Reported deal between global buyout firm in which Abu Dhabi government owns significant stake and top government contractor warrants close scrutiny, tightening of standards for review of national security concerns

WASHINGTON, D.C. - Global buyout firm the Carlyle Group's announcement that it seeks to acquire Booz Allen's government consulting business should raise serious questions about the ramifications for national security and demands immediate government oversight to ensure adequate controls exist should the deal be completed.

This arm of Booz Allen had $1.2 billion in Department of Defense contracts last year. The Carlyle Group already owns a large number of US defense contractors. 

Last September, Carlyle announced the Mubadala Development fund of the Government of Abu Dhabi paid $1.35 billion for a 7.5% ownership stake in Carlyle. Driven by rising oil prices, the falling dollar, and political opportunism, foreign countries are increasingly investing in the US economy through the purchase of stakes in leading American companies by huge sovereign wealth funds.

The potential for a Carlyle Group-Booz Allen buyout demands urgency on the part of lawmakers and regulators to examine the risks faced by the US when foreign governments potentially have access to classified and other sensitive national security information through their stake in US companies.

The potential risks are becoming alarmingly high, as Carlyle Group has announced its intention to invest billions in developing infrastructure such as toll roads, water and sewer systems, bridges, tunnels, highways and airports across the US.

"We shouldn't allow the unchecked greed of buyout billionaires like David Rubenstein to put our communities at risk,"said Stephen Lerner, Director, SEIU Private Equity Project. "With billions of taxpayer dollars at stake in these contracts, accountability and transparency is a primary concern since the Carlyle Group operates behind a veil of secrecy."

The US economy is becoming increasingly tied to sovereign wealth funds. In the wake of the subprime mortgage crisis, Citigroup Inc <C.N> and Merrill Lynch & Co Inc <MER.N> announced Monday that they are raising $20 billion in capital from investors in Asia and the Middle East. Such transactions are likely to gain additional scrutiny as the economy worsens and becomes the subject of election-year discussion. In Tuesday's Democratic presidential debate, all three top candidates called for transparency and accountability with respect to sovereign wealth funds and related financial transactions.

 

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