Morality & Ethics
A case study of the Carlyle Group
By Lester Michaels
The Carlyle Group was the brainchild of two virtually unknown
businessmen, established in 1987 by David Rubenstein, a Washington
lawyer and former policy assistant to Jimmy Carter, and Stephan
Norris, a former executive for the Marriott Hotels Group. The
two men were able to find a tax loophole that saved Marriott a
considerable amount of money, and the Carlyle Group was born.
Since then the Carlyle Group has evolved into the world's largest
private equity firm with 18 billion dollars under management,
and having large stakes in an extensive list of the world's most
exclusive big money industries, including real estate, aerospace
and defense contracting, telecom and media, energy and power,
automotive and trans, tech and business Svs, and various other
industries. So how did this small investment firm come to be such
a force in so many sectors of the marketplace? It did not happen
right away, at first the company was far from successful, with
a series of business failures marked by backing a management led
buyout of Caterair and appointing George W. Bush to the board
of directors. Norris, who presided over the deal left the company
soon there after, and Dubya soon followed as well.
The company experienced a rebirth when it appointed Frank Carlucci
(former Secretary of Defense, and deputy director of the CIA)
to the board. Frank Carlucci came to the company bringing his
rolodex of big time government contacts and connections. The move
to hire Carlucci proved to be the right move for the company,
which was looking to get into weapons and defense.
The Carlyle Group led by Carlucci bought out BDM, a defense contracting
giant with a vast network of connections thanks to CEO Earle Williams,
a long time defense industry man who was friends with Carlucci
through their previous dealings when Carlucci was secretary of
defense. Carlyle made a killing, defense contracts were being
slashed as the cold war ended and cheap buyout opportunities were
One of the companies Carlyle had its eye on was Vinnell. A little
known company that started out building airstrips, but by the
1970s was training Saudi Soldiers to protect oil fields. Vinnell
was one of the few companies that did not vacate the Middle East
during the first Gulf war, and by the time Carlyle managed to
acquire it in 1992, Vinnell had built the Saudi National Guard
from 26,000 troops to 70,000 troops. It is said the reason Osama
Bin Laden turned against the US is because after spending a decade
fighting the Russian occupation of Afghanistan, he came home only
to find the US erecting military bases on his soil and US companies
training his country's army.
Perhaps the most notable acquisition in Carlyle's short yet
"explosive" rise to prominence was the purchase of United
Defense in 1997. United Defense had developed a 40 ton howitzer
called the Crusader, which despite strong opposition from the
Army, was commissioned by the Pentagon at a whopping 665 million
dollars. Even though just months later the Crusader project was
scrapped (not before going public, enticing prospective investors,
and raking in 224 million dollars the day Carlyle floated it on
the market), United Defense was given a new contract to build
a lighter weapon.
Around the same time, information leaked about the Bin Laden
family having a large stake in the Carlyle fund that owned United
Defense. Carlyle experienced severe backlash. They went as far
as to hire an outside PR firm for damage control, but the company
was taking flack on all fronts for its business association with
the Bin Ladens. In a courageous move, Democratic Representative
Cynthia Mckinney cited the Carlyle Group as a prime example of
an organization "close to this administration poised to make
huge profits off America's new war." Soon after, the Bin
Ladens sold their shares in the company. A spokesperson for Carlyle
said that their investment was 'only' around 2 million dollars,
though there is some speculation that they had much more invested
in the company in the past.
On a side note: Cynthia McKinney was consequently rubbed out
by forces in the republican party who are connected to the Carlyle
Group. A republican woman posing as a democrat was sent into her
district to run against her in the primary, and 47,000 registered
republicans were urged to re-register as democrats and vote for
the republican impostor (who conveniently is also a black woman)
and against McKinney. Cynthia McKinney was maliciously supplanted
for her outspoken opposition to the Carlyle Group and its too
close for comfort ties to the Bush administration.
After 9/11 came fear of anthrax attacks. One company who benefited
was the Pittsburgh based IT Group, which conveniently won a number
of contracts to clean up anthrax infected buildings, including
the Hart Senate office building. Carlyle owns 25% of this company
which they subsequently sold off at huge profit. Interestingly
enough, Carlyle owned a company called US Investigation Services,
a company that specializes in checking the back round of employees.
Immediately after the Patriot Act was past in the Senate and the
House, US Investigative Services' stocks rose dramatically.
Other Carlyle companies who have benefited from the 9/11 attacks
that have prompted 2 wars are: EC&G, which makes x-ray scanners.
