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July 6th, 2004 5:05 pm
Will Isikoff Finally Knock-It-Off?
Never mind that the New York Times has already asserted that all the facts in “Fahrenheit 9/11” check-out (see Philip Shenon’s “ Will Michael Moore’s Facts Check Out?”), Newsweek’s chief investigative reporter Michael Isikoff has made it his mission to discredit the film. After issuing a sharp response to Isikoff’s first swipe at the film (“Under the Hot Lights,” Newsweek, June 28th), Craig Unger, author of “House of Bush, House of Saud,” is back to expose Isikoff’s latest distortions. Here is Unger's point-by-point clarification (The following is also available on his website www.houseofbush.com):
The Newsweek-Fahrenheit Wars, Part 3
July 3, 2004
How Many Mistakes Can Newsweek's Michael Isikoff Make?
by Craig Unger
How many mistakes can Michael Isikoff make? In his zealous campaign to discredit Fahrenheit 9/11, Newsweek's star investigative reporter has already made at least seven errors, distortions and selective omissions of crucial information.
Let's take them one by one.
1) In his first Newsweek piece attacking the movie, "Under the Hot Lights," which appeared in theJune 28 issue of the magazine, Isikoff asserts that I claim "that bin Laden family members were never interviewed by the FBI." Isikoff proceeds to attack me for that claim. Unfortunately for him, I never made it. Isikoff's assertion is a complete fabrication.
2) The same article also erroneously reports that the Saudi evacuation "flights didn't begin untilSept. 14—after airspace reopened." As House of Bush, House of Saud notes, however, the first flight actually took place a day earlier, on September 13, when restrictions on private planes were still in place. Isikoff knew this. I even gave him the names of two men who were on that flight-- Dan Grossi and Manuel Perez-- and told him how to get in touch with them. Earlier, Jean Heller, a reporter for the St. Petersburg Times, took the time to follow up on my reporting. She called Grossi, and in her subsequent article wrote, "Grossi did say that Unger's account of his participation in the flight is accurate."
Rather than try to refute or corroborate my reporting, however, Isikoff omitted it entirely. The facts interfered with his argument.
It is worth noting that Jean Heller was also able to obtain verification of the September 13 flight from other sources as well. Heller reports that the flight from Tampa, Florida to Lexington, Kentucky, has finally been corroborated by authorities at Tampa International Airport--even though the White House, the FBI and the FBI repeatedly denied that any such flights took place.
3) A week after "Under theHot Lights" appeared, Newsweek apologized for fabrication number one in its print edition of the magazine. But the error remains uncorrected online where it continues to be desseminated by other media.
Worse, in its "apology," Newsweek amplified the distortion it made the previous week. This time, the magazine admits that the September 13 flight did take place. But the editors again omit crucial information in order to suggest that the flight is a red herring, asserting that the flight "took off late on Sept. 13 after restrictions on flying had already been lifted," Newsweek says.
In fact, some restrictions had been lifted--but not all. Commercial aviation slowly resumed on September 13, but at 10:57 am that day, the Federal Aviation Administration issued a Notice to Airmen stating that private aviation was still banned. Three planes violated that order and were forced down by American military aircraft that day. (See House of Bush, House of Saud, p. 9) Yet the Saudis were allowed to fly on the ten passenger Learjet. Far from being irrelevant, the Tampa to Lexington flight is vital because it required permission from the highest levels of our government. Once again, all this information is in the book, and Isikoff told me he had read it. This relevant information contradicted Isikoff's thesis.
If you think about it, Isikoff's argument defies logic. Hundreds of thousands of planes fly each day. If the Tampa to Lexington flight was just another normal flight, why would anyone go to a crisis-stricken White House to get permission for the Saudis to fly? Yet thanks to Richard Clarke's testimony before the 9/11 Commission, we know that the White House did grant permission for the Saudis to fly.
4) On June 30, Isikoff was at it again, this time in an online story co-written with Mark Hosenball, "More Distortions from Michael Moore." (link).
If the basics of journalism are important to you, it is worth pointing out that Isikoff's story confuses Carlyle founding partner David Rubenstein with public relations legend Howard Rubenstein. This is just one of three names (William Kennard and Caterair are the others) Isikoff gets wrong in the story. (The article has since been corrected online.)
5)More to the point, Isikoff's chief target is the movie's assertion that $1.4 billion in Saudi funds went to businesses tied to the Bushes and their friends. As Isikoff notes, House of Bush, House of Saud is the chief source for this information.
Most of this figure comes from defense contracts to companies owned by the Carlyle Group in the mid-nineties, and according to Isikoff, therein lies the problem. “The movie clearly implies that the Saudis gave $1.4 billion to the Bushes and their friends,” Carlyle public relations executive Chris Ullman tells Newsweek. “ But most of it went to a Carlyle Group company before [former president George H.W.] Bush even joined the firm.”
Isikoff accepts Ullman's explanation almost uncritically, leaving the reader with the impression that the Bush family and its allies had little or no relationship with the Carlyle Group until 1998. If that were true, he might have a point.
But in fact, the Bush-Carlyle relationship began eight years earlier when the Carlyle Group put George W.Bush on the board of one of its subsidiaries, Caterair, in 1990. In 1993, after the Bush-Quayle administration left office and George H. W. Bush and James Baker were free to join the private sector, the Bush family's relationship with the Carlyle Group began to become substantive.
By the end of that year, key figures at the Carlyle Group included such powerful Bush colleagues as James Baker, Frank Carlucci, and Richard Darman. Because George W. Bush's role at Carlyle had been marginal, the $1.4 billion figure includes no contracts that predated the arrival of Baker, Carlucci and Darman at Carlyle. (These figures are itemized in the appendix of House of Bush.) With former Secretary of Defense Carlucci guiding the acquisition of defense companies, Carlyle finally began making real money from the Saudis, both through investments from the royal family, the bin Ladens and other members of the Saudi elite, and through lucrative defense investments.
