CalPERS, Carlyle profit from Afghan war
San Francisco Chronicle
BY David Lazarus
Sunday, December 2, 2001
As America's military involvement abroad deepens,
profits are increasing for the Carlyle Group -- and,
it turns out, for thousands of California civil
servants.
The Carlyle who, you ask?
The Carlyle Group, as in a secretive Washington,
D.C., investment firm managing some $14 billion in
assets, including stakes in a number of defense-
related companies.
Carlyle counts among its chieftains former Defense
Secretary (and deputy CIA Director) Frank
Carlucci, former Secretary of State James Baker
and, most notably, former President George Bush.
Until October, the Carlyle Group also maintained
financial ties with none other than the family of
Osama bin Laden, but those links were severed
when it was agreed that the relationship was
becoming a tad embarrassing for all concerned.
What is not well known is that Carlyle's profits also
benefit the 1.2 million members of the California
Public Employees Retirement System, or CalPERS,
the largest public pension fund in the United States.
CalPERS has about $730 million invested in Carlyle
itself and in various Carlyle funds. It owns 5.5
percent of the Carlyle Group in a minority equity
stake and has an option to double that holding
during the next two years.
"We're not too keen on discussing anything related
to the political nature of the people at Carlyle," said
Pat Macht, a spokeswoman for the fund. But she
noted that "Carlyle is among the top five largest
private equity partners of CalPERS."
Senior Carlyle officials are scheduled to brief
CalPERS' investment committee later this month in
Sacramento on the performance of the company's
assets.
The Carlyle Group has cultivated and enjoyed a
decidedly low profile for the past 14 years. Yet it
has succeeded in attracting to its ranks not just a
who's who of Republican bigwigs but also a
dazzling array of international politicos.
John Major, the former British prime minister, is a
Carlyle adviser, as are former Philippine President
Fidel Ramos and former Thai Premier Anand
Panyarachun. So is a former president of Germany's
Bundesbank and a former head of the U.S.
Securities and Exchange Commission.
Connected? That's an understatement where
Carlyle is concerned.
And because the Carlyle Group remains privately
held, it is not required to disclose details of its
investments or business activities. It is commonly
known, though, that the firm favors the defense and
aerospace sectors, with a wide array of investments
in Pentagon affiliates.
"Their defense holdings are quite extensive," said
Tom Fitton, president of Judicial Watch, a
Washington public interest law firm. "Because of
their investments, they are a major contractor for
the Pentagon."
Among Carlyle's holdings is United Defense
Industries, a maker of armed vehicles and weapons,
which filed in October to raise up to $300 million in
an initial public offering of its shares.
Judicial Watch filed suit last week to obtain
documents shedding light on Carlyle business
activities undertaken by President Bush's father,
who reportedly met with bin Laden's family in Saudi
Arabia at least twice prior to the Sept. 11 attacks.
He also has had dealings with a variety of foreign
governments.
"The appearance is awful," Fitton said. "For the
father of our current president to be doing business
with foreign governments, there is a clear conflict of
interest."
Carlyle spokesman Chris Ullman said the elder
Bush does little more than give speeches on
Carlyle's behalf when abroad and does not call up
his son to lobby for Carlyle's business interests.
Ullman also said there is nothing improper about the
Carlyle Group's phenomenal political connections
throughout the world.
"These are all former government officials who have
chosen to team with us in various capacities," he
said. "I stress the fact that they are former
government officials."
Critics of the Carlyle Group have grown
increasingly vocal in recent weeks, particularly over
the perception that a private organization with
unmistakable links to the White House is benefiting
from America's military action in Afghanistan.
Because the Carlyle Group is partly owned by
CalPERS, the company's fortunes are shared not
just by the political elite -- is there really such a thing
as a former politician? -- but also by hundreds of
thousands of California bureaucrats and school
officials.
CalPERS' investment in Carlyle has steadily earned
between 20 and 30 percent per year in returns --
not too shabby considering the recent performance
of publicly listed companies.
On the other hand, CalPERS is watching closely
now that the Carlyle Group has quietly become a
player in Bay Area real estate circles -- a move that
could cost the company a bundle following the
implosion of commercial property values.
In San Francisco, Carlyle bought and subsequently
sold a 25-story office tower at 180 Montgomery
St. The company also bought and rapidly discarded
office space in Pleasanton and Redwood City, and
recently acquired additional office space in
Sunnyvale, San Jose, Brisbane and Mountain View.
"We've been pretty busy," Ullman said of Carlyle's
Bay Area real estate deals.
As for CalPERS, he said the Carlyle Group values
its relationship with its California co-owners.
"Their participation is very important to us," Ullman
said. "They're an important part of our team. We're
going to do our best to make sure their money is
invested wisely."
And in light of current events, CalPERS has every
reason to expect the returns to be enormous.
· Email this article to a friend
sfgate.com
©2001 San Francisco Chronicle Page G - 1 |
