IBM’s ed-conscious chairman heads to contact-heavy Carlyle Group

As IBM chief executive and newly appointed chairman Samuel J. Palmisano confronts the fallout in the education community from his company’s alleged eRate infractions, outgoing chairman Louis V. Gerstner has set his sights on aspirations far removed from educators’ concerns.

Gerstner, well known for his calls for sweeping education reform, will take the helm of The Carlyle Group, the politically connected investment league whose rarefied leadership and investor roster ranges from former President George Bush to, until recently, the Saudi family of Osama bin Laden.

Gerstner will become chairman of the Washington, D.C.-based Carlyle on Jan. 7, replacing Frank Carlucci, who was defense secretary during the Reagan Administration.

“This is a once-in-a-lifetime opportunity for Carlyle to have a businessman of Lou’s stature and accomplishments join our organization,” said Carlucci, who will become chairman emeritus at Carlyle.

The firm, with almost $14 billion in assets and headquarters on Pennsylvania Avenue near the White House, has long been considered a power broker in the defense industry, buying out or investing heavily in weapons and aerospace firms. The firm also invests in consumer products, energy, health care, information technology, real estate, and telecommunications. Would-be investors need to pony up $5 million to gain access to one of Carlyle’s funds.

Since 1987, the firm says it has invested $7.2 billion and achieved a rate of return of 36 percent.

The company’s leadership bundles a slew of retired top government officials—mainly Republicans—including former Secretary of State James A. Baker III and Richard Darman, former director of the Office of Management and Budget under former president Bush, who himself served with Carlyle. According to research firm Hoover’s, Colin Powell, before becoming Secretary of State, made an appearance on Carlyle’s behalf, and the current payroll includes Britain’s former prime minister John Major and former Securities and Exchange Commission chairman Arthur Levitt.

Carlyle’s investor roster proved embarrassing in the aftermath of the Sept. 11 terrorist attacks, when it was revealed that both the Bush and bin Laden families had earned profits from the firm.

The bin Laden family cut its ties with Carlyle last year, selling its $2.02 million stake in a fund that invests in buyouts of military and aerospace companies. Saudis complained the family might profit from increased military spending in the U.S. war against terrorism. The family disowned exiled Islamic militant Osama bin Laden years ago.

Gerstner, who retired from a nine-year tenure as IBM’s chief executive in March, will commit about 20 percent of his time to Carlyle, advising the group’s investments and portfolio companies. Gerstner stepped down as IBM’s chairman at year’s end.

Gerstner joined IBM in 1993 and oversaw a dramatic turnaround at the then money-shedding technology maker. Previously, he served as chief executive at RJR Nabisco and as a top officer at American Express Co.

While at IBM, Gerstner co-authored Reinventing Education: Entrepreneurship in America’s Public Schools and co-chaired Achieve, an organization created by U.S. governors and business leaders to drive high academic standards for the nation’s public schools. He also established IBM’s $75 million Reinventing Education program in support of systemic school reform.

Through Reinventing Education, IBM has initiated strategic partnerships with 21 states and school districts, which are using IBM technology and technical assistance to eliminate key barriers to school reform and improve student performance. Neither Gerstner nor The Carlyle Group returned calls seeking comment.


The Carlyle Group

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