6) In addition, Isikoff erroneously dismisses the relationship between the Bushes and the House of Saud at the Carlyle Group as a distant one. "Six degrees of separation" is the term he uses. Yet according to a December 4, 2003 email from Carlyle's Chris Ullman, James Baker and George H. W. Bush made four trips to Saudi Arabia on Carlyle's behalf, and that does not include meetings they had with Saudis that took place in the U.S. During the course of these trips, Ullman says, former president Bush sometimes met privately with members of the Saudi Binladen Group. At times, Carlyle officials have characterized these meetings as "ceremonial." But in fact, at least $80 million in investments came from the House of Saud and allies such as the bin Laden family. It would be unseemly-- and unnecessary--for former president Bush or James Baker to actually ask for money from the Saudis at such meetings. Instead, David Rubenstein's team did that after Bush and Baker spoke. For a more complete account of this, see Chapter Ten in House of Bush, House of Saud.
7) In the same article, Isikoff tries to pit me against Michael Moore by asserting that my book, unlike the movie, concludes that the role of James Bath, a Texas businessman who represented Saudis and was close to George W. Bush, was not terribly significant. Isikoff writes,"The movie—which relied heavily on Unger’s book—fails to note the author’s conclusion about what to make of the supposed Bin Laden-Bath-Bush nexus: that it may not mean anything."
Isikoff is wrong again. It is true that no conclusive evidence has yet answered the specific question of whether or not bin Laden money actually went from the bin Ladens to Bath and then into George W. Bush's first oil company, Arbusto. But beyond that unresolved issue, the bin Laden-Bath-Bush nexus is crucial to the birth of the Bush-Saudi relationship. Even if bin Laden money did not go into Arbusto, Bath introduced Salem bin Laden and his good friend Khalid bin Mahfouz to Texas. A host of contacts between them and the House of Bush ensued. Bin Mahfouz shared financial interests with James Baker. His associates bailed out Harken Energy, where George W. Bush made his first fortune. Money from both the bin Ladens and the bin Mahfouzes ended up in Carlyle. This relationship is what House of Bush is about. Isikoff cherry-picks information that suits his agenda and leaves out the rest.
In his assault against Fahrenheit, Isikoff does raise one provocative question, one that many other people have asked. If the Saudi evacuation flights are so wrong, how is it that former counterterrorism czar Richard Clarke, a fierce critic of the Bush White House,has not had any problems with them. "I thought the flights were correct,”Clarke said. “The Saudis had reasonable fear that they might be the subject of vigilante attacks in the United States after 9/11. And there is no evidence even to this date that any of the people who left on those flights were people of interest to the FBI.”
It is a fair question and it deserves a serious answer.
If there is a hero in House of Bush, it is Richard Clarke, a man who understood Al-Qaeda's new transnational form of terrorism and developed a forceful strategy against it, but who was thwarted in both the Clinton Administration (thanks to the Lewinsky scandal) and in the Bush administration (by being left out of the loop).
But Clarke is also a brilliant and savvy bureaucrat who is unlikely to characterize decisions in which he played a role as stupid or wrong. And much as I admire him, I disagree with him on this issue.
When first interviewed on this subject in 2003, Clarke said that his approval for evacuating the Saudis had been conditional on the FBI’ s vetting them. “I asked [the F.B.I.] to make sure that no one inappropriate was leaving. I asked them if they had any objection to Saudis leaving the country at a time when aircraft were banned from flying.” He noted that he assumed the F.B.I. had vetted the bin Ladens prior to September 11.
Then he added, “I have no idea if they did a good job. I'm not in any position to second guess the FBI.”
And there's the rub. Given the long history of errors made by the FBI in investigating counterterrorism, how can one possibly accept their infallibility as unquestioningly as Isikoff does.I interviewed two FBI agents who participated in the Saudi evacuation and they made it clear that they did not subject the passengers to a formal criminal investigation. One rather astonishing finding of the 9/11 Commission is that though the rubble was still very much ablaze at the World Trade Center a few days after the attacks, the FBI did not even bother to check the Saudi passenger lists against its terror watch lists.
There are many other unanswered questions. "It is clear that the Saudi charities were being used as cover for Al Qaeda, but it is unclear how far up the chain of authority that went," Clarke said. Do we know for certain none of the Saudis on the flights could have shed light on that crucial question? Were any of them tied to the charities in question? Did any of them have any information on bin Laden? Did we let a treasure trove of intelligence leave?
Finally, it is still unclear whether other people in the White House had knowledge. Do the president and his men bear no responsibility for leading a thorough criminal investigation into the worst crime in in American history?
Perhaps we will never know the answers to all these questions. But American journalists have a responsiblity to try to uncover the facts rather than muddy the waters-- and that includes Michael Isikoff.
July 2nd, 2004 11:32 pm
Michael Isikoff and Newsweek Magazine Deceive the Public About Fahrenheit 9/11
In the June 28, 2004 issue of Newsweek Magazine, Newsweek writer Michael Isikoff makes completely false and misleading statements about facts and issues contained in Fahrenheit 9/11. Isikoff has also gone on television shows repeating the charges.
Here are some of the falsehoods he is telling, and the truth:
Saudi Flights: Isikoff writes that "The movie claims that in the days after 9/11, when airspace was shut down, the White House approved special charter flights so that prominent Saudis - including members of the bin Laden family - could leave the country. Author Craig Unger appears, claiming that bin Laden family members were never interviewed by the FBI. Not true, according to a recent report from the 9/11 panel."
Isikoff's account of the movie is flatly untrue.
