Fahrenheit 9/11 | Library + Resources Book

It is hard to imagine a more concentrated display of wealth than Manhattan’s Upper East Side, where building after building reeks of money, power, and prestige. Multimillion dollar homes share Madison Avenue sidewalks with lavish galleries, ritzy boutiques, upscale nannies, and purebreds. But even against this extravagant setting, the Carlyle Hotel stands out. Its tower rises unapologetically into the sky, lording over Central Park and dominating the skyline around it. The blue-blood interior with lush carpeting and hushed tones perfectly suits its high-end clientele. It is a place for those accustomed to success and comfortable with luxury. In a city full of opulent hotels, it is among royalty.

So it is altogether fitting that the Carlyle Group would assimilate the name of this regal residence when banding together in the summer of 1987. At the time, co-founders Stephen Norris and David Rubenstein met often at the hotel on 76th Street and Madison Avenue. They wanted the name of their company to sound like old money, and the Carlyle moniker fit the bill. But little did either co-founder know, the Carlyle Group would go on to become one of the most powerful and successful private equity firms in the world, with over $13 billion under management and more political connections than the White House switchboard. In its 15 years of existence, the Carlyle Group has become the corporate embodiment of the hotel it was named after: a towering presence in a world of wealth, power, and politics.

Today, the Carlyle Group is a story of dealings inside the “Iron Triangle,” the place where the world’s mightiest military intersects with high-powered politics and big business. It is a company whose history includes ties to CIA cover-ups and secret arms deals, and an astounding trail of corporate cronyism. By making defense buyouts the cornerstone of its business strategy, Carlyle now finds itself the beneficiary of the largest increase in defense spending in history. Indeed the stars seem to have aligned perfectly for Carlyle, in just 15 short years. With the ascension of George W. Bush to the presidency, the White House is now full of ex-Carlyle employees, friends, and business partners. And with the newly fattened defense budget, Carlyle has been able to extract massive profits from its defense holdings, like United Defense, in the wake of the terrorist attacks on September 11, 2001. It may be tough times for America, but as Bette Midler might say, everything’s coming up Carlyle.

While the company flew well under the radar screen for the first decade of its life, lately success has not come without scrutiny for the Carlyle Group. After all, it’s hard to remain anonymous when your employee roster includes names like George Herbert Walker Bush, James Baker III, John Major, and Arthur Levitt. It’s also difficult to avoid those pesky accusations of corporate impropriety, conflict of interest, and influence peddling when your chairman emeritus is former defense secretary Frank Carlucci, a man who has courted controversy his entire life and spent his years at Princeton University bunking with his close friend Donald Rumsfeld, the current secretary of defense. Even George W. Bush and Colin Powell put their time in with the Carlyle Group. After years of doing business with everyone from the Bushes to members of the bin Laden family, Carlyle executives have now found their fortunes being accompanied by the cries of conspiracy.

Some critics charge that the company practices nothing more than “access capitalism,” trotting out big names that bring in big money. Some call it “The Ex-Presidents Club.” Some worry that it is influencing domestic and foreign policy. And some, including former Georgia congresswoman Cynthia McKinney, even implied that President Bush allowed the events of September 11 to take place to enable him to dictate policy that would benefit the Carlyle Group. But no matter how deep your suspicions run, the Carlyle Group warrants close examination. That a company like the Carlyle Group even exists is testament to the irresistible temptation for expoliticians to cash in on their time as public servants, in ways that to some seem less than scrupulous.

If the thought of all of these men working together outside the fishbowl of international politics makes you uneasy, you are not alone. Political watchdog groups, like the Center for Public Integrity and Judicial Watch, have long been howling over the potential for corruption at Carlyle. The company has been investigated by the FBI, excoriated by representatives, sued by political activists, and embarrassed by scandal. Yet the Carlyle machine hums along, doing what it does best: making gobs of money for investors. Watchdogs might as well be barking at the moon, because the scandal here is not what’s illegal, but what’s legal.

In a time when the ties between high-ranking politicians and billion-dollar businesses has the country on edge, bracing for the next corporate scandal, and waiting for the political shoe to drop, the Carlyle Group has come to symbolize the extent to which many of these relationships continue unchecked. And when accusations of war-profiteering ring out, Carlyle is usually at the top of most people’s list of guilty parties. Coincidence and circumstance only go so far in explaining the unbridled success of this company. Connections, cronyism, and cunning fill in the gaps. Far more disconcerting to the discriminating investor is the fact that Carlyle has become the model for a new generation of investment banking in which former politicians are brought in at high-level positions to butter up investors, foreign heads of state, and business partners. Why else would Los Angeles–based Metropolitan West Financial appoint Al Gore, with zero professional investment experience, its vice chairman? Investment banks are learning that the Carlyle model pays.

But it is Carlyle’s particular style of investing that has raised eyebrows. Concentrating on heavily regulated industries like defense, telecommunications, energy, and health care, Carlyle is betting that it can predict future trends in government spending and policy, or influence them outright. And by hiring former secretaries of defense, ex-presidents, the former head of the Securities and Exchange Commission, and the former chairman of the Federal Communication Commission, they are in a position to do either.

Dwight D. Eisenhower, upon leaving the office of president in 1961, warned future generations against the dangers of a “military-industrial complex,” and the “grave implications” of the “conjunction of an immense military establishment and a large arms industry.” He went on to presciently say, “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic process.”

The wisdom of these comments has clearly been lost in the 40 years since Ike left office. The first step toward turning things around is understanding how we got here. No single company can illustrate that progression better than the Carlyle Group, a business founded on a tax scheme in 1987 that has grown up to be what its own marketing literature once called “a vast interlocking global network.” The company does business at the confluence of the war on terrorism and corporate responsibility. It is a world that few of us can even imagine, full of clandestine meetings, quid pro quo deals, bitter ironies, and petty jealousies. And the cast of characters includes some of the most famous and powerful men in the world. This is today’s America. This is the Carlyle Group.