Tom Rhodes, New York
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The TIMES London
AN INVESTMENT bank connected to leading fundraisers for George W Bush, the Republican frontrunner, is involved in a fraud inquiry being conducted by the FBI. The Carlyle Group, which employs former President George Bush as a senior consultant and is associated with corporate backers of his son, is being investigated in a wider inquiry into an allegedly illicit transfer of public funds.
At its centre is Wayne Berman, a former assistant secretary of commerce in the Bush administration who represents Carlyle and whose company, Park Strategies, was involved in the transfer of $800m (£500m) in 1998 from the Connecticut state pension fund into private ventures. A sum of $50m was placed in a Carlyle fund.
In an attempt to limit damage to the Texas governor's campaign, Berman, who denies any wrongdoing, has relinquished his position as a "pioneer", one of 400 elite supporters selected to raise money for the campaign war chest. Democrats, however, believe the unfolding inquiry may prove harmful to Bush.
His rival John McCain's strong rhetoric about reforming the electoral process by banning huge corporate donations has ensured that the role of big money will be an election issue.
Bush's opponents will try to show that he has courted special interests in return for financial and political support. Carlyle, whose board includes two Bush backers, James Baker, the former secretary of state, and Frank Carlucci, a former defence secretary, provides a window on to the unusual cadre of corporate and political contacts Bush has relied on, particularly since he became governor in 1994. Many have been selected as Bush pioneers.
Carlyle - which has hired John Major, the former prime minister, as a European consultant - first came into direct contact with the younger Bush in 1989 when it acquired Caterair, one of America's largest airline catering businesses. It asked Bush to sit on the board. He resigned as a director when he ran for governor, but never lost touch with his father's old associates.
A month after becoming governor, Bush received a campaign contribution of $25,000 from Thomas Hicks, a multimillionaire he subsequently confirmed in a seat on the board of regents at the University of Texas.
One of the wealthiest men in Texas, Hicks had conceived an ambitious investment strategy for his alma mater's $13 billion in assets. With Bush's support, Hicks gained unprecedented control of these public funds. Using his investment company as the university's broker, he set up a separate corporation known as the University of Texas management company.
In 1995 Tom Loeffler, a former Republican congressman and Washington lobbyist for Hicks, joined the board of regents. Also appointed to the board was Don Evans, an oil company executive and close friend of Bush.
Shortly afterwards the regents voted to hand over $10m to the Carlyle Group: in effect, Bush's political appointee oversaw an investment of public funds in a company that not only had maintained a long-term business relationship with him but later employed his father.
In 1998 a further $20m was invested in a deal involving the wealthy Bass oil family from Fort Worth, Texas. Later that year $96m was placed by the university in Maverick Capital, a new Dallas venture whose partners were the Wyly family, big Republican contributors and friends of the Bushes.
When Evans, now Bush's campaign chairman, released a list of 115 pioneers, few were surprised by the names. Steven Hicks, brother of the Texas investor, Loeffler, Charles Wyly and Lee Bass, whose partnerships received investments from the university fund, and Berman were all included.
As they monitor the FBI inquiry into Berman and Carlyle, Democrats are poring over files they hope will contribute to the portrayal of Bush as the corporate candidate.
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