyle’s extensive investments in the region.

June 2001—Former President George H. W. Bush urges his son to reconsider his stance on North Korea, reminding him, among other things, of the U.S. business interests in the Korean peninsula. George W. Bush subsequently reverses his policy toward North Korea.

July 2001—Former President George H. W. Bush personally calls Crown Prince Abdullah of Saudi Arabia, reassuring the heir to Saudi Arabia that his son is “going to do the right thing” and “his heart is in the right place.” The call is in response to George W. Bush upsetting the Saudi prince with his policy toward the Israeli-Palestinian conflict. It also helps protect Carlyle’s extensive business in the region.

September 11, 2001—America sustains a highly organized attack by terrorists, leveling the World Trade Center towers, and ripping a gash in the Pentagon building. The attacks would lead to a massive increase in defense spending. A week after the attacks, Anthraxlaced letters are found throughout the East Coast, leading to heightened fears, and unexpected new contracts for Carlyle companies.

October 2001—Carlyle is forced to liquidate its holdings from the bin Laden family as news reports of the company’s association with terrorist Osama bin Laden’s estranged family overwhelm the press.

December 2001—Carlyle takes United Defense public after newly approved defense spending temporarily secures the Crusader’s future. The company earns $237 million in one day on the sale of shares, and on paper made more than $800 million.

April 2002—Cynthia McKinney, a Democratic congresswoman from Georgia calls for an investigation into the September 11 attacks, pointing out the President’s extensive ties with the Carlyle Group, a company that stands to make millions from the aftermath of September 11.

May 2002—The Army is forced to investigate whether its own officials illegally lobbied Congress in support of the Crusader in the face of the program’s cancellation.

August 2002—United Defense issues an official press release announcing the cancellation of the Crusader program. The same press release announces the awarding of a new contract for United Defense to build another gun for the Army, effectively replacing Crusader.

November 2002—Lou Gerstner, the man who engineered IBM’s stunning turnaround during the 1990s, is hired as Carlyle’s chairman. The move is characterized by many in the media to change Carlyle’s image from a defense oriented buyout firm to a more traditional private equity company. Frank Carlucci stays on as Chairman Emeritus.

CAST OF CHARACTERS

(in Order of Appearance)

Stephen Norris—co -founder Carlyle Group.