We have an enormous amount of our own personal capital - about 90% of our net worth is tied up in these funds. My partners and I and all the other professionals have committed $700 million to our various funds throughout the world so we've got a lot of money committed to this and it's important to get it back. But it's more important that we not do anything that impairs the reputation of ourselves or our investors. So making money is nice but we're more worried about our reputation and concerned with ethics and that's first and foremost.
Rubenstein and his fellow cofounders stand ready to release a chunk of their net worth via Carlyle's planned IPO. However, for an ethical firm, Carlyle has a number of blips.
1) Carlyle settled several pension fund "pay to play" investigations, Connecticut and New York.
2) Investors sued Carlyle over the implosion of Carlyle Capital Corporation, the canary in the Lehman Brothers coalmine. Plaintiffs say Carlyle failed to disclose unrealized losses prior to an initial public offering. Carlyle claimed "unprecedented tumult."
3) Carlyle's Semgroup, a staid energy pipeline company, went bankrupt due to billions in bad energy bets. Investors sued, while Carlyle's lawyers entered a puffery defense.
4) Carlyle's LifeCare Hospitals had the highest patient death toll after Hurricane Katrina. The company is vigorously defending lawsuits while claiming patients became wards of the federal government when FEMA evacuation teams set up in New Orleans.
5) Rubenstein joked about George W. Bush and his board slot at CaterAir, but failed to mention the role Carlyle and the Bush administration played in legitimizing Libya's Muammar Gadhafi. The Carlyle Group solicited over $100 million of Gadhafi funds with the help of James A. Baker, III, Frank Carlucci and David Welch of Bush's State Department. Welch went on to Bechtel, where he helped build a massive power plant east of Tripoli, Libya's capital city.
Reputation, ethics? Carlyle is about power, influence, and greed. That makes the untold stories compelling.