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White House Watch: With friends like these

By NICHOLAS M. HORROCK, UPI Chief White House Correspondent   |   July 16, 2003 at 2:48 PM
WASHINGTON, July 16 (UPI) -- In this time when President Bush is explaining a $450 billion budget deficit, a national economy on permanent respirator and rising unemployment rates, having a friend liked David Rubenstein characterizing some of your past business experience may not be all Bush hoped for.

Rubenstein is the co-founder of the Carlyle Group, an investment banking firm managing $14 billion of other people's money, with Bush's father, former President George H.W. Bush, and a good number of the senior administration officials among its members.

The Carlyle Group's chairman is Frank Carlucci, who was secretary of Defense under Bush One, and other members include James Baker, Dick Darman and Arthur Levitt. Former British Prime Minister John Major heads its European office. Former Secretary of State Baker is counselor, former White House Budget Director Darman is a partner and former Securities and Exchange Commissioner Leavitt an adviser. The list goes on.

It is because of these connections in Republican administrations that Carlyle Group has earned the suspicion of liberals, who suggest that many of its successful investments are the result of inside government knowledge and the government contracts won by companies it controls.

In April, Rubenstein, who noted in a recent Washington Post article that his firm has replaced the Trilateral Commission as the object of suspicion as a secret capitalist cabal, addressed the board of the Los Angeles County Retirement Association, which is one of Carlyle's clients. The meeting was public.

In the course of the address, Rubenstein turned to the subject of Caterair, an early investment for Carlyle and thereby President George W. Bush:

Caterair, Rubenstein said, was an airline food service provider owned by the Marriott Corporation, which Carlyle acquired in a no-money deal. "And we thought, this is an easy business. So they're going to give us a company. No. 1 in the world. Gold-plated. Got all the equipment you need. Good management team," he recalled.

But the first Gulf War came along and people stopped flying and the airlines weren't buying the food Caterair thought they would. "So the airline catering business has gone this way," he said.

"When were putting together the board," Rubenstein said, "somebody 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 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.'"

Rubenstein said he told the intermediary "'We're not usually in that business. But, OK, 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 us.'

"We put him on the board and (he) spent three years. Came to all the meetings. Told a lot of jokes -- not 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 much value to the board. You don't know that much about the company.'"

The board member told him, Rubenstein said, "Well I think I'm getting out of this business anyway. 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," Rubenstein said. "He became president of the United States. So if you said to me, name 25 million people who would be president of the United States, he wouldn't be in that category. So you never know."

Rubenstein's words, not surprisingly, have become the darling of the liberals and a recording of the speech was aired on Democracy Now, a radio and TV news program broadcast over 140 stations in the United States. The speech was first reported by Suzan Mazur for the Progressive Review. The White House has made no comment on the broadcasts and the Carlyle Group's chief public affairs spokesman did not return United Press International's calls.

Cliff Wagner, who is in charge of investments for the retirement fund that has some $95 million in Carlyle, said he attended the meeting at which Rubenstein spoke. He said that the board recorded the speech, but he did not know how a copy got in the hands of the radio station. He said he has listened the version on the radio and it was part of Rubenstein's remarks, "they were kind of tongue in cheek," but he had no idea how the radio station obtained the recording.

One last thought from Rubenstein last April, "Anyway, I haven't been invited to the White House for many things."

© 2003 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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