What the movie says is this: "It turns out that the White House approved planes to pick up the bin Ladens and numerous other Saudis. At least six private jets and nearly two dozen commercial planes carried the Saudis and the bin Ladens out of the U.S. after September 13th. In all, 142 Saudis, including 24 members of the bin Laden family, were allowed to leave the country."
These facts are based entirely on the findings contained in the 9/11 commission draft report, which states, "After the airspace reopened, six chartered flights with 142 people, mostly Saudi Arabian nationals, departed from the United States between September 14 and 24. One flight, the so-called Bin Ladin flight, departed the United States on September 20 with 26 passengers, most of them relatives of Usama Bin Ladin." National Commission on Terrorist Attacks Upon the United States, Threats and Responses in 2001, Staff Statement No. 10, The Saudi Flights, p. 12;
Isikoff claims that Fahrenheit 9/11 says that these flights out of the country took place when commercial airplanes were still grounded. The film does not say this anywhere. The film states clearly that these flights left after September 13 (the day the FAA began to slowly lift the ban on air traffic).
Moreover, in an interview with author Craig Unger, the film makes reference to the fact that these individuals were briefly interviewed before they were allowed to leave. Here is how Unger put it in a Letter to the Editor to Newsweek today (June 22, 2004):
To the Editors:
In "Under the Hot Lights," Michael Isikoff attacks Fahrenheit 9/11 by asserting that "Craig Unger appears, claiming that bin Laden family members were never interviewed by the FBI." The article then goes on to say that this assertion is false.
Unfortunately for Isikoff, I make no such statement in the movie. I do argue -- accurately -- that the bin Ladens and other Saudis were whisked out of the country without being subjected to a serious investigation. But the sequence to which Isikoff refers ends with director Michael Moore summing up my account of the bin Laden evacuation by saying, "So a little interview, check the passport, what else?" "Nothing," I respond.
It would be one thing if Isikoff had simply made an honest error; but that clearly is not the case. When he called me, I specifically told Isikoff that the evacuation process involved brief interviews of the bin Ladens which fell far short of the kind of intense criminal investigation that should have gotten underway after the murder of nearly 3,000 people. The worst crime in American history had just taken place two days earlier, and the FBI did not even bother to check the terror watch lists. Isikoff omitted all that. Instead, he put words in my mouth that are simply not in the movie.
Isikoff also wrongly asserts that the Saudi "flights didn't begin until September 14 -- after airspace reopened." In fact, as I reported in House of Bush, House of Saud, the first flight took place on September 13, when restrictions on private planes were still in place. According to the St. Petersburg Times, that flight has since been corroborated by authorities at Tampa International Airport. Isikoff knew all this. I told him. I even gave him the names of two men who were on that flight and told him how to get in touch with them. But Isikoff left all that out as well -- as he did other information that did not suit his agenda. In dismissing the Bush-Saudi ties, Isikoff even omits the fact that more than $1.4 billion in investments and contracts went from the House of Saud to companies in which the Bushes and Cheney have been key figures -- all of which is itemized in my book. Isikoff begins his article by asking, "Can Michael Moore be believed?" The real question should be whether Michael Isikoff can be believed. Clearly, the answer is no.
Craig Unger
New York City, NY
(Note: The St. Petersberg Times article to which Unger refers also states, "The 9/11 Commission, which has said the flights out of the United States were handled appropriately by the FBI, appears concerned with the handling of the Tampa flight... Most of the aircraft allowed to fly in U.S. airspace on Sept. 13 were empty airliners being ferried from the airports where they made quick landings on Sept. 11. The reopening of the airspace included paid charter flights, but not private, nonrevenue flights." Jean Heller, TIA now verifies flight of Saudis; The government has long denied that two days after the 9/11 attacks, the three were allowed to fly.
St. Petersburg Times, June 9, 2004.)
2. Carlyle and United Defense. Isikoff writes, "The movie quotes author Dan Briody claiming that the Carlyle Group 'gained' from September 11 because it owned United Defense, a military contractor. Carlyle Group spokesman Chris Ullman notes that United Defense holds a special distinction among U.S. defense contractors that is not mentioned in Moore's movie: the firm's $11 billion Crusader artillery rocket system developed for the U.S. Army is one of the only weapons systems canceled by the Bush administration."
This is completely misleading. The Crusader contract was canceled AFTER UNITED DEFENSE WENT PUBLIC, which is the entire point of the movie.
Here is what the film says: "September 11th guaranteed that United Defense was going to have a very good year. Just 6 weeks after 9-11 Carlyle filed to take United Defense public and in December made a one day profit of $237 million dollars."
This is exactly what happened, to wit:
"On a single day last month, Carlyle earned $237 million selling shares in United Defense Industries, the Army's fifth-largest contractor. The stock offering was well timed: Carlyle officials say they decided to take the company public only after the Sept. 11 attacks... On Sept. 26, [2001], the Army signed a $665-million modified contract with United Defense through April 2003 to complete the Crusader's development phase. In October, the company listed the Crusader, and the attacks themselves, as selling points for its stock offering. Mark Fineman, "Arms buildup is a boon to firm run by big guns," Los Angeles Times, January 10, 2002.
"Or its 1997 purchase of United Defense for $ 180 million. Four years later -- just before Rumsfeld canceled its Crusader howitzer program -- Carlyle took United Defense public and sold about half the stock for $ 588 million." Greg Schneider, "Connections and then some," The Washington Post, March 16, 2003
In "Crusader a Boon to Carlyle Group Even if Pentagon Scraps Project," Washington Post's Walter Pincus wrote (May 14, 2002):
Carlyle's financial success with United - and the success of others associated with the Crusader - shows how major Pentagon weapon systems can turn into cash cows. In turn, United's lobbying expenditures and campaign contributions show why they can be so difficult to kill, as Secretary of Defense Donald H. Rumsfeld announced he would try to do with the Crusader last week.
