Pair of Proposals Take Aim at Carlyle Group
Friday, February 15, 2008
The Carlyle Group finds itself under fire from two legislative initiatives.
Sens. Charles E. Grassley (R-Iowa) and Herb Kohl (D-Wis.) yesterday introduced legislation that would increase the regulation of nursing homes. District-based Carlyle in December closed a $6.3 billion deal to buy Manor Care, one of the nation's largest nursing-home chains.
Wednesday, a California state assemblyman introduced a bill that would bar California's giant public pension funds from investing their money with private-equity firms that are partly owned by countries with poor records on human rights.
Both bills are supported by the Service Employees International Union, which has 1.9 million members, including nursing-home workers. The union, which helped write the California legislation, alleges that private-equity firms underpay workers and put profit ahead of care for nursing-home patients.
"SEIU members support an economy that works for everyone, not just big private-equity firms and sovereign wealth funds," said Stephen Lerner, assistant to the president of the SEIU and director of its private-equity project. "We have serious concerns about our members' pension fund money being invested with countries that engage in human trafficking and violate human and workers' rights."
The California legislation is aimed at the California Public Employees' Retirement System (Calpers) and the California State Teachers' Retirement System (Calstrs). Calpers invests with Carlyle and owns a 5.5 percent stake in the company that is estimated to be worth about $1 billion.
Calpers did not return a call seeking comment.
Carlyle spokesman Chris Ullman yesterday said, "Carlyle has been one of Calpers's most successful equity investments. And it would do a disservice to pensioners, which includes SEIU members, to deprive them of the fruits of those investments."
The company declined to comment specifically on either bill.
In September, Carlyle sold a 7.5 percent share of its general partnership for $1.35 billion to an investment group owned by the government of Abu Dhabi, which is part of the United Arab Emirates. The State Department has described the UAE's record on human rights as "problematic."
Mubadala Development is only the second outsider, after Calpers, that Carlyle has allowed to buy into its highly profitable partnership.