- [David Rubenstein, co-founder and Managing Director of
The Carlyle Group, the "world's largest private equity firm,"
recently recounted his first meeting the current president and Bush's days
on the Carlyle board in a speech to the Los Angeles County Employees Retirement
Association. LACERA has invested $95 million in Carlyle, now the 11th largest
defense contractor in America as majority shareholder in United Defense.
For ethical reasons, many in the association would like to see LACERA funds
pulled and invested elsewhere.
-
- In the speech Rubenstein also touched on company ethics
- under intense scrutiny since 9/11 - including widely reported stories
about Carlyle operating as a shadow government. He assured investors that
"making money is nice" but Carlyle is "first and foremost"
concerned with ethics.]
-
- DAVID RUBENSTEIN - We have an enormous amount of our
own personal capital - about 90% of our net worth is tied up in these funds.
My partners and I and all the other professionals have committed $700 million
to our various funds throughout the world so we've got a lot of money committed
to this and it's important to get it back. But it's more important that
we not do anything that impairs the reputation of ourselves or our investors.
So making money is nice but we're more worried about our reputation and
concerned with ethics and that's first and foremost.
-
- [He had this to say about George W. Bush]
-
- Let me talk about a bad deal. At the beginning of Carlyle
- early - we didn't have any funds. We didn't have any dedicated funds.
And we had a deal that seemed like it would be the greatest deal since
sliced bread. It was handed to us. Marriott said to us, look, we're going
to sell our airline catering business [Caterair].It's number one in the
world. Management team has been there for 10 years. We dominate all the
markets and we're not going to do an auction. We're going to sell it to
you guys 'cause some of our people [Carlyle co-founders Steve Norris and
Dan D'Aniello and Bush crony Fred Malek] used to work at Marriott. You
know, what could be better?
-
- So the financing was there. And we thought, this is an
easy business. So they're going to give us a company. Number one in the
world. Gold plated. Got all the equipment you need. Good management team.
-
- Well, then the Gulf War came. And all of a sudden people
stopped flying. And then those who were flying realized that they weren't
going to be getting the food that they thought they were going to get.
. . . So no matter how good you think a company can be something can go
wrong. We couldn't anticipate the Gulf War. So the airline catering business
has gone this way.
-
- I mention this because it reminds us all the time we
shouldn't have hubris. You know no matter how smart we think we are or
how good we are, something can go wrong. And if something seems too good
in life to be true, it usually is. In this case, the only interesting thing
about the deal--and we lost all our money in it. Our money and our investors'
money in it. In that deal.
-
- But when we were putting the board together, somebody
[Fred Malek] came to me and said, look there is a guy who would like to
be on the board. He's kind of down on his luck a bit. Needs a job. Needs
a board position. Needs some board positions. Could you put him on the
board? Pay him a salary and he'll be a good board member and be a loyal
vote for the management and so forth.
-
- I said well we're not usually in that business. But okay,
let me meet the guy. I met the guy. I said I don't think he adds that much
value. We'll put him on the board because - you know - we'll do a favor
for this guy; he's done a favor for us.
-
- We put him on the board and [he] spent three years. Came
to all the meetings. Told a lot of jokes. Not that many clean ones. And
after a while I kind of said to him, after about three years - you know,
I'm not sure this is really for you. Maybe you should do something else.
Because I don't think you're adding that much value to the board. You don't
know that much about the company.
-
- He said, well I think I'm getting out of this business
anyway. And I don't really like it that much. So I'm probably going to
resign from the board.
-
- And I said, thanks - didn't think I'd ever see him again.
His name is George W. Bush. He became President of the United States. So
you know if you said to me, name 25 million people who would maybe be President
of the United States, he wouldn't have been in that category. So you never
know. Anyway, I haven't been invited to the White House for any things.
-
- ----------
- Suzan Mazur's reports have appeared in the Financial
Times, Economist, Forbes, Newsday, Philadelphia Inquirer, and on PBS, CBC
and MBC. She has been a guest on McLaughlin, Charlie Rose, and Fox television
shows.
-
- http://prorev.com/bushcarlyle.htm
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