'Carlyle's aggressive approach ...is one reason why the Crusader lived this long,' said Lawrence J. Korb, an assistant secretary in the Reagan Pentagon and now director of studies at the Council on Foreign Relations. Even if Rumsfeld's decision stands, Korb said, United still will have received $ 2 billion from the Crusader program and will receive substantially more to close it down.
Still, in its annual report for 2001, United announced that it had been awarded a three-year, $ 697 million contract to complete full upgrading of 389 Bradley units and had added a $ 655 million contract modification to complete the Crusader's "definition and risk-reduction phase contract," which would be worth $ 1.7 billion through 2003. Together, the Crusader and Bradley programs contributed 41 percent of United sales in 2001, the report said.
With Crusader and the Bradley upgrade in hand, a decision was made to sell United stock to the public in late 2001. In preparation, United refinanced the roughly $ 180 million it owed on the original purchase loan, securing a new $ 600 million loan and $ 200 million in revolving credit.
...
After the debt restructuring came the stock offering. The United offering filed with the Securities and Exchange Commission included this boilerplate caveat to potential investors: 'The Carlyle group, our other stockholders and our executive officers will realize substantial benefits from the offering.'
When it took place, in December 2001, Carlyle sold 11 million shares of the 20 million offered at $ 19 a share, receiving a total of about $ 225 million. Even so, Carlyle still owns more than 47 percent of the outstanding United shares and controls United's board of directors.
Also in late 2001, according to SEC filings, Peay and Shalikashvili were paid 'performance' bonuses, though their separate employment contracts filed with the SEC state they only are to serve as directors and receive $ 25,000 annual retainers plus stock options and reimbursed expenses. Peay received $ 160,000, and Shalikashvili $ 102,586, according to a filing with the SEC.
A United spokesman said the generals did no lobbying and that their bonuses were similar to ones given company officers based on "the performance of the company." Neither retired general responded to requests for comment. Korb, who served as a vice president at Northrup, said he had never heard of company directors receiving bonuses based on the performance of the company.
July 1st, 2004 5:02 pm
Newsweek: Howard Rubenstein or David Rubenstein?
YOU MAKE THE CALL
In a June 30th piece on FAHRENHEIT 9/11, Newsweek's Michael Isikoff and Mark Hosenball focused on the movie's coverage of the Carlyle Group. In the story, which contends that the film was too tough on the Carlyle Group, the magazine identified high profile, well-known New York Public Relations executive Howard Rubenstein as the founder of the Carlyle Group. In fact, the founder of the Carlyle Group is David Rubenstein, a close confidante of the Bush family (David likes to go on safari trips with former First Lady Barbara Bush). Given the similar biographies of the two Rubensteins and how much they look like each other (see photos and stories below), we can understand how easy it must have been for a news magazine like Newsweek to get fooled - just like they were fooled when President Bush said that America needed to go into Iraq because of the WMD and the ties to Al Qaeda.
We invite you to weigh in and vote for whichever Rubenstein you believe is the managing partner of the Carlyle Group - feel free to analyze the info below, which is readily available and accessible after even a cursory search on the Internet, or call Newsweek's Messrs. Isikoff and Hosenball in Washington, DC to inquire about their research capabilities. 202 626-2000.
"Its [Carlyle] founding and still managing partner is Howard Rubenstein, a former top domestic policy advisor to Jimmy Carter."
-- Newsweek 6/30/04 in a story on FAHRENHEIT 9/11
Ironically, the Newsweek piece had an additional glaring factual mistake, involving, appropriately enough, the word "cannard" (Newsweek's spelling):
It refers to former Chairman of the Federal Communication Commission, William Kennard, as William Cannard. Maybe, using "Cannard" was merely a conscious effort to convey that their story was a "canard" - "a false or unfounded story or report." (Webster's Tenth Edition)
"One of its other managing partners is William Cannard, Clinton's chairman of the Federal Communications Commission." -- Newsweek, 6/30/04
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Connections and Then Some
David Rubenstein Has Made Millions Pairing the Powerful With the Rich
By Greg Schneider
Washington Post Staff Writer
Sunday, March 16, 2003; Page F01
David M. Rubenstein is exasperated, and he blurts something that a quick look around the room proves is outrageous: "We're not," he nearly shouts, "that well connected!"
Behind him is a picture of Rubenstein on a plane with then-Gov. George W. Bush. Across the room, a photo of Rubenstein with the president's father and mother. Next to that, Rubenstein and Mikhail Gorbachev. Elsewhere: Rubenstein and Jimmy Carter. On a bookshelf: Rubenstein and the pope.
This is not some honor wall in Rubenstein's office on Pennsylvania Avenue, this is his wood-paneled den at home in Bethesda. The snapshots are nearly hidden among books and trinkets and family photos -- the decorating restraint of the truly, deeply connected.
Rubenstein, after all, is co-founder of the Carlyle Group, an investment house famous as one of the most well-connected companies anywhere. Former president George H.W. Bush is a Carlyle adviser. Former British prime minister John Major heads its European arm. Former secretary of state James Baker is senior counselor, former White House budget chief Richard Darman is a partner, former SEC chairman Arthur Levitt is senior adviser -- the list goes on.
Those associations have brought Carlyle enormous success. Founded in 1987 with $5 million, the Washington-based merchant bank controls nearly $14 billion in investments, making it the largest private equity manager in the world. It buys and sells whole companies the way some firms trade shares of stock.
But the connections also have cost Carlyle, in ways that are hard to measure. It has developed a reputation as the CIA of the business world -- omnipresent, powerful, a little sinister. Media outlets from the Village Voice to BusinessWeek have depicted Carlyle as manipulating the levers of government from shadowy back rooms. "The Iron Triangle," a book about the company due out next month, promises to take readers into "a world that few of us can even imagine, full of clandestine meetings [and] quid pro quo deals."
