BUZZFLASH: If we were looking at the Carlyle Group -- aside from
its controversial nature and the political world of who runs it
and the consultants affiliated with it -- what business model
does it represent?
BRIODY: It’s what’s known as a private equity firm. And that’s a
very vague term to describe a whole umbrella of different types
of companies. What Carlyle specializes in is buyouts, which
means that they operate very similar to a mutual fund. Only
instead of buying and selling stock, they buy and sell private
companies. And they also do venture capital and real estate.
So
they’re in a variety of different kind of financial
transactions-based businesses. But their bread and butter is
buyouts. And within that area, they focus heavily on
government-regulated industries – anything that depends very
heavily on policymaking and legislation coming out of
Washington, D.C. As such, they hire a number of ex-politicians
to help them in that regard.
BUZZFLASH: In terms of companies that they buy out, most notably
in terms of their political-business crossover, they’re probably
most known for their relationship to the defense industry, even
though that’s not by any means exclusively what they do.
BRIODY: They got their start in the defense buyout business.
They struggled for the first couple of years before they hired
Frank Carlucci, who was the outgoing Secretary of Defense from
the Reagan administration. And Carlucci brought them in the
direction of defense buyouts in the late ‘80s, early ‘90s, in
between the Cold War and the Gulf War, when defense properties
were undervalued. And the company struck gold a couple times in
that business and was able to build a very healthy buyout
practice on the back of these defense LBOs, or leveraged
buyouts.
From there, they have diversified over the ensuing 10-12 years,
into everything from healthcare to telecommunications, to
aerospace and others. But defense is still the cornerstone of
their practice. And when people think of the Carlyle Group, the
first thing they think of is defense.
BUZZFLASH: On the cover jacket of your book, it says that the
book will provide witness to how the Carlyle Group profited from
the Sept. 11 terrorist attacks and continues to profit from the
ongoing war on terrorism. What evidence do you provide for that?
BRIODY: There are a number of transactions that the company
profited from directly following the Sept. 11 attacks. The most
important one was the fact that they were able to take United
Defense, their crown jewel of defense holdings public shortly
after the attacks. In fact, in the prospectus that they
circulated, before that IPO (Initial Public Offering), they cited
the Sept. 11 attacks as
one of the reasons why they were able to sell public stock in
this company at this time. So that was all on the back of the
defense build-up following Sept. 11.
There are also a number of other holdings of theirs -- like at
that time, they owned a company called the IT Group, which is a
company that cleans up hazardous materials and won a very
lucrative contract to clean up the Hart Senate Building in
Washington, D.C., which had been tainted by anthrax.
They also own a company called U.S. Investigative Services,
USIS,
which is a company that does background checks and provides
varying levels of security clearance for different government
employees, airline employees – things like that. Obviously their
contracts went through the roof after Sept. 11.
In addition to that, they own companies that do all kinds of
security, different aerospace companies. So whenever there’s a
big defense buildup, those companies profit. So there are a
number of ways that they’ve profited very handsomely from Sept.
11.
BUZZFLASH: I recall that reading in the British papers that
Tony
Blair was considering privatizing a portion of the intelligence
apparatus in Britain, and that the Carlyle Group was going to be
subcontracted to do some of that.
BRIODY: He did, in fact. The new company is called
Qinetiq.
It’s spelled Q-I-N-E-T-I-Q. It’s the research arm of the
ministry of defense in the U.K., which is essentially equivalent
to DARPA [the Defense Advanced Research Projects Agency] here in
the U.S. And the Carlyle Group was part of that transaction, so
they own part of Qinetiq. It was a very controversial
transaction in the U.K., obviously. I mean, if you could try to
imagine a foreign company coming in and buying DARPA from the
United States. It’s unimaginable. And particularly a company
that’s so stockpiled with very powerful former politicians.
BUZZFLASH: So Tony Blair essentially condoned the privatization
of a large section of the British defense intelligence apparatus
to the Carlyle Group. It would be comparable for us to
subcontract that to a foreign company.
BRIODY: Yes, which I don’t think would ever happen.
BUZZFLASH: You mentioned in another interview that we heard – I
believe it was on NPR, Terry Gross – that your book doesn’t
detail illegal activity of the Carlyle Group. And whether that
exists or not, you don’t know. But it details the legal
activity, which is, to you, probably the more worrisome issue –
that all of this is legal. By that, do you mean the seamless
relationship between the private military sector and the
governmental military sector?
BRIODY: That’s exactly what I mean.
The book opens up with a
mention of
Dwight Eisenhower’s farewell speech, in which he
warned the country against the formation of this
military-industrial complex. And I think that that is exactly
what we’re seeing today. We’re seeing a very tight-knit group of
companies and private military contractors that are virtually
indistinguishable from various administrations and the political
infrastructure of Washington, D.C. – so much so that it’s not
clear whose interests we’re acting on when we go to war.
BUZZFLASH: And now we see the extension in the case of Britain,
to the British defense intelligence industry.
BRIODY: Right. And we’re also seeing Carlyle expand into Italy.
