The name “Carlyle Group” has been cropping up a lot lately in news stories in connection with arms deals and the powerful interests involved in making those deals. But little is known about the group – who is in it, how does it operate and what does it have to do with the lives of ordinary people?

An article in the March 18 Fortune, which caters to upper-income people, gives the result of the magazine’s six week study of the mysterious group that includes among its members some of the biggest financial and political names in the U.S. and the world.

The Carlyle Group got its name from the N.Y. hotel owned by one of its first investors, the Mellon family. But its roster of investors includes such luminaries as former President George H.W. Bush, former Secretary of Defense Frank Carlucci, former Secretary of State James Baker, former Securities and Exchange Director Arthur Levitt, former British Prime Minister John Majors, former White House Budget Director Dick Darman, former Federal Communications Commission head William Kennard and former Philippines President Fidel Ramos.

Also included is a group of Saudi Arabian investors named bin Laden, though the family has said it had cut all ties to Osama. Still, the connection through Carlyle, between the Bush and bin Laden families, in a money-making enterprise, is a most interesting one.

And this is no ordinary money-making enterprise. In the past five years, Carlyle has raised a total of $14 billion from investors, and its average annual rate of return on investment has been 36 percent.

The Carlyle Group focuses on companies funded by the government such as defense contractors and other companies affected by government, regulations, such as telecommunications. But its interests and investments go beyond defense industies and include a European auto parts company, a Japanese DSL company and Silicon Valley startups. In fact, 25 percent of its profits come from real estate investments.

However, Carlyle is mostly associated with and interested in the defense industry, whose budget the Bush administration is proposing to increase by over $40 billion, on top of the $437 billion provided by the 2003 Federal Budget. Getting as much as they can out of that budget is the goal of the Carlyle Group, and that helps to explain the coming together of so many top former Defense Department and other former government Big Wigs like Carlucci, Kennard and Baker, among others.

The founder of the Carlyle Group is a lawyer, David Rubenstein, who worked as an aide in the Carter White House. He was joined by former MCI Chief Financial Officer Bill Conway and Dan D’Aniello, a former finance executive for Marriott, but it was the addition of Frank Carlucci that really got the company involved in the defense industry in a big way and brought in the big money.

Carlyle made a $130 million investment in military contractor United Defense Corp., and when that company went public last November, Carlyle’s investment ballooned to $900 million. Now, United Defense is expected to supply the Pentagon with 480 of its Crusader artillery systems for $5 billion. And it’s purely happenstance that Frank Carlucci and Donald Rumsfeld, present Secretary of Defense, are old buddies from the Princeton wrestling team and the Rumsfelds have been to dinner at Carlucci’s and have offered their ski house in Taos, New Mexico, to the Carluccis.

Fortune tells of a luncheon Rumsfeld gave a year ago where former Pentagon officials like Carlucci, William Cohen, Casper Weinberger, William Perry and Dick Cheney mingled. “Cabinet people are a small fraternity who all stay in touch,” says a former Carlyle staffer. “Once they’ve reached that global 50,000-foot view, they tend to stay there.”

And it’s strictly non-partisan. Former FCC head Kennard, and former Securities and Exchange Commission chairman Arthur Levitt are both Democrats. In a similar deal, former Vice President Al Gore was recently hired by Metropolitan West Financial of Los Angeles to help with tech deals and make introductions overseas.

But Carlyle is currently the largest and most profitable of its kind, due in large part to its defense investments and connections. So if you’re wondering what are some of the factors operating behind the scenes in the pursuit of the ever-expanding and everlasting “war against terrorism,” a full appreciation of such entities as the Carlyle Group and their role on the world scene, might be very enlightening.

Herb Kaye is a frequent contributor to the PWW from Oakland, Calif. He can be reached at