Last year, then-congresswoman Cynthia McKinney (D-Ga.) even suggested that Carlyle's and Bush's ties to the Middle East made them somehow complicitous in the Sept. 11 terror attacks. While her comments were widely dismissed as irresponsible, the publicity highlighted Carlyle's increasingly notorious reputation. Internet sites with headlines such as "The Axis of Corporate Evil" purport to link Carlyle to everything from Enron to al Qaeda.
"We've actually replaced the Trilateral Commission" as the darling of conspiracy theorists, says Rubenstein -- who, truth be told, happens to be a member of the Trilateral Commission.
It didn't help that as the World Trade Center burned on Sept. 11, 2001, the news interrupted a Carlyle business conference at the Ritz-Carlton Hotel here attended by a brother of Osama bin Laden. Former president Bush, a fellow investor, had been with him at the conference the previous day.
But even if you believe the conspiracy theories that Carlyle luminaries are pulling strings on the company's behalf, there is evidence they haven't been very good at it lately. The current Bush administration has sloughed off advice from Baker calling for restraint in the Middle East, where Carlyle has investors, and from former president Bush on the need for calm on the Korean peninsula, where Carlyle owns banks. Defense Secretary Donald Rumsfeld even canceled the $11 billion Crusader howitzer program, a crucial contract for the Carlyle-owned United Defense company.
Rubenstein resents the suggestion that Carlyle's bigwigs shape public policy for private gain -- it's what made him erupt in an interview about his lack of connections. "Do you really think the current president of the United States would ruin his reputation and potentially hurt the United States because of his father's business interests? It's ludicrous," he says. "Do you really think because your father's making speeches in Saudi Arabia you're going to tilt U.S. policy one way or the other? It's ridiculous, it's absurd."
Still, he knows why people believe that about Carlyle. He even takes the blame for it. "I probably failed in conveying the idea that we're not using this company in an inappropriate way," he says.
Now, bit by bit, Rubenstein wants to change that image. A year ago he hired his first public relations specialist. Then, in November, he replaced former defense secretary Frank Carlucci as Carlyle's chairman with a different type of heavyweight: Louis V. Gerstner Jr., the former chairman of IBM.
It is Carlyle's first marquee hire from the world of business instead of government. It's only a step, and Carlyle has a long way to go to overcome its shadowy reputation. But Rubenstein has experience with transformation. His own career took a curious twist, as Rubenstein transformed himself from a young Carter White House policy wonk into a tycoon whose family safaris with Barbara Bush.
"His ideology was compatible with mine -- dedicated to human rights, civil rights, environmental quality, better education," Carter says in an interview. "I have been truly amazed by what David has done since the White House years."
Midlife Croesus
Carlyle, in its early days, was a far humbler creature than it is now. In fact, the company's first successful venture sounds like something from a spam e-mail. Rubenstein had discovered a legal loophole allowing Native Americans in Alaska to sell their tax losses, and he did a brief, brisk business connecting Eskimos with corporations in search of a write-off. Congress quickly closed the loophole, and Carlyle moved on in search of companies to buy. It made an abortive stab at the Chi-Chi's restaurant chain, and bought the Caterair International airline food service -- putting George W. Bush on the board, but later selling it at a huge loss.
The whole venture was something of a midlife crisis for Rubenstein, who had read somewhere that people rarely start businesses after they are in their late thirties. He had been treading water in a Washington law office, and through old friend Ed Mathias, then of Legg Mason, hooked up with a few other men of similar age looking to get into something new.
What they started was a private equity firm, aimed at using money from rich people or institutions to buy companies, run them for a while and sell them, hopefully at a profit. Carlyle was named for the swanky-sounding New York hotel, but that city's elite derided the little company for being based in a financial backwater like Washington.
Rubenstein craved legitimacy, so he paid attention when a former law partner passed on the tip that a big name in government, Carlucci, was about to leave office and was looking for opportunities. Rubenstein resolved to hire him.
"He was a person of some prominence. We were a 10-person firm, we thought hiring a person who was better known than we were might help us get our calls returned more. It was nothing more nefarious than that, or more intelligent than that," Rubenstein says.
It worked. Carlucci is one of the world's great networkers. He got insight into business deals all over the country by serving on a long list of corporate boards. With his Pentagon background, he pushed Carlyle to buy defense contractors at a time when such companies were out of favor with investors. When the defense industry later consolidated, Carlyle minted money by selling its pieces to the dominant new corporations.
Carlucci became chairman, and Rubenstein realized he had hit on a winning formula: If you put powerful people next to rich people, some of the power rubs off on the rich guys and some of the money rubs off on the powerful guys. Rubenstein began hiring other statesmen like a football owner stocking his team with stars, and the company steered its investments into government-regulated industries.
He got Baker, the former secretary of state, in a twofer with Darman, the former White House budget director. Former FCC chairman William Kennard signed on to oversee telecommunications and media investing. Former SEC chairman Levitt is helping Carlyle find companies to buy and advising on corporate ethics. Baker helped land Bush, whose primary function is to give speeches for Carlyle that attract wealthy foreigners in places where the former president is especially revered, such as Asia.
After Bush speaks, Rubenstein and others close in to get the wowed attendees to entrust them with their riches.
The company has rewarded its faithful with a 36 percent average annual rate of return. It has done so through deals such as its $165 million purchase of Magnavox Electronic Systems in 1993, which it sold two years later for $370 million. Or its 1997 purchase of United Defense for $180 million. Four years later -- just before Rumsfeld canceled its Crusader howitzer program -- Carlyle took United Defense public and sold about half the stock for $588 million.
