With investors like these, who needs the public?
Dear Mr. Berko:
What can you tell me about a partnership called the Carlyle Group? I have been told that it is an extremely successful consulting, investment and advisory firm that each year has billions of dollars in revenues and that Carlyle’s business is international in scope. My sister, who works for the huge California Public Employees Retirement System, tells me that it owns a small piece of this very exclusive company and that Carlyle will go public sometime next year. Sis says Carlyle is the best-performing investment ever owned by CalPERS.
I’d like to buy $5,000 worth of Carlyle if you recommend it. The reason Carlyle is going public is so other private investors, like CalPERS, will have liquidity and be able to get their money back and sell shares when they need it. Please tell me what you can about this.
N.R., Erie, Pa.
You’d sooner be able to flap your arms and fly than become a shareholder of the Carlyle Group. This is a tightly exclusive fraternity whose members at one time held powerful and influential government positions in their respective countries. Carlyle partners are covertly selected for their ability to guide the favorable placement of government contracts especially in the aerospace and defense industry, information technology, oil and gas, construction and telecommunications.
Some renowned Carlyle shareholders or affiliated persons include former Secretary of State James Baker, former Defense Secretary Frank Carlucci, former Office of Management and Budget Director Richard Darman, former Federal Communications Commission Chairman William Kennard and former President George H.W. Bush. Other notables include former Securities and Exchange Commission Chairman Arthur Levitt, former Internal Revenue Service Commissioner Charles Rosotti, former Philippines President Fidel Ramos, former British Prime Minister John Major and Luis Tellez, former energy secretary of Mexico.
Louis Gerstner (former chief executive officer of IBM Corp. and Philip Morris Cos.) is the active chairman of Carlyle. Meanwhile the Saudis, Koreans, Japanese, Germans, etc. are also influential owners in the Carlyle Group. In fact, there are some 80 or so other high-profile partners around the world and you’d recognize many of those names too.
Carlyle had $31 billion in 2003 revenues. At least that’s the number for public consumption. I’ve been told by a knowledgeable source that the real revenue number may be significantly higher.
The Carlyle Group says it does not make contributions to candidates for public office or to any political organizations. I believe that’s true. However, the Saudis, the Japanese, Gerstner, Rosotti, Baker, Bush, Major, ad nauseam, certainly contribute a tad more than chump change from their personal funds to various political parties and candidates.
Carlyle also tells us that “several former government officials are affiliated with Carlyle — and none of them lobbies his former government colleagues.” Well, this means that only several former government officials do not lobby their former colleagues. That certainly leaves the door open for all Carlyle’s other former government officials, doesn’t it? And I believe that Carlyle’s August 2004 purchase of Verizon Telephone of Hawaii from the huge Verizon Communications (a deal approved by the FCC) was made possible by Carlyle partner Kennard, who was FCC chairman. It was approved in record time with zero red tape.
I made a couple of phone calls to some “connected” people and none of them know anything about Carlyle going public. Yes, CalPERS owns a huge chunk of Carlyle. And of course it’s their best-performing investment. But Carlyle doesn’t need to go public to give its shares liquidity. Carlyle has enough cash to buy your hometown of Erie, Pa., lock, stock and firkin.
Frankly, I doubt that Carlyle could stand up under the scrutiny of a public offering, former SEC chief Levitt and former IRS commissioner Rosotti notwithstanding. For example, did you know that Osama Bin Laden’s family had a longtime interest in the Carlyle Group, which was supposedly sold after 9/11?
The Carlyle Group is an immensely profitable company that has made multiple billions of dollars in net profits during the past couple dozen years because its partners can influence to whom their respective governments’ contracts are awarded. Those profits have been distributed among its 90-plus partners and in a unique tax-favored manner.
I believe Carlyle will remain private, so the hoi polloi like us can never become shareholders. Tell your sister that somehow someone gave her incorrect information.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at firstname.lastname@example.org.