Tuesday, December 1, 2009

Carlyle Group Made by "Arab Money," Now Angry

Funny what a $50 million loss does to some people. A prominent Kuwaiti conglomerate is suing The Carlyle Group for its total loss in Carlyle Capital Corporation (CCC). CCC imploded in March 2008. The Channel Islands based mortgage backed security fund was leveraged 39 to 1. The Kuwaiti firm's $50 million was part of that "1". FT reported:

The implosion of CCC has damaged Carlyle’s reputation in the Middle East, where the affiliate raised most of its funding, according to people familiar with the matter. It is a personal setback for Carlyle’s co-founder and chief fundraiser, David Rubenstein, a frequent visitor to the Gulf.

Arab money made Carlyle what it is,” said the head of the investment bank of one major financial institution in Dubai.

They aren't the only one suing David Rubenstein's firm for false marketing. Michael Huffington wants his $20 million back. Mr. Rubenstein approached the angry investors with an apology and promise to invest future money for fewer fees. The Kuwaiti's didn't like the offer.

NIG’s decision (to sue) came several months after a stormy meeting in Kuwait involving Mr Rubenstein and Saad Al Saad, the head of NIG and the patriarch of one of Kuwait’s wealthiest families.

The meeting was abruptly terminated after a young Carlyle staffer told the NIG executives to lower their voices, according to people familiar with the matter.

NIG was also angry that the meeting was attended by the general manager of a fund that Carlyle was in the process of launching – the Hong Kong-based Asian Growth Fund.

The Middle East and Dubai were the "it" region not long ago. How long will China last? Who else will sue for investments gone bad? Will Mr. Rubenstein improve his sales pitch to angry investors? Who will rise to David's defense? Maybe, James A. Baker, III. Baker Botts has offices in the Middle East.

BusinessWeek quoted Rubenstein on Dubai:

"Don't count Dubai out," says Carlyle Group co-founder David Rubenstein. "It has world-class infrastructure, a high-quality talent pool, and will continue to be an important financial center for decades to come."
Ever the salesman?