Such deals are the province of co-founders Daniel D'Anielo, who runs daily operations, and William Conway, who oversees investments. Rubenstein is the people person. He travels 300 days a year recruiting investors, visiting employees, scouting for opportunities. He is a Jew who sips tea in Arabian palaces, the son of a Baltimore postal worker who buys pinstripe suits -- all alike -- in London.
His role would suggest some- one with a chamber-of-commerce smile, a two-handed handshake. Rubenstein is not that guy. "I'm a pretty serious person," he says, cataloguing the sins he avoids: "I don't drink alcohol, I don't smoke, I don't play golf."
At 53, he manages to look boyish even though his hair has gone white. His eyebrows are still dark, à la Steve Martin, and his mannerisms -- the palms-up shrug, the fast blinking when he makes a point -- evoke a less-hyper Woody Allen.
One of the most complicated things about Rubenstein is his sense of humor, which is pervasive but so bone-dry and understated that it's almost sneaky. When he greets someone for the first time with the stony-faced line "You were promised lunch, but the truth is, we don't actually have any lunch," the effect is off-putting and then amusing, a kind of barbed-wire charm.
Rubenstein also is relentlessly self-deprecating. Being a reporter must be a fascinating job, he'll say -- "with the exception of this interview." President Bush would no doubt love to have his advice, he deadpans, "so he could get inflation to 18 percent" the way Carter did with Rubenstein's help.
He speed-reads 10 newspapers a day and six books a week. Among the clutter on his coffee table one Saturday afternoon: Gulf Business magazine, the book "What Went Wrong: Western Impact and Middle Eastern Response" by Bernard Lewis and "The Lexus and the Olive Tree" by New York Times columnist Thomas Friedman.
Despite his drive to stay informed, Rubenstein also nurses an image as someone apart from the modes of the day. He hasn't seen a movie "in a dozen years." He carries a cell phone for emergencies, but doesn't know its number. He gets some 200 e-mails daily and responds to them all -- though he writes the responses on a legal pad and has an assistant type them into the computer.
Rubenstein's only real indulgence is gossip, which he uses both to reward and to milk his global network of big names. Otherwise, the man has no diversions. Work is his hobby.
"If I were forced to relax in conventional ways I'm convinced I'd have a heart attack," he says. "I came from a very modest background, worked very hard and now I've achieved something -- not a Nobel Peace Prize, not Bill Gates, but something."
The Wonk Years
An only child, Rubenstein was raised in a working-class Jewish neighborhood in the Pikesville section of Baltimore. "It was a rigidly segregated place by religion," he says. But everything changed for him when he went to Baltimore's enormous City College public high school.
There Rubenstein became friends with a charismatic football star named Kurt Schmoke, who one day would become the first elected black mayor of Baltimore. The two were members of the Lancers, a club for boys founded and still operated by retired Baltimore judge Robert I.H. Hammerman.
"I didn't think David was a leader in the sense of Kurt being a leader, in the sense of being president of a class or president of a school," says Hammerman, who recalls urging the teenage Rubenstein to believe in himself. "I didn't think David at that time had that in him because he was too shy and too unsure of himself. . . . He did not have much self-confidence then, [though] he might feel he always bristled with confidence, because he certainly bristles with it now."
Rubenstein went on to Duke University and won a scholarship to the University of Chicago Law School. After a couple of years working at a law firm in New York City, Rubenstein signed on as legal counsel to the presidential campaign of Birch Bayh.
When Jimmy Carter won the Democratic presidential nomination in 1976, Rubenstein won a job crafting domestic policy with campaign adviser Stuart Eizenstat. The two formed a close working relationship, and after the election Rubenstein found himself as the president's deputy domestic policy adviser at the age of only 27.
Intoxicated by the job, Rubenstein made himself indispensable through sheer labor. "He devoted probably more hours to his work in the White House than anyone on my staff, so far as I ever knew," Carter says. "He was a reticent person as far as putting himself forward. He was very modest, and never claimed credit for successes when they did materialize. . . . And he never betrayed me."
Newsweek magazine profiled Rubenstein in 1978 as the prototypical hyper-committed young policy wonk -- eating dinner from a vending machine, all but sleeping in his office. As the last one out of the West Wing most nights, Rubenstein would put his and Eizenstat's memos at the top of the pile in the president's private study, ensuring Carter always knew their positions. A jealous staffer with the Office of Management and Budget eventually got a Secret Service agent to sniff out his technique and put that agency's memo on top, Rubenstein says.
He likes to add that he didn't speak to that staffer for months, but later married her. Alice Rogoff Rubenstein went on to become an assistant to Donald Graham, then publisher of The Washington Post, and she later spent eight years as chief financial officer of U.S. News & World Report.
Rubenstein also recruited his old friend Schmoke to the White House staff. "All the legends about him and how hard he worked are absolutely correct," Schmoke says. "He was somebody that I never heard anybody say anything critical or a bad word about. He was always somebody concerned about community. . . . He was very much interested in public policy concerns, and broad societal issues."
Then, to Rubenstein's surprise, Carter failed to win a second term.
Lawyers who had once dangled job offers now didn't return Rubenstein's calls. He eventually hired on at the firm of Shaw, Pittman, Potts & Trowbridge, but found that he didn't really enjoy the work. Eizenstat, who remains a close friend, didn't worry about Rubenstein, because he figured he would follow a path similar to his own -- practice law, write papers for think tanks, step in and out of Democratic administrations.
But Walter Mondale's big loss in 1984 soured Rubenstein on politics. And as he entered his late thirties, he was restless for something to focus all that intense drive upon. Something that might carry a significant paycheck.
So he took the leap and formed Carlyle. Not long after the firm started up, Rubenstein met Judge Hammerman for lunch at Duke Zeibert's. "I just want you to know," he said to his old mentor, "I'm not selling out."
Wealth and Influence
Rubenstein got his payday, and then some. He has lost track of his net worth, he says, because Carlyle's structure gives him an interest in each of the firm's 250-plus investments, and those values fluctuate. But it's safe to say he has many millions.
