"bizarre" coincidences

[pynchonoid]

Five Degrees of Osama
FORTUNE
Wednesday, January 22, 2003 
By Nicholas Stein 

In December, President Bush named Thomas Kean, the
former Republican governor of New Jersey, chairman of
an independent commission examining the Sept. 11
terrorist attacks. But FORTUNE has learned that Kean
appears to have a bizarre link to the very terror
network he's investigating--al Qaeda. 

Here's how the dots connect: Kean is a director of
petroleum giant Amerada Hess, which in 1998 formed a
joint venture--known as Delta Hess--with Delta Oil, a
Saudi Arabian company, to develop oil fields in
Azerbaijan. One of Delta's backers is Khalid bin
Mahfouz, a shadowy Saudi patriarch married to one of
Osama bin Laden's sisters. Mahfouz, who is suspected
of funding charities linked to al Qaeda, is even named
as a defendant in a lawsuit filed by families of Sept.
11 victims. True, Hess is hardly the only company to
cross paths with Mahfouz: He has shown up in dealings
with, among others, ultra-secretive investment firm
Carlyle Group and BCCI, the lender toppled by fraud in
1992. 

Kean, who was unavailable for comment, may not have
been aware of the Mahfouz connection. But Hess
spokesman Carl Tursi did reveal another interesting
coincidence: Three weeks before Kean's appointment,
Hess severed its ties with Delta. 

>From the Feb. 3, 2003 Issue	  


....re Carlyle Group:

Los Angeles Times
January 10, 2002 	
Arms Buildup Enriches Firm Staffed by Big Guns
 Defense: Ex-president and other elites are behind
weapon-boosting Carlyle Group.

By MARK FINEMAN, Times Staff Writer
WASHINGTON -- Even by Washington standards, the
Carlyle Group has some serious clout. 

President George W. Bush's father works for Carlyle;
so does former Defense Secretary Frank C. Carlucci,
whose close friend Donald H. Rumsfeld now runs the
Pentagon; and so does a stellar cast of retired
generals and Cabinet secretaries, including former
Secretary of State James A. Baker III. 
 	 
 And even by Wall Street standards, the Carlyle Group
has some serious money: $12.5 billion in investments
at last count. The Washington-based private equity
firm, which advises and invests for wealthy clients
and institutions, has shown returns of more than 34%
through the last decade, particularly through timely
defense and aerospace investments. 

So when President Bush declared war on terrorism in
September, few were better poised than Carlyle to know
how and when to make money. 

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. The stock sale cashed in on
increased congressional support for hefty defense
spending, including one of United Defense's
cornerstone weapon programs. 

Carlyle's windfall is a result of astute business
decisions, excellent connections, strategic lobbying,
good timing and a bit of luck. It is also a prime
example of how defense contractors got well in a hurry
after the Sept. 11 attacks, in a year when the Bush
administration already was planning steep hikes in
defense spending. 

For several years in the late 1990s, United Defense's
Crusader Advanced Field Artillery System--a massive
high-tech cannon that could fire faster and with more
impact than any before it--was in trouble at the
Pentagon. The system clashed with the vision many
military planners and analysts have for a lighter,
more mobile Army. And its high price tag--originally
$20 billion--endangered it in times of tight defense
budgets. 

But the suicide attacks on the Pentagon and the World
Trade Center freed up tens of billions of dollars in
new defense spending. United Defense already had
modified the Crusader, making it 20 tons lighter. And
the Army had cut its order by more than half to make
it more palatable to budget cutters. 

On Sept. 26, 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. 

Then Congress fully funded the system in the defense
authorization bill that passed the House and Senate on
Dec. 13, the day before Carlyle's stock sale. And
President Bush is scheduled to open the funding spigot
today, when he signs a defense appropriation bill that
includes $487.3 million for the Crusader in 2002. 

The ties that bind the president's family and close
advisors to Carlyle have helped draw the confidence of
its investors--and the criticism of outsiders. 

"It's the first time the president of the United
States' father is on the payroll of one of the largest
U.S. defense contractors," said Charles Lewis,
director of the Center for Public Policy and one of
Carlyle's most ardent critics. 

"Between Baker and Carlucci, not to mention dear old
dad, the relationship of the president with this
particular company is as tight and close as, well,
anyone can imagine."  [...] 


It was founded as a small private-equity firm in 1987
by David M. Rubenstein, a young lawyer who had worked
as an aide in Jimmy Carter's White House, and two
investment specialists. They named the company after
their favorite hotel in New York and started out with
a modest portfolio of $100 million. 

In 1989, Carlucci retired as Ronald Reagan's Defense
secretary and joined Carlyle. Soon after, the company
aggressively went after defense and aerospace
investments, a specialty for Carlucci and the other
former government officials who followed him into
Carlyle. 

Their investment strategies paid off, not only in
defense acquisitions and sales but also in a wide
array of corporations. Carlyle's portfolio quickly
grew into the billions of dollars as pension funds and
wealthy businessmen and families, including royal
sheiks in the Persian Gulf, invested with the firm. 

As its reputation grew, so did the group's
star-studded management roster. It added former Joint
Chiefs of Staff Chairman Gen. John M. Shalikashvili;
Arthur Levitt, the long-serving former chairman of the
Securities and Exchange Commission; former British
Prime Minister John Major; former Secretary of State
Baker; and former President Bush (Carlyle officers say
the elder Bush's principal role is as "a draw":
delivering speeches at Carlyle-sponsored events). 

Last February, the California Public Employees'
Retirement System announced it was investing $425
million in "a strategic partnership" with Carlyle.
Even the company owned by Osama bin Laden's estranged
billionaire family in Saudi Arabia was among Carlyle's
clients--a mere $2-million investment that Carlyle
said it bought out after Sept. 11 "for image reasons,"
Ullman said. He declined to say whether the Bin Ladens
made a profit. 

[..] Carlyle's timing was impeccable. 

First came the Bush administration's proposed 2002
defense budget. The document landed in Congress in
June 2001, and it included an 11% hike in defense
spending, including full funding for the Crusader. 

Bolstered by the good news and the prospects for the
company, Carlyle took its first dividends from United
Defense on Aug. 13: $289.7 million. 

Twenty-nine days later, the two hijacked airliners
slammed into the World Trade Center towers, while
another hit the Pentagon. President Bush declared war
on terrorism, defense industry stocks were suddenly
hot and, just five weeks later, Carlyle was ready to
take United Defense Industries public. 

On Oct. 22, United Defense filed its stock-offering
prospectus with the SEC. 

"The terrorist attacks of September 11, 2001, have
generated strong Congressional support for increased
defense spending," the prospectus declared. "We
believe that domestic and international defense
spending will grow over the next several years as a
result of an increased focus on national security by
the U.S. government and its allies." 

A month later, Carlyle took $92 million more in
dividends out of United Defense. 

Then, on Dec. 13, the Defense Authorization Bill
passed both the House and Senate, with full funding
for the Crusader, just one day before United Defense
went public. United Defense's president and chief
executive, Thomas Rabaut, even got invited to ring the
opening bell at the New York Stock Exchange that day. 

Carlyle Managing Director Allan Holt explained: "The
decision to take United Defense public was a function
of the performance of the company, the outlook for its
programs in the defense budget and the receptiveness
of the market to defense equity offerings. 

"We have an obligation to try to achieve the best
returns for our investors." 

And they did. 

By the closing bell, Carlyle, which still controls 54%
of United Defense, had sold more than 11 million of
its shares in the company for a total of $237 million.
United Defense raised an additional $163 million from
the sale of about 9 million new shares. [...] 





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