Ambushing Private Equity

Lerner proposed a "late-night CNN commercial" labeling the Abu Dhabi government's $1.35 billion ownership of a stake in Carlyle as a potential risk to U.S. security.

"We should make some hay of it," said one of the team members. "Maybe do some public demonstrations around it."

The stakes are high, union officials said.

"Our country and the rest of the world is living through the most profound, significant and transformative revolution in the history of the world," said SEIU President Andy Stern, whose union will spend $100 million trying to get candidates elected over the next two years. "What we are seeing is the growth of a new form of capitalism."

In the United States alone, there were 881 buyouts worth a total of $390 billion in 2006 and 752 deals totaling $397 billion in 2007, according to Dealogic, a data-research firm. Those included Carlyle's $22 billion purchase of energy infrastructure company Kinder Morgan, Blackstone Group's $39 billion acquisition of commercial real estate giant Equity Office Properties, Kohlberg Kravis Roberts's $33 billion purchase of for-profit hospital chain HCA and TPG's (formerly Texas Pacific Group) $45 billion purchase of utility TXU.

Since the SEIU's assault began, there have been private-equity hearings on Capitol Hill and federal legislation introduced on nursing-home care. Legislation was introduced in California to stop private-equity firms from accepting new investments from countries with poor human rights records. The bill has been withdrawn. The Carlyle Group issued a bill of rights for patient care last year following criticism from the union.

Lerner and Stern began meeting with the heads of the big private-equity firms about a year ago, asking them to be more generous with health care, salaries and other employee benefits.

"Our tone was, 'You are now employers and you have a responsibility to make life better for employees,' " Lerner said.

When the union didn't get the response it wanted, it turned up the heat. It picked Carlyle and its co-founder Rubenstein as foils because Rubenstein often speaks publicly on private-equity issues. They set up a Web site called "Behind the Buyouts" and issued a 42-page pamphlet criticizing the big profits at buyout firms.

Carlyle and its allies said the SEIU's goal was less about global economics and more about recruiting new union members and enhancing its ability to organize workers. They said the SEIU was conducting several similar campaigns designed to embarrass companies such as Wackenhut and HCA. Wal-Mart is going through a similar hazing from the United Food and Commercial Workers union.

"These campaigns are three-dimensional negative political campaigns waged against the reputation of the target," said Steven Law, general counsel for the U.S. Chamber of Commerce. The SEIU's "true goal is to inflict as much pain as possible so that the employer gives the union what they want."

What the union really wants, say private-equity executives, is to force employers to waive their rights to insist on a secret ballot on union representation. Unions want to be able to organize a workplace by gaining the signatures of a majority of employees; executives say signatures could be coerced.