The Rubensteins remodeled their Georgian-style home in Bethesda -- assessed last year at $1.7 million -- then bought the place next door and renovated it as a guesthouse. They built a 10,000-square-foot chalet in Beaver Creek, Colo., and a compound that sleeps 30 on Nantucket.
For all that, Rubenstein spends most of his time on airplanes or in hotels. He likes to point out that he neither skis nor sails, and visits those getaway homes maybe one week apiece each year.
"I'm kind of fascinated with his acquisition of houses," says Arthur Levitt, the former SEC chairman. "I'm not convinced that he likes any of these houses a great deal. . . . He talks about them, but I certainly don't have the feeling that he has any commitment to them whatsoever."
Despite his riches, Rubenstein has hung on to the persona of the earnest staffer laboring to make the marquee names look good. He hates the spotlight so much, associates say, he'll rearrange place cards at dinner to get himself off the head table. But what he's really doing is putting big potential investors next to the guest of honor, softening them up.
One thing that has changed about Rubenstein is his politics. He hasn't let go of his roots -- his wife, Alice Rogoff Rubenstein, is on the board of the Carter Center, and the Carters were overnight guests at the Rubensteins' Nantucket home this summer. But George and Barbara Bush are more common houseguests. Rubenstein's wife and three children went along on a safari with Mrs. Bush, and the Rubensteins were among a select group invited to the former first lady's 75th-birthday party.
"Spending time with them has affected my political views," Rubenstein says. Rather than Democrat or Republican, he now sees himself as a capital-C Capitalist. And he says he wants to position his company the same way.
Rubenstein has refused to let Carlyle form its own political action committee, and he has all but stopped making political donations. Since 1999 Rubenstein has contributed a total of about $2,500 to political campaigns, all Republican, according to the Center for Responsive Politics.
Others associated with Carlyle have given far more. From 1999 to 2000, people affiliated with the firm gave nearly $224,000 to Democratic candidates and groups and nearly $248,000 to Republicans, according to the center's numbers. Carlucci and co-founder William Conway are the company's most generous givers.
Numbers were way down in the post-presidential 2000 to 2001 cycle: $27,350 to Democrats and $81,285 to Republicans.
Rubenstein says he voted for the current president but did not raise money for him, and that he has visited this Bush White House only once, when a friend was involved in staging a Kennedy Center event.
Critics argue that the Carlyle magic can't be gauged by such traditional standards. "My concern is the influence that Carlyle has that is not accountable or monitored," says Charles Lewis of the Center for Public Integrity watchdog group. "This is a company that doesn't register for the most part in terms of its activities in Washington. It clearly has enormous influence, I mean astonishing influence."
Even Rubenstein, for all his protests that Carlyle doesn't consciously lobby the government, concedes that "maybe you get this influence by people thinking you have it."
How do you measure the impact, Lewis asks, when a company's top executive -- Carlucci -- chats at a cocktail party with Donald Rumsfeld about their wrestling days at Princeton? Or when its top adviser is not only a former president but once changed the diapers of the current president?
It's not just in Washington that such questions arise. Last year when the British government decided to privatize its secret technology lab by selling a stake to Carlyle, commentators and even some of the lab's employees expressed outrage about the company's ties to former British prime minister Major and to U.S. power brokers.
Also last year, Carlyle made the seemingly innocuous purchase of a Hong Kong company that is the world's biggest manufacturer of artificial Christmas trees. Shareholders in the Chinese company who opposed the sale pointed out that one of its top executives kept a picture of Major in his office, implying that once again Carlyle's connections had given it an unfair advantage.
One Carlyle insider, while vigorously defending the company's ethics, concedes that there is often an unsaid component to overseas dealings in which "certain types of investors" will assume Carlyle's big names mean big influence. "No matter how much you try to tell them, they think it's like their system," the source says.
That's also why the Internet hosts a robust strain of Carlyle-bashing. A British musical act calling itself the Carlyle Group has posted songs online with titles like "Vast Right-Wing Conspiracy" and "Blinded by the Right." One Web site offers a "Carlyle Casino" slot machine that uses pictures of Bush, Baker and Carlucci in place of cherries, bells and bars. Pull the handle, line up the photos and find out "Who's making billions from the War on Terror?"
The characterization infuriates some of Carlyle's biggest names. "I say that's bull[expletive], and you can print it!" snaps Baker. "Somebody would say, well, you had one of the bin Laden brothers as an investor. Well, that's exactly right," he says, adding that the bin Ladens are one of the wealthiest families in the Middle East and have disowned Osama.
Still, to deflect criticism, Rubenstein returned the bin Ladens' $2 million investment, and said that while Carlyle still has other investors in the Middle East, it no longer owns any companies there.
But even people who aren't looking for sinister conspiracies have questioned Rubenstein's approach with Carlyle. Rep. Marcy Kaptur (D-Ohio) was once a junior member of Carter's domestic policy staff and is amazed by her former colleague's career.
"I sort of saw David as the ultimate public servant. He was so selfless. He gave all that effort over all that period of time," she says. But now he has become something else: "I want to use a complimentary word here, I don't want to say a shadowy figure," Kaptur says. "Kind of a translucent figure."
Using former statesmen such as Bush and Baker to pursue private gain just seems inherently wrong, she says. "I think that using your public-sector contacts to aggrandize yourself when you leave . . . creates a view that the public sector is for sale."
Rubenstein understands the negative way some people view what he's done. Democrats, especially, "often consider the making of money in this kind of private-equity business as not as socially significant as working in a foundation or in government," he says. But he argues that Carlyle has contributed to the social good: it has created jobs and generated wealth for investors that include the California Public Employees Retirement System and other major pension funds.
