The Carlyle Group, a large investment firm linked to US and British politicians, has pulled out of a scheme to recover billions of dollars from Iraq, following the publication in The Guardian this week of documents detailing the secret proposals of a consortium with which it was involved.
Carlyle published a withdrawal letter yesterday sent to other members of its consortium.
The consortium offered a confidential deal to use its political influence to collect a US$27 billion debt owed by Iraq to Kuwait, despite US pleas for debt forgiveness from other countries.
A Carlyle partner, former US secretary of state James Baker, has been accused of a conflict of interest, because he has been touring the world demanding debt relief on behalf of US President George W. Bush, while his firm had a private interest in doing a special deal with Kuwait.
Carlyle's letter, signed by its general counsel, Jeffrey Ferguson, and dated Oct. 13, says: "Carlyle does not want to participate in the consortium's work in any way, shape or form and will not invest any money raised by the consortium's efforts."
The letter also claims that at the time Baker was appointed the president's debt envoy that "Mr Baker understood that Carlyle would have no involvement with the consortium."
Carlyle admits it was involved in the original scheme by a consortium of financiers and lobbyists, who lobbied Kuwait at a meeting on July 16 last year.
Documents from the consortium describe Carlyle's chairman, former US defense secretary Frank Carlucci, as the man who "played a convening and guiding role on behalf of Carlyle."
They also specifically mention Baker's name as one of the "leading individuals associated with Carlyle" who they claim will be free to play a "decisive role" once Baker retires from his "temporary position" as debt forgiveness envoy.
The scheme had two parts. The first was to turn over Kuwait's US$27 billion war reparations debt to a foundation set up by the consortium, which would then use its political influence to ensure Iraq was made to pay up.
The second part of the plan was to benefit Carlyle specifically, by handing over to them US$1 billion from Kuwait to manage in their investment funds.
The documents suggest that Carlyle scaled back its stated involvement in the scheme while Baker was in his official post, but Kuwait was informed by the consortium that this was temporary.
The letter to Kuwait with the detailed proposal confirming Carlyle's continuation as a participant was signed by another former secretary of state turned lobbyist, Madeleine Albright, by a Washington law firm, Coudert Bros, and by the consortium's leader, Shahameen Sheikh of the "International Strategy Group."
In its second change of position in as many days, Carlyle claimed yesterday in its letter that "Carlyle was never a member of the consortium." The previous day, its spokesman claimed Carlyle "withdrew" from the consortium after Baker became debt envoy last December.
The day before that, its spokesman Chris Ullman told The Guardian, Carlyle had merely "restricted" its consortium role.
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