‘Settlement’ exposes politician-financier corruption

Carlyle Group, the world’s second largest private equity corporation, agreed on May 14 to pay $20 million as part of an out-of-court settlement for its role in the “pay-to-play” corruption scandal involving public pension funds. The out-of-court settlement shields all Carlyle executives from any criminal liability.

Carlyle is a private equity firm that enjoys close connections to the Bush family and a number of other prominent politicians. It is one of a handful of financial firms that have been ensnared by an investigation launched by the New York State attorney general. Begun more than two years ago, the investigation has now spread to a host of other states as it has become apparent that the trail of corruption extends far beyond the Empire State.

The unfolding investigation has exposed the process whereby private equity corporations bribe politicians with campaign contributions and direct kickbacks. Once in office, the politician steers public pension funds toward investing with the private equity corporation that backed his or her campaign.

Hank Morris, a top aide to former New York State Comptroller Alan Hevesi, was recently indicted for an alleged role in the scandal. Morris allegedly received at least $15 million in kickbacks from investment firms like Carlyle Group and Quadrangle Group in return for giving the firms access to the retirement funds of public employees.

Quadrangle Group was co-founded by Steven Rattner, who is currently overseeing the attack on autoworkers as head of President Barack Obama’s auto task force. Rattner was serving as a senior executive at Quadrangle during the years the company was allegedly paying kickbacks to Hank Morris and others.

As part of the settlement, Carlyle Group has agreed to sign on to New York Attorney General Andrew Cuomo’s proposed Public Pension Code of Conduct. The code will place restrictions on campaign contributions from financial firms to politicians who control public pension funds.

Cuomo said of the code, “This is a revolutionary agreement. It ends pay-to-play. It bans the selling of access. It puts the political power brokers out of business.” (Bloomberg, May 15)

If only it were that easy. While Cuomo claims victory over corporate corruption and audaciously claims to be putting “the political power brokers out of business,” the reality is that his settlement with Carlyle amounts to an ineffectual slap on the wrist. The watered-down code will do little to end the symbiotic relationship between corporations and politicians.

The settlement allows Carlyle to essentially sweep serious allegations of corruption under the rug in return for the $20 million payment. While $20 million is an almost-unimaginable fortune for the hundreds of thousands of city and state employees whose retirement funds Carlyle gained access to, for Carlyle itself, $20 million is a drop in the bucket. Carlyle is a financial behemoth with a war chest of more than $85.5 billion.

Carlyle received more than $878 million in investments from the New York State Common Retirement Fund alone. Carlyle extracted “management and incentive” fees totaling $37.5 million from the retirement fund. (ABC, May 14)

When discussing the investigation at a recent press conference, Cuomo likened some of the political players involved in the scandal to Boss Tweed, the infamously corrupt New York City politician from the mid-nineteenth century. Before proclaiming that his new code of conduct agreement will put an end to pay-to-play scandals, Cuomo should ponder the fact that the same kind of corruption that was taking place more than 150 years ago is still going on today.

Under capitalism, politicians are paid representatives of the banks and corporations. They enable the unceasing assault by the corporations and banks against the workers and oppressed. Politicians served this role in the early stages of capitalism in Boss Tweed’s day, and they serve this role in modern global capitalism.

The results of Cuomo’s investigation are yet another confirmation that a tiny minority of billionaire politicians, bankers and bosses are perpetrating a perpetual rip-off of the workers and oppressed. They are robbing us from the cradle to the grave.

The same politicians who hand out the retirement funds of public employees to private equity corporations are slashing budgets for public education and social services for children and youth. They are the same politicians who are overseeing the trillion-dollar, taxpayer-financed bailouts of the banks and corporations. And they are the same politicians and corporations that are fighting in tandem against pro-worker legislation like the Employee Free Choice Act.

For the workers and oppressed, the pension fund scandal is additional proof that faith in capitalist politicians is misplaced. The power for true and lasting change lies not in the empty rhetoric of capitalist politicians, but rather in the mass worker-led movements that are out in the streets struggling for social and economic justice.

Workers will be gathering for a People’s Summit in Detroit on June 14-17 to strategize and plan ways to strengthen the mass struggle against the corporations and banks and their political enablers. For more information visit www.bailoutpeople.org.