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While complaining about being called secretive, Carlyle refuses to disclose many of its owners, and almost all information about investors in its partnerships. The firm's Web site puts it this way: "Carlyle's investors are public and private institutional investors and high net worth individuals. Carlyle does not disclose information about its investors."
Christopher Ullman, a spokesman for Carlyle, said most such equity firms are private and not required to disclose ownership information. Carlyle is "very honored" to be affiliated with CalPERS and believes the relationship benefits both entities, he said. "We've provided very good returns for their investors, and the credibility that comes with [CalPERS's] investment serves us well," Ullman said.
Carlyle's involvement in defense has been overemphasized by the press, Ullman said; the firm has just 6 percent of its portfolio in defense properties, and laid out for CalPERS all the areas in which its funds would invest ahead of time.
(In a side note, Ullman said former President Bush resigned from Carlyle because, at age 80, he "decided to ratchet back on his business activities. We very much enjoyed the relationship.")
As a private firm, the Carlyle Group has every right to keep most of its financial and ownership information private, to seek maximum profit allowed by law in any business sector, including defense, and to employ whomever it wishes, including public officials of any persuasion.
But CalPERS is a public entity that should be able to tell the public whether it is allied with, let us say (in the absolutely hypothetical case), a bunch of Saudi princes when it sells part of a major military contractor that's played a significant role in a U.S. military conflict in a country that borders Saudi Arabia. And it seems, at the least, odd that a public entity that portrays itself as a champion of openness and a foe of offshore tax shenanigans would be partnering with firms that set up shop in the Cayman Islands. That circumstance doesn't seem odd just to me.
Bill Allison, a spokesman for the Center for Public Integrity, a Washington, D.C.-based, nonpartisan government watchdog group, says CalPERS involvement with offshore entities "raises eyebrows."
"I have to say that is strange that a public pension fund is involved with offshore entities like that. ... You have something like CalPERS, which is supposed to have accountability and transparency, and you're dealing with a group [Carlyle] that is the opposite of that, very opaque," Allison says.
I asked the retirement system whether it would disclose its co-owners in the Carlyle Group and co-investors in Carlyle partnerships -- particularly the previously mentioned partnerships chartered in the Cayman Islands. In response, CalPERS Media Relations Manager Brad Pacheco said he had searched the system's meeting agendas and associated public paperwork in regard to Carlyle and found no disclosure of such ownership. Determining whether other CalPERS staff had ownership information, and whether the retirement system's contracts with Carlyle permitted disclosure of that information, would require more time than my deadline for writing this column allowed, he indicated.
He indicated it five days after receiving my written request for the ownership information.
When it comes to the retirement accounts of 1.4 million public employees, retirees, and their kin, I'm not a PC cause-pusher. The beneficiaries of CalPERS deserve a retirement system that's doing everything reasonable to keep returns and benefits high.
When it comes to the way business is done in Washington, I'm no doe-eyed do-gooder. Engaging in business with the federal government requires the use of people with experience and personal connections in the federal system. One acquaintance of mine describes it as a "player" system. Either you've got the right players on your side, or you lose; it's that simple.
When it comes to business-government relations, I'm no conspiratorialist. Carlyle employs many talented people, and a good deal of the firm's success is no doubt attributable to smarts and hard work, rather than inside dealing with government.
Still, as the generally staid New York Times noted in a recent unsigned editorial, "It is hard to enter the debate over postwar Iraq without tripping over a business associate or political ally of the White House." There is indeed a debate about the appearance of financial favoritism by members of the Bush administration, particularly in regard to defense and foreign affairs. Carlyle has become part of that debate.
I asked Pacheco, the CalPERS spokesman, whether the media controversy surrounding Carlyle had ever caused the retirement system board to rethink its investment strategy with the firm. He said he's been with CalPERS eight years and does not remember any such discussion, and a check of records for CalPERS board meetings also found none.
I was unable last week to reach Angelides or other CalPERS board members who might want to talk about the CalPERS-Carlyle connection. I think it's about time that the board and the retirement system's membership have a real discussion about that link, and openness, and defense investment, before someone trips while reading a retirement statement.