Former president Carter says he finds no fault in Carlyle's stable of statesmen. "I think each public official, once leaving office, is as completely free as all other citizens of the United States to shape their own careers, within the bounds of ethical proprieties," he says.
But he is quick to add that Carlyle is something "in which, by the way, I have never been involved at all. I have never been in the commercial life at all." He did make one speech at a Carlyle conference, he says, but only to promote the Carter Center.
Times are changing, though. It's no longer valid to assume that Carlyle's golden roll of all-stars automatically opens doors in certain parts of the world, says Youssef M. Ibrahim of the Council on Foreign Relations in New York. "George Bush junior is kind of screwing his father up, slowly but surely, in terms of securing relationships in the region," Ibrahim says of the Mideast. The current administration's support for Israel, its hostility toward Iraq and its rocky dealings with the Saudi royal family have soured business and political relationships alike, he says.
In that light, it was especially good timing last year when Levitt introduced Rubenstein to Gerstner. The legendary IBM executive was planning to retire, and Rubenstein, much as he did 15 years before with Carlucci, resolved to hire him.
It was past time for Carlyle to work on its image, Rubenstein decided. Frustrated by the conspiracy theories, burned by the Sept. 11-bin Laden situation, Rubenstein viewed hiring Gerstner as the beginning of the next stage for his company.
"Maybe you would say it's an evolution," he says. Political connections got them started, but now Rubenstein would like Carlyle to take the next step -- becoming part of the bedrock of American finance, an institution that outlives its founders, the "Goldman Sachs of private equity."
As for his own future, Rubenstein has been thinking about someday getting his hand back into an administration. Not as a staffer or appointee -- that would be too restrictive, he says. No, Rubenstein now understands that if you want to do something to affect public policy, being the rich buddy of a sitting president would be the way to do it.
"I'm not as convinced as I once was when my hair was dark and I was 27 that all public-policy achievements are accomplished within government," he says. "I can have influence, if I want to, on the outside."
© 2003 The Washington Post Company
TAKEN FOR A SPIN
By SUZANNE KAPNER
June 6, 2004 -- Howard Rubenstein has built a career out of representing the rich and famous, but at a recent lunch for the Federal Law Enforcement Foundation, the publicist was greeted by some of the city's power brokers like a celebrity in his own right.
Police Commissioner Ray Kelly gave Rubenstein's hand a hearty shake, and then quietly shared his views on a high-profile murder case.
Attorney General Eliot Spitzer called Rubenstein a "paragon of integrity."
"He's good for business," Rubenstein, 72, said teasingly of Spitzer, whose crusade against corporate wrongdoers has created fresh demand for the publicist's services.
Not that Rubenstein is hurting for clients. For 50 years, he's served as spokesman for nearly half the city, running interference for the likes of Ron Perelman and Leona Helmsley, sometimes by turning potentially toxic publicity to his clients' advantage.
In the process, he's become one of the most well-connected people in a town where doing business is often dependent on whom you know.
Tomorrow night, about 3,000 of the city's movers and shakers will gather at Tavern on the Green to help Rubenstein celebrate the half-century mark. On the guest list are Mayor Bloomberg, real estate developer Donald Trump, New York Yankees owner George Steinbrenner and, yes, even media mogul Rupert Murdoch, the owner of this newspaper.
Real estate developer Larry Silverstein, who is battling insurance companies in his effort to rebuild the World Trade Center, called Rubenstein's advice "invaluable."
Rocco DiSpirito's mother recently dropped off a tray of homemade meatballs at Rubenstein's Midtown office to thank him for helping her son in his legal fight with restaurant partner Jeffrey Chodorow.
Rubenstein, ironically, attributes his success to a trait publicists are rarely known for -- honesty. A paperweight in his office is inscribed with the following Mark Twain quote: "If you tell the truth, you don't have to remember anything."
But in a world where perception is everything, Rubenstein has also learned to navigate expertly the shades of gray.
For instance, on a recent morning in his office, he told this reporter that he would never try to kill an unflattering story about one of his clients.
Moments later, the phone rang. Rubenstein picked it up, telling an unnamed client that he had convinced a certain publication to refrain from printing an unflattering story.
Rubenstein defended himself by saying that the story in question was totally false.
"I told the editor that if he ran a libelous story," Rubenstein said -- lowering his voice a notch -- "my client would end up owning his publication."
Before playing hardball with editors, Rubenstein was a Harvard Law School dropout with an uncertain future.
With the help of his father, Sam, a crime reporter for the Herald Tribune, Rubenstein started writing press releases for the Menorah Home and Hospital for the Aged. He later returned to law school, attending St. John's at night and graduating first in his class. Over the years, Rubenstein has perfected a knack for diffusing explosive situations.
For instance, the publicist was on hand when magician David Blaine ran into a media backlash during a stunt in London last year.
Blaine had spent 44 days in a box suspended over the Thames, while onlookers taunted him by throwing eggs and other refuse.
Afterward, Rubenstein coached Blaine on how to handle the prickly tabloids.
"We didn't get angry," Rubenstein said. "David told them he wished he'd thought of the pranks himself."
Given his age, Rubenstein frequently fields the inevitable questions about retirement (he won't) and succession (his sons). Richard and Steven Rubenstein currently run their own p.r. firms and stand to jointly succeed their father.
Some observers wonder how well the firm will fare when the founder is no longer at the helm, given that Rubenstein has been so closely intertwined with its success.
Rubenstein said his company, now with 170 employees, 450 accounts and annual billings estimated at more than $30 million, already far exceeds the talents of one man.
That may be true, but, colleagues said, no one operates quite like Howard.
"Howard would sit in a meeting with a client, he'd doodle and you'd think he wasn't even paying attention," said former employee Larry Weinberg.
"Then, at a crucial moment, he'd make a point that would synthesize the driving point -- and he was always right."
