With the ascension of George W. Bush to the presidency, the White House is now full of ex-Carlyle employees, friends and business partners. And with the newly fattened defence budget, Carlyle has been able to extract massive profits from its defence holdings.

THE same morning as American Airlines Flight 11 roared towards the north tower of the World Trade Center the Carlyle Group was holding its annual investor conference. Among those who gathered in the plush setting of the Ritz Carlton hotel in Washington were former world leaders, former defence experts and wealthy Arabs from the Middle East.

There with them, looking after the investments of his family, was Shafiq bin Laden, Osama bin Laden’s estranged half-brother. George Bush Sr. was also at the conference, but left before the terror attacks. It is impossible to say when it dawned on the partners at the Carlyle Group that what was to come, as a direct result of September 11, would serve their financial interests. Perhaps it was that very day, in the midst of the chaos and grief that had gripped the nation.

Or maybe it was the next day, when President Bush characterised the attacks in no uncertain terms as “acts of war’’. Regardless, there was little doubt by the third day after the attacks that Carlyle was in for some heady times. Congress overwhelmingly approved $40 billion in emergency funds, about half of which was earmarked for the armed services.

Also in the works was a massive increase in the Pentagon budget, $33 billion, in time for the Department of Defence’s 2002 fiscal year, beginning October 1, 2001.

But before cashing in Carlyle had to deal with a public relations crisis. Carlyle had been doing business with dozens of families and businesses throughout the Middle East since the early 1990s. And they had been extremely successful in the region.

After all, the company had been running the Saudi Economic Offset Program for years, a government-funded programme designed to encourage foreign investment into Saudi Arabia, under the condition that a portion of the profits be reinvested in Saudi Arabia. In a sense, Carlyle had become the gatekeeper to foreign investing in Saudi Arabia.

Not many people were aware of any of this at the time of the September 11 attacks. But by the end of September, the general public would know far more about Carlyle’s business than anyone Carlyle was comfortable with. In the weeks following the attacks, the name Osama bin Laden leaped on to the forefront of America’s consciousness as public enemy number one. Then, on September 27, The Wall Street Journal ran a story entitled “bin Laden Family Is Tied to U.S. Group’’. That group, of course, was Carlyle.

Carlyle had a relationship with the bin Ladens that began in the early 1990s, when they tried to put together a deal for the Italian Petroleum (IP) company. At the time, Basil Al Rahim, a young Carlyle associate, was travelling from Saudi Arabia to Amman to Bahrain, to United Arab Emirates, drumming up support for Carlyle’s forthcoming international funds. One of the clients that Al Rahim helped secure was the bin Laden family, which owned a $5 billion construction business by the name of Saudi Binladin Group.

The bin Laden family consists of more than 50 brothers and sisters, all the progeny of Mohammed bin Laden. Osama had his Saudi citizenship revoked in 1991, and was reportedly cut off from his family. Since his father’s passing, Bakr bin Laden became the head of the business and the family, and as such he committed money to Carlyle on several occasions. It was a fruitful relationship for both parties involved. But now, in the most atrocious irony of Carlyle’s history, the bin Laden family was in a position to make millions from the war being waged against their own brother. The news that George Bush Sr., James Baker and other Carlyle worthies had visited the bin Ladens in recent years stunned the American public. It was, in fact, the Carlyle Partners II fund in which the bin Laden family was invested. The same fund that held a host of defence holdings.

Carlyle told the press that the bin Ladens were only in for $2 million, a relatively small amount of money considering the whole fund was worth $1.3 billion. But one bin Laden family financial representative says the number was much larger. Regardless of the actual amount, the irony ultimately proved too much for Carlyle, and by the end of October, they severed ties to the family, liquidating their holdings. But it wasn’t until a member of Congress called out Carlyle by name that the company started fighting back.

In March 2002, Representative Cynthia McKinney, a Democrat from Georgia, spoke out against “persons close to this administration who are poised to make huge profits off America’s new war’’. She went on to say, “We know there were numerous warnings of the events to come on September 11 . . . what did this administration know and when did it know it . . . what do they have to hide?’’

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