Carlyle Changes Its Stripes

In the two decades since private equity firms first stormed the business world, they've been called a lot of things, from raiders to barbarians. But only one firm has been tagged in the popular imagination with warmongering, treason, and acting as cold-eyed architects of government conspiracies. The broadsides got to be more than David M. Rubenstein, William E. Conway Jr., and Daniel A. D'Aniello, founders of Washington's Carlyle Group, could take. "It was nauseating," Rubenstein says.

Carlyle, founded 20 years ago in the shadow of Washington's power centers, long went about its business far from the public eye. Its ranks were larded with the politically connected, including former Presidents, Cabinet members, even former British Prime Minister John Major. It used its partners' collective relationships to build a lucrative business buying, transforming, and selling companies--particularly defense companies that did business with governments.