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Revelations that the Carlyle Group was involved in a secret deal to profit from Iraq's debt have vanished under a spell of silence

Less than 24 hours after it was disclosed that former secretary of state James Baker and the Carlyle Group were involved in a secret deal to profit from Iraq's debt to Kuwait, NBC was reporting that the deal was "dead". At The Nation magazine, which broke the story that was then carried on these pages, we started to get congratulatory calls. They were commending us for costing the Carlyle Group $1bn, the sum the company would have received in an investment from the government of Kuwait in exchange for helping to extract $27bn of unpaid debts from Iraq. We were flattered (sort of), until we realised that Carlyle had just pulled off a major PR coup. When the story broke, the notoriously secretive merchant bank needed to find a way to avoid a full-blown political scandal. It chose a bold tactic: in the face of overwhelming evidence of a glaring conflict of interest between Baker's stake in Carlyle and his post as George Bush's special envoy on Iraq's debt, Carlyle simply denied everything. The company issued a statement saying that it does not want to be involved in the Kuwait deal "in any way, shape or form and will not invest any money raised by the consortium's efforts" and, furthermore, that "Carlyle was never a member of the consortium". A spokesperson told the Financial Times that Carlyle had pulled out as soon as Baker was appointed debt envoy, because his new political post made Carlyle's involvement "unsuitable". [more]