Composite Structures, a maker of metal bond structures in fighter
jets and missiles, Lier Siegler Services Inc, a major military
contractor that provides logistics support, and CSX Lines, an
ocean currier that specializes in shipping heavy equipment, which
was bought by Carlyle only a month before the invasion of Iraq.
Carlyle currently has some of the most high profile and elite
political figures on their payroll: George Bush Sr (former president
and vice president, ex CIA director). James Baker III (former
secretary of state and secretary of the treasury), Frank Carlucci
(former secretary of defense and deputy director of the CIA),
John Major (former British prime minister), Richard Darman (former
white house budget advisor under both Clinton and bush). From
Saudi royals to Asian dictators, it is very difficult to know
who is on their payroll at any given time. A lot of these shadowy
figures are never officially hired and paid in very ambiguous
ways, perhaps off investments made for them through the Carlyle
Group, perhaps on the money they raise, nobody really knows. This
is the gray area that makes the Carlyle Group the most secretive
companies in the world.
Carlyle publicly denies that they have benefited from the September
11th attacks and the subsequent invasions of Afghanistan and Iraq.
Co-Founder William Conway went on record as saying "Nobody
wants to a beneficiary of 9/11." Yet despite Conway's denial,
the Carlyle Group has reaped tremendous benefits from "the
war on terror." There is no disputing this fact.
To say that the Carlyle Group is unethical would be the understatement
of the century. The Carlyle group is a collection of Washington
insiders and ex high-level government officials, who use their
contacts, connections, and knowledge of government as a means
to further their own personal political and economic agendas.
One can only imagine the path one must take to reach the pinnacle
Their scam works like this: The Carlyle group is nothing but
a revolving door for top level government officials, they rotate
in and out of public office, setting or influencing policies while
they're in office and then exploiting those policies once they've
left and have gone back to Carlyle.
This is a precedent setting conflict of interest. The Carlyle
group currently has no official code of ethics. Instead, they
have a mission statement: "Our mission is to be the premier
global private equity firm, leveraging the insight of Carlyle's
team of investment professionals to generate extraordinary returns
across a range of investment choices, while maintaining our good
name and the good name of our investors."
The Carlyle Group has blurred the lines of ethical behavior
to the point of obliteration. The collusion between Carlyle and
the government is a staggering violation of ethics and morality
in business, in government, and in life. From the sale of out
of date cold war hardware, to the manufacturing of hi-tech weapons
that they know will not work, to angering fundamentalists in the
Middle East who have now taken blood oaths to destroy the Western
World. These are intentionally fraudulent and dangerous business
and political practices that have not only cost the American taxpayers
hundreds of billions of dollars, but it also has cost the lives
of many innocent people.
It would appear that from their "mission statement"
that they are an honest ethical company. That could not be further
from the truth. They are the masters of extortion and manipulation.
Carlyle is in desperate need of an official code of ethics.
A good place to start would be not allowing any former government
officials to get a job in an industry that they had a hand in
regulating. This is the underlying theme of the Carlyle Group.
At the core, this is how they are able to get away with their
shady dealings and ambiguous business associations.
Another example of the Carlyle Group's total disregard for ethics
and morality is Sequoia Systems, Inc. Sequoia is a major manufacturer
of the new touch-screen-voting-machines that have been stirring
controversy in the United States. Opponents claim that the American
election process has been sold off to private companies like Sequoia
Systems, which is yet another subsidiary of the Carlyle Group.
How ethical is it to have the father of the President of the
United States spearheading a company that owns another company
that manufactures machines that count votes? To any objective
person this would appear like another gross conflict of interest.
The Carlyle Group has seemingly taken corruption to the next
level. They are the inevitable manifestation of the marriage of
big business, the military industrial complex, and politics. A
hybrid entity controlled by the few, the rich, the elite. I'd
like to officially refer to this as "polynomics." This
new breed of company operates in total autonomy. It is immune
to responsibility, and immune to prosecution. Before we had companies
that did horrible things for profit, and continue to do horrible
things for profit, but none of them had the influence and backing
that Carlyle currently has. For how can they ever be held accountable
for their brazen indiscretions when they both make and break the
Is Carlyle ethical towards its competitors? Well, nobody can really
answer this question because Carlyle has no competition. They
are a global monopoly, an unrivaled power in the global economy.
This in and of itself is highly unethical.
Does Carlyle defraud the government/public? This is an interesting
question because for all intents and purposes, Carlyle is a quasi
government agency, a private firm that drifts dangerously deep into
politics, and because Carlyle is comprised of ex top level government
officials, they are able to defraud the public in a way that breaks
with any responses