Did The Carlyle Group Profit From Insider Information On The Crusader Weapons System?
by Douglas Page

JULY 9, 2002 (Douglas Page) -- TCG Holdings, a Carlyle company, itself owned a privately held company, United Defense Industries until it was taken public in an IPO on December 13, 2001. United Defense Industries Inc. raised $400.9 million, ahead of its initial public offering. The company sold 21.1 million shares at $19, the mid-point of its $18 to $20 price range.

UDI held the contract to build the Crusader weapon system.

Speculation is that UDI had tried for years to mount an IPO, but was unable to do so. On the strength of the Crusader contract and plenty of verbal help, UDI offered a successful IPO.

TCG Holdings owned 40% of UDI prior to the IPO on December 13, 2001. The IPO was attractive for investors because of the Crusader weapons system, for which UDI had a contract.

Strangely enough, the insider officers and President of UDI sold a lot of their stock on December 19, 2001.

Furthermore, The Carlyle Group (TCG Holdings) sold off more than 240 million dollars worth of UDI stock in January 2002.

Did these people sponsor an IPO based on Crusader enthusiasm, and then quickly sell their stock, knowing that Rumsfeld was going to cancel the Crusader?

January 12, 2002: TCG sold 11 million shares for $202 million.

January 16, 2002: TCG sold another 2.3 million shares for $41 million.

January 16, 2002: insider officers sold more of their shares.

According to the NYSE report on UDI's Insider and Restricted Trades (Yahoo Finance -- second link, below) TCG Holding's sale of UDI stock "Indicates that some (or all) shares are held indirectly (e.g. in a trust, by a spouse etc.)"

On June 5, 2002 Iron Horse Holdings announced a planned sale of 1 million shares of UDI stock for an estimated $22 million. (we have not been able to locate further information on Iron Horse Holdings.)

These are, to say the least, very suspicious transactions. If UDI shares prior to the IPO were of dubious value, the Carlyle Group profited handsomely from these transactions.

The address of TCG Holdings is
c/o Carlyle Group
1001 Pennsylvania Ave
Suite 2203
Washington DC 20004-2505
Phone: 202-347-2626.

Does The Carlyle Group hold and manage any assets of President George W Bush, Vice President Dick Cheney, and Secretary of Defense Donald Rumsfeld? Were any of these assets vested in UDI stock?

Considering that former President George H.W. Bush, James Baker, and other principals of the Carlyle Group have long personal and financial relationships with the current administration -- can these assets possibly be held by TCG in a true "blind" trust?

Peter Boyer writes in the July 1, 2002 issue of the New Yorker magazine of the antagonism between Donald Rumsfeld and the Army "old guard". Rumsfeld wants a modern, very mobile Army with light armaments; the Army "old guard" want heavy, expensive items such as the Crusader artillery system. Bush publicly campaigned for the Crusader and publicly supported it at least until May of this year. Rumsfeld came aboard to moderninze the Army in a revolutionary way. Despite what Bush said publicly, one can only suspect that he must have known of Rumsfeld's intentions and his view.

When did the principals of The Carlyle Group learn of Donald Rumsfeld's intent to cancel the Crusader as part of the Army modernization -- despite the President Bush's public support of the Crusader?

Forbes analysis of UDI

Background: United Defense Industries is engaged in the design, development and production of combat vehicles, artillery, naval guns, missile launchers and precision munitions. For the 3 months ended 3/31/02, revenues rose 22% to $356.4M. Net income before extra. item rose from $5.1M to $19.3M. Results reflect funding for the Crusader program, increased funding for a Bradley upgrade contract and a decrease in intangible amortization and interest expenses. Fifty-Two Week High: $29.85 Fifty-Two Week Low: $18.99.

UDI -- Insider & restricted shareholder transactions reported over the last two years (Yahoo!)

UDI Stock Chart (Yahoo!)

UDI summary (Yahoo!)

UDI in the News (Yahoo!)


UDI downgraded -- May 2, 2002 (CBS Marketwatch)

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ISSN No. 1523-1690