The Big Guys Work For The Carlyle Group

The Big Guys Work For The Carlyle Group: "Are you the sort of person who believes in conspiracies--the Trilateral Commission secretly runs the world, that sort of thing? Well, then, here's a company for you. The Carlyle Group, a Washington, D.C., buyout firm, is one of the nation's largest defense contractors. It has billions of dollars at its disposal and employs a few important people. Maybe you've heard of them: former Secretary of State Jim Baker, former Secretary of Defense Frank Carlucci, and former White House budget director Dick Darman. Wait, we're just getting warmed up. William Kennard, who recently headed the FCC, and Arthur Levitt, who just left the SEC, also work for Carlyle. As do former British Prime Minister John Major and former Philippines President Fidel Ramos. Let's see, are we forgetting anyone? Oh, right, former President George Herbert Walker Bush is on the payroll too.

The firm also has about a dozen investors from Saudi Arabia, including, until recently, the bin Laden family. Yes, those bin Ladens. Is it any wonder that Internet sites with names like paranoiamagazine.com are rife with stories about Carlyle's shadowy, corrupt global network? And it's not just wackos. 'Be careful,' a tech entrepreneur in Silicon Valley wrote in an e-mail when he learned I was doing a story on Carlyle. 'The rabbit hole runs really deep on this one.''

Leaving aside the conspiracies for a moment, what exactly does the Carlyle Group do? Start with the basics: It's one of the world's largest and most powerful private-equity investment firms, meaning it buys and sells privately held companies and divisions of large public companies for big profits. Founded in 1987 (and named after the favorite New York hotel of the firm's first investors, the Mellon family), Carlyle has raised a total of $14 billion from investors in just the past five years--more than any other private-equity firm has attracted in the same period, except the Blackstone Group and CSFB Private Equity. Profits, too, have been pretty terrific. Not counting the standard 20% cut that goes to Carlyle's partners and managing directors, the firm's average annual rate of return has been 36%."