Three Carlyle Founders Each Land a $138m Payday

By Dominic Rushe, Guardian UK

12 January 12

he trio who founded private equity powerhouse Carlyle Group took home more than $400m in compensation last year, according to a regulatory filing.

The huge payday for the firm, which claims presidents and prime ministers among its advisers, comes as the private equity industry has fallen under intense scrutiny over the course of the race for the Republican nomination.

Current GOP frontrunner Mitt Romney has come under fire for his time at Carlyle rival Bain Capital, where he amassed a large personal fortune.

Carlyle founders David Rubenstein, Bill Conway and Daniel D'Aniello each received $138m in pay last year, according to documents filed with the top US financial watchdog the Securities and Exchange Commission (SEC).

The three co-founders each received a base salary of $275,000, a bonus of $3.5m, and a $134m share of the firm's investment profits.

Rubenstein, Conway and D'Aniello founded the Washington-based firm 25-years ago and named it after the luxurious New York hotel they favour. It once specialised in defence contracts but has since expanded its investment interests. Recent buyouts include the car rental group Hertz, Dunkin' Donuts and Moncler, the Italian fashion and sportswear brand. The disclosures were made as Carlyle prepares for a stock market listing.

Often described as 'secretive', Carlyle is famous for its top-level contacts and political hires. It counts former president George Bush, his secretary of state James Baker, and John Major, the former UK prime minister, among its alumni and was a target of Michael Moore's documentary Fahrenheit 9/11.

Last year Carlyle returned $17bn to its investors, a company record. In the third quarter Carlyle's net income rose 60% to $918.1m, on revenue of $2bn, the firm disclosed in a regulatory filing.

The payout comes amid intensified scrutiny of the private equity industry from both sides of the political spectrum. Romney's Republican rivals have gone after his record as chief executive of Bain Capital. Newt Gingrich has accused Romney of "looting" companies, depicting him in ads as a greedy job killer "more ruthless than Wall Street". Rival Rick Perry compared the industry to "vultures" in South Carolina this week.

Carlyle itself has had its run-ins with the law. In 2009 it paid $20m to settle a case brought by Andrew Cuomo, then New York attorney-general and now New York governor, which charged that it paid well-connected executives to secure investments from New York state's huge pension fund.

The whole industry has also been criticised, by top investor Warren Buffett among others, for the advantageous tax status its executives enjoy. Thanks to a longstanding tax break, payouts to private equity executives can be treated as a capital gain, taxed at a 15% rate, rather than income, typically taxed at 35%.