David Rubenstein, co-founder and Managing Director of The Carlyle Group, the "world's largest private equity firm," recently recounted his first meeting the current president and Bush's days on the Carlyle board in a speech to the Los Angeles County Employees Retirement Association. LACERA has invested $95 million in Carlyle, now the 11th largest defense contractor in America as majority shareholder in United Defense. For ethical reasons, many in the association would like to see LACERA funds pulled and invested elsewhere.
In the speech Rubenstein also touched on company ethics - under intense scrutiny since 9/11 - including widely reported stories about Carlyle operating as a shadow government. He assured investors that "making money is nice" but Carlyle is "first and foremost" concerned with ethics.
David Rubenstein: But when we were putting the board together, somebody [Fred Malek] 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 a board position. 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.
I said well we're not usually in that business. But okay, 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 for us.
We put him on the board and [he] spent three years. Came to all the meetings. Told a lot of jokes. Not that 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 that much value to the board. You don't know that much about the company.
He said, well I think I'm getting out of this business anyway. And 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. He became President of the United States. So you know if you said to me, name 25 million people who would maybe be President of the United States, he wouldn't have been in that category. So you never know. Anyway, I haven't been invited to the White House for any things.