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Naming the Carlyle Group as an example of the cronyism she was talking about, McKinney was implying that the Bush administration knew the attacks were coming, allowed them to happen, and was now reaping the profits, both financial and political, through its connections to the Carlyle Group. The Republican counter attack lambasted McKinney for a total lack of responsibility. Senator Zell Miller from Georgia called her “very dangerous and irresponsible’’. Kathleen Parker, a nationally syndicated columnist, called McKinney's statements “idiotic’’ and bordering on treason.

McKinney would eventually back off a little from her comments, saying, “I am not aware of any evidence showing that President Bush or members of his administration have personally profited from the attacks of 9/11.’’ But at least part of what she said was dead on: persons close to the Bush administration were in fact in a position to gain financially from the September 11 attacks.

By the beginning of 1993, Carlyle was a somewhat seasoned, if not terribly successful, private equity firm with stakes in ten companies valued at around $2 billion. But then began a rapid transformation, from bit-part player into an international political and financial powerhouse. Starting with James Baker, former Secretary of State under George Bush Sr., Carlyle brought in the high-priced, high-profile talent that would ultimately define the company.

Baker would prove to be an invaluable addition to the firm. He would help attract money from some of the wealthiest people in the world. A trend that in turn would make Carlyle itself one of the biggest investors in the world. The Carlyle Partners II fund was set up to focus on aerospace, defence, healthcare, telecommunications and insurance. The idea was to parlay the newly acquired political expertise that Carlyle had gained through the hiring of Baker, and invest in industries that are heavily dependent on federal regulation. This way, Carlyle could cash in on its ex-politicos in two ways: first, to help them raise money by giving speeches at home and abroad, packing the house with high net worth individuals; and, two, to leverage their relationships with lawmakers to gain insight on the direction of policies that affect their target industries. It was a brilliant strategy that was about to make all of them very, very rich.

The goal for the fund was $500 million, a relatively modest sum in private equity circles, but five times as much as Carlyle had ever raised. After rounding up almost $150 million from banks and pension funds, the company went after an investor that could contribute both money and fame and get them over the hump. They went after George Soros.

The Hungarian-American Soros already had a reputation as the most prescient and successful investor in the world. So when he agreed to become a limited partner in Carlyle's new fund he was bringing far more than just $100 million. With his reputation for making gobs of money, Soros was also jump-starting a fund that would go on to be the most successful in Carlyle’s history. By the time Carlyle Partners II closed in September 1996, the fund had raised more than $1.3 billion. From this massive fund, the company would spread its investments all over the defence world. Names like Aerostructures Corp., United Defence, United States Marine Repair, and US Investigations Services dominated the list of investments. And most of them had one thing in common: they depended on government contracts to make a living.

Carlyle was really starting to hit its stride in the mid-1990s, both in raising capital and cutting deals. They decided to hit the global scene, using ex-politicos to open doors and wallets. By the this time the company had George Bush Sr. casually working for them on and off as a “senior advisor’’. So it wasn’t difficult to hook former UK Prime Minister John Major, as well. He had been America’s ally during the Gulf War, which put him largely in the good graces of Carlyle’s Middle East investors. And Carlyle had plans to create another massive buyout fund, this time targeted at European companies. The fit was perfect, and in late 1997, John Major became a member of the Carlyle European Advisory Board — just months after he left his post as prime minister in May.

Over the next two years, the company would raise funds for investments in Asia, begin marketing funds to Latin America and Russia, and start up several venture capital funds aimed at smaller investments of up-and-coming companies. It would set up real estate funds in Europe and the US. By the end of the decade, Carlyle stood with more than a dozen funds and close to $10 billion under management. It was officially a juggernaut, and the world was taking notice.

The company was hiring politicians from all over the world to further their cause: former President of the Philippines Fidel Ramos; Prime Minister of South Korea Park Tae-joon; former SEC chairman Arthur Levitt. And, of course, George Bush Sr.

The Iron Triangle by Dan Briody is published by John Wiley at £17.50. To order your copy at £14.00 + £1.95 p&p call Times Books Direct on 0870 160 8080 or visit our website at www.timesonline.co.uk/booksdirect.

The author will be online to answer your questions on Monday, May 12. To send e-mails, go to www.timesonline.co.uk/talkingpoint  

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How Carlyle buys respectability and profits

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