They just bought part of Fiat’s aerospace division, which was a
state-controlled Italian military agency. And they are also in
the running to buy out DaimlerChrysler’s aerospace division in
Germany. So we’re seeing a real broadening of the military
activity around the Carlyle Group, so much so that’s becoming
more than just a domestic concern here – it’s becoming an
international concern.
BUZZFLASH: Now Carlyle is – correct me if I’m wrong – a holding
company. Is it publicly traded?
BRIODY: It is not publicly traded.
BUZZFLASH: So it’s a limited partnership?
BRIODY: Yes. It’s a limited partnership. And as such, it’s under
no obligation to release any of its financial data. So it’s very
difficult for the average citizen to find out what the holdings
of this company are and where the conflicts of interest might
be. You may have noticed that
they "opened up" their website
recently because they were receiving a lot of criticism for
being secretive and closed up. But they’re still controlling
what information they’re putting on that website, so it’s not
like we’re getting a look under the hood, so to speak, of this
company. And they’ll never go public. They would never do that.
BUZZFLASH: Now probably the most controversial relationship is
the relationship of former President Bush to the company. As you
point out, so many of the members of the cast of characters in
the Carlyle Group have been associated with past
administrations, particularly Reagan and Bush’s. Former
President Bush has probably the highest profile relationship.
What is his relationship to the Carlyle Group, and what has he
been used for?
BRIODY: George Bush Sr. is a senior advisor to the company --
again, an ambiguous term -- but essentially his role is to
travel abroad and meet with foreign business leaders and foreign
heads of state, give speeches on behalf of the Carlyle Group,
and pack the house full of wealthy investors who will contribute
to Carlyle’s buyout fund. And also he has had his hand in a
number of deals for Carlyle. He has worked closely with business
leaders in South Korea and in Saudi Arabia. He’s very close with
the bin Laden family. He’s close with the royal family in Saudi
Arabia. So he’s been very, very involved and a very effective
business partner for the Carlyle Group for a number of years
now.
BUZZFLASH: Is there cause to be concerned? Some people who cover
Carlyle also mention that one shouldn’t solely focus on him,
because he sort of jumps in and out. It’s more the day-to-day
people who cross back and forth between their relationships with
government officials and the private industry – the
military-industrial complex, if you will, as Eisenhower called
it. But former President Bush is the most visible symbol. Do you
have any speculation on how that might impact foreign policy,
since he’s the father of the current president?
BRIODY: There have been numerous reports that have been widely
circulated, and not disputed, by the New York Times, Wall Street
Journal, of how the father of the president is advising his son
on foreign policy. Certainly in the first year, he was very
active in advising his son on policy toward Korea and toward
Saudi Arabia.
And in both cases, he stepped in and placed phone
calls himself to the leaders of those nations to try to smooth
things over for his son, who was struggling a little bit in the
early going, in dealing with some of those more sensitive areas.
So I think that the impact of the father on the son in foreign
policy has been very significant and very inappropriate, given
the investments of George Bush Sr.’s company in both regions –
in both the Korean peninsula and in Saudi Arabia.
BUZZFLASH: On pages 144 to 146, you discuss a little bit of the
relationship between Carlyle and the bin Laden family. Can you
just mention that in passing, and what that relationship was and
perhaps is now?
BRIODY: The Carlyle Group started working in Saudi Arabia in the
early ‘90s through a Saudi prince, who is one of the biggest
foreign investors here in the United States. And through that
relationship, they started expanding their business in Saudi
Arabia very significantly. One of the most important investors
that they found in the kingdom was the bin Laden family, which,
of course, owns the Saudi Binladin Group. It's about a $5
billion construction company -- extremely wealthy family,
extremely successful company, and who officially disavowed Osama
bin Laden back in the early ‘90s.
So they had been doing business with the bin Laden family for,
give or take, five or six years, when Sept. 11 happened. And
suddenly, Osama bin Laden became public enemy number one. He was
on the cover of all the newspapers. And it came to light that
this company that was employing George Bush Sr. counted the bin
Laden family among their investors. And they had to divest
themselves from that relationship because of the criticism.
BUZZFLASH: And although you don’t mention it, there are those,
including author Greg Palast, who have claimed that the Bush
administration ferreted out members of the bin Laden family on
special planes after Sept. 11. But again, that’s not a part of
what’s in your book, but we’re just pointing that out.
Let’s look at United Defense as one example of the relationship
between the private industry, the defense industry, and, in this
case, it’s a publicly held company owned by the privately held
Carlyle Group. Is that correct?
BRIODY: That’s right. And they own 50% of it.
BUZZFLASH: And what is United Defense? Maybe you can give us as
a case study of the interrelationship between a company that has
an umbilical cord to the U.S. government, about how a company
like that is never a loser.
BRIODY: United Defense is a classic military contractor. They
make guns and gun systems, large Howitzer-type, mobile
Howitzers. They make the Bradley fighting vehicles and the
Paladin gun systems that we’ve seen a lot of on TV, especially
during the Iraqi war. They are one of the largest defense
contractors to the Army in the nation. And the Carlyle Group has
owned this company since 1997.
