"Briody: The Carlyle Group [Investments] is a private equity firm, which essentially means that they invest in private companies - they take money from private investors and then invest that money into private companies. They essentially work like a mutual fund would, only instead of buying and selling stocks, they buy and sell companies. So they have different funds and among those funds are industries that are heavily government regulated. So health care, telecommunications and two of the biggies are defense and aerospace. Those are the industries that Carlyle [Fund(s)] got their start on back in the early 90s. It is what they have built their practice on.I think that is as concise an answer as I've ever heard.
The way that Carlyle [mgnt] is able to succeed at investing in these heavily government regulated industries is they hire ex-politicians - George H. W. Bush, John Major, Frank Carlucci, former secretary of defense under Reagan, James Baker III. These are guys that have access to former heads of state, foreign business leaders, and they enable Carlyle [Geography] to really get its tentacles out all over the world and do some very serious investing with heavy-hitter investors from all around the world. And it also gains them access to investment opportunities.
After 9/11, Carlyle was set up in a number of defense properties. They owned a company called United Defense - this was probably the biggest boon after 9/11 that Carlyle experienced. United Defense [Products] was a company that makes the Bradley fighting vehicles, the Crusader gun system - these are things we have seen on TV a lot since the Iraq war started, and United Defense [Capabilities]was able to go public months after September 11 because of the huge increase in defense spending. Carlyle made $270 million on one day in that IPO and then went on to make close to a billion dollars on paper from that transaction over time as the stock price continued to go up. This was an enormous investment for them and it was a huge win.
Their other aerospace companies, their other defense properties, their security companies, their biological cleanup companies - all of them scored major contracts after September 11, which improved the fund - the defense and aerospace funds invested in, which are billion dollar funds - $1-2 billion funds - huge private equity funds. The list of benefits is long, but we will never know exactly how much Carlyle made from 9/11 because they are not under any obligation to disclose that information.
They are never going to tell."
Briody: I think the most disconcerting thing about George H. W. Bush working for this company is that Bush Sr. was the head of the CIA for a long time and as such he continues to have access to CIA briefings as do all ex-presidents actually, but very few of them take advantage of this right. Bush Sr. continues to get briefings from the CIA. Now you can imagine what kind of an advantage that could be for a company that does international business especially in the areas of defense and aerospace, but even in telecommunications, health care and other types of international business. It's a huge advantage - an unfair advantage really and certainly some of the other big private equity firms aren't allowed access to this type of information and nor should they be. It kind of creates an un-level playing field when you look at it in that respect. Did Bush Sr. actually use this information to trade on or to benefit the Carlyle Group? Nobody knows and until he starts talking about this issue, we will never know.And, a question: Just how much will Baby Bush and the girls inherit, especially if Papa Bush passes during the current 'death tax' hiatus?