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Potentional conflict surfaces in bid to ease iraq debt { October 14 2004 } Original Source Link: (May no longer be active)
http://www.boston.com/news/world/articles/2004/10/14/potential_conflict_surfaces_in_us_bid_to_ease_iraqs_debt/http://www.boston.com/news/world/articles/2004/10/14/potential_conflict_surfaces_in_us_bid_to_ease_iraqs_debt/
Potential conflict surfaces in US bid to ease Iraq's debt
By Farah Stockman, Globe Staff | October 14, 2004
WASHINGTON -- When President Bush appointed a close family friend, former secretary of state James A. Baker III, as a special envoy to help reduce Iraq's foreign debt, Baker's monumental task was clear: to persuade the governments of the world, including Kuwait, to forgive billions that Iraq owes them.
But even as Baker traveled this year to Asia, Europe, and the Middle East, the company in which he is a partner stood to earn a lucrative fee through its involvement with a consortium of companies offering to help Kuwait collect $27 billion owed it by Iraq, according to individuals involved in the deal.
Baker, a voluntary envoy who reports directly to the president, is an equity partner with a significant financial stake in The Carlyle Group, a Washington-based merchant bank where Baker serves as a senior counselor.
A 65-page proposal to the Kuwaiti government by the unnamed consortium, which includes the Albright Group, touted the connections of Carlyle Group officials, including Bush's father, a former Carlyle adviser, and Baker himself, according to copies posted on the Internet by The Nation, a liberal weekly news magazine.
The proposal stated that Kuwait was in danger of losing billions that Iraq owes in both debt and war reparations, and said the consortium's "personal rapport with the stakeholders in the anticipated negotiations" will help "reach key decision-makers in the UN and in key capitals."
Yesterday, the Carlyle Group issued a statement saying it "does not want to participate in the consortium's work in any way, shape, or form."
Christopher Ullman, the Carlyle Group's vice president of corporate communications, also said that no one in the Carlyle Group had seen the proposal before it was submitted to Kuwait in January 2004, and did not agree with all that it said.
However, Ullman acknowledged that Frank Carlucci, a former defense secretary who is chairman emeritus of the group, had long been involved in discussions with Kuwait about the deal and that the consortium's proposal would have given Carlyle a lucrative arrangement.
He said, however, that Carlyle opted not to officially become part of the consortium because of the appearance of a conflict of interest with Baker and that, had the deal gone through, measures would have been taken to ensure that any gains the company would have gotten from the agreement would not have flowed to Baker.
"We were in discussions with these folks. There were legal documents that in the end we decided not to sign because of Baker's post," Ullman said.
Baker, secretary of state under Bush's father and head of the former president's campaigns, was appointed a volunteer envoy for President Bush last December. At the time, many critics expressed concern about a possible conflict of interest arising between his job as envoy and his widespread business contacts, which include a Texas law firm, Baker Botts, that represents numerous clients in the Middle East, as well as Halliburton.
Thomas Fitton, president of Judicial Watch, a conservative ethics watchdog, spoke out against Baker's appointment in December and expressed dismay yesterday at the news of a potential conflict of interest.
"If it is true, it is the type of activity that ought to give pause to those concerned about ethics in government," Fitton said. "You have a revolving door of high-level officials . . . leaving government and going into that company. The Bush administration has been slow to realize the problems of using individuals linked to Carlyle or quickly going to Halliburton. They have got to understand that appearances matter."
The White House had no immediate response to the story, which broke hours before the final presidential debate. Fred Jones, a spokesman for the National Security Council, said he did not know if the White House was aware of the proposal by the private consortium, which does not appear to have been accepted by the Kuwaitis.
In a statement, Albright Group spokeswoman Jamie Smith confirmed that firm's involvement in the consortium and the authenticity of the proposal. The firm is headed by Madeleine Albright, former secretary of state.
"Our purpose in joining the consortium proposal was to help secure justice for victims of [Saddam Hussein's] invasion of Kuwait and ensure that compensation to Kuwaiti victims, fully consistent with US policy, be used to promote reconciliation, environmental improvements, and investment in Kuwait, Iraq, and the region," Smith said.
Numerous calls to Mark Curran, spokesman for the Coudert Brothers, another consortium member, were not returned yesterday. Calls to Baker's law firm also were not returned.
© Copyright 2004 The New York Times Company
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