When they bought the company, there was a gun program that was
the future of United Defense. It was a gun called the Crusader.
It was essentially a next-generation Paladin gun system – a very
large, mobile Howitzer. It looks like tank, but it’s essentially
an enormous gun. And the Crusader was heavily criticized by a
national defense panel that was put together to assess the
military requirements going forward. It was called too heavy,
too slow – a Cold War relic. And it was on the chopping block
for years after that.
But the Carlyle Group was able to mount a
very successful campaign by using strategically placed
lobbyists, by extending their personal relationships with folks
in the Pentagon and in Washington, and by waging essentially a
public relations campaign for the gun, and they kept it alive
through successive rounds of defense budget cuts – miraculously.
No one could believe that this gun had survived as long as it
did. And then finally after Sept. 11, when all ships were sort
of, you know, rising on the tide of defense spending, they were
able to take United Defense public, make hundreds of millions of
dollars off of that IPO, only to then finally have the Crusader
program cancelled in a very public fashion by Donald Rumsfeld in
an announcement. But of course, behind the scenes, what the
public didn’t see was that United Defense was awarded a
brand-new contract for a brand-new gun that very same day that
the Crusader program was cancelled. In fact, the press release
that United Defense put out about it had the announcement of the
new contract in it as well.
BUZZFLASH: So they were essentially held harmless.
BRIODY: Yes, exactly.
BUZZFLASH: Perhaps this is more of a comment, but we found it
not-so-curious that after the controversial visit of Bush to the
U.S.S. Abraham in the flight suit, that he returned to
California from 30 miles offshore and gave a speech at, of all
places, the United Defense plant. Do you have any thoughts there
about the fact the President of the United States is speaking at
a plant that is 50% owned by a company that his father is a
consultant with?
BRIODY: I think it’s brazen, and I think it’s shameless. And I
think that that will go down as a hallmark of this
administration. We have seen an absolute affinity for mixing
business and politics, and throw in a war and you’ve got the
Bush administration. And that scene of him giving that speech at
United Defense’s plant in Santa Clara summed up perfectly what
this administration is all about.
BUZZFLASH: So all the interconnections were right there -- he
was boosting the war effort, talking about keeping the country
secure, which meant, in this case, he was praising the employees
of United Defense, who, in essence, are employees, in part, of
the Carlyle Group, with which his father is affiliated.
BRIODY: He was doing it all. He was pitching a tax cut for the
very wealthy while doing an advertisement for his father’s
company, and professing the war to be over, and kicking off his
reelection campaign, all in one fell swoop. It was an amazing
achievement.
BUZZFLASH: And yet for all these connections, I did not see any
of them in the press. I only made them because of your book, and
knowing about the Carlyle Group, and just going back and
confirming that United Defense was, in essence, a company that
the Carlyle Group had ownership of.
BRIODY: It was missed by most of the mainstream media, and that
was very disappointing. But The Nation picked up on it, thank
God.
BUZZFLASH: Going in another direction, you detail how the firm,
when it was opened in 1987, picked the name, “the Carlyle
Group.”
BRIODY: Well, the co-founders, David Rubenstein and
Stephen
Norris, were, at the time, meeting frequently at this hotel on
the Upper East Side of New York called the Carlyle Hotel. And
the Carlyle was very, very, very opulent and it’s a very swanky
establishment. It’s a beautiful hotel. And these guys were
looking for a name that gave them a sense of legitimacy and
credibility in the industry.
They wanted something that was a
little blue-blood, or, as Steve Norris put it, gave them a
silk-stocking air. And so they thought that the Carlyle Group
was the right way to go. And certainly it does have that
blue-blood, old money kind of feel to it, even though it’s only
15 years old.
BUZZFLASH: Your book about the Carlyle Group, subtitled Inside
the Secret World of Carlyle Group, is called
The Iron Triangle.
Why did you choose that title?
BRIODY: Well, “the iron triangle” is the euphemism that is
employed in a number of different areas. But among the areas
that it’s employed is this confluence of business and politics
that Eisenhower was talking about when he referred to the
military-industrial complex. This is a combination of power and
influence that is very dangerous and can result in foreign
policy decisions that are based solely on monetary concerns of
very few people. And that’s what I think we’ve found here today.
BUZZFLASH: Recently we’ve read that the Carlyle Group is
starting to dabble into media acquisition. Is that right? And if
so, should we be worried about that?
BRIODY: Yes, they have picked up a couple media companies. They,
for a while now, have owned a very popular publication called Le
Figaro in France, and they have been expanding their media
acquisitions. And I definitely think this is something that we
should be concerned about. I mean, anytime you see a company
that has this much political clout -- and obviously has a
political agenda -- picking up media properties, you’ve got to
be concerned, especially with the action that the FCC has taken
so far this year.
We’re looking at the potential for having a
real controlling influence in the media. And I personally would
not like to see Carlyle Group controlling the information that I
receive on a daily basis.
