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Say What? White House Plots With Secretive Investment Firm With Ties to Bushes And Bin Ladens?

05/30/2014 01:08 pm ET | Updated Jul 30, 2014

President Obama likes to say that his is "the most transparent administration" ever. But members of the environmental community and biofuel industry -- some of his most ardent supporters in the past -- might beg to differ. For if a news-service article had not appeared in early May, the public might never have known about secret political maneuverings that resulted in the Obama administration taking actions to reduce renewable fuel standards on behalf of Big Oil, a move that will lead to dirtier air and a greater dependence on foreign oil.

The saga began in 2011 when Sunoco decided that two of its refineries in Philadelphia, Pennsylvania had become a drain on its profits. If a buyer could not be found, Sunoco would close them. Sunoco identified as a potential buyer the Carlyle Group, one of the largest private equity firms in the world with $199 billion in assets under management -- a company also known to value profits over all else. In 2012, the companies entered into a joint venture, which saw Sunoco no longer putting up working capital and Carlyle taking over operation of the refineries. Anxious not to lose 850 jobs in his district, Congressman Robert Brady, a Democrat, helped convince Gene Sperling, director of the National Economic Council, to push through approval of the sale by the Environmental Protection Agency.

New financial problems soon arose. They stemmed from the Renewable Fuels Standard. Established by Congress in 2005, the law required transportation fuel to contain a minimum amount of renewable fuel such as ethanol. The renewable fuel would be blended into traditional fuel, escalating until it reached 36 billion gallons by 2022. A Renewable Identification Number (RIN) is issued each time a gallon of biofuel is made, and they are sold on the market like a commodity. RINs are the mechanism that oil companies use to prove they have blended the renewable fuels into their product. In 2013, when a RIN credit suddenly rose from a nickel to well over a dollar each, refineries such as the complex in Philadelphia faced financial ruin.

To solve the problem, Carlyle did what came naturally: It tried to manipulate government to its advantage. Carlyle executives met with Ronald Minsk, an economic adviser to President Obama. More importantly, in July 2013, a Carlyle executive approached Congressman Brady. When the financial crisis was described to him, Brady went to Joe Biden on behalf of Carlyle. "I walked into the vice president and told him what the issue was," Brady was later quoted. "[Biden] said, 'We've got to try to fix that.'" Whatever Biden did next was carried out in secrecy.

Carlyle is notorious for its association with politicians. From 1998 until 2003, former president George H.W. Bush made speeches for Carlyle, at $80,000 a piece, and served on its Asia Advisory Board. From 1993 until 2005, James A. Baker III, Bush's secretary of state who had served in the Reagan administration, was Carlyle senior counselor. From 1989 until 2005, Frank Carlucci, Ronald Reagan's last secretary of defense who was once deputy director of the Central Intelligence Agency, was Carlyle chairman and chairman emeritus.

In the early 2000s, critics leveled charges of cronyism and conflict of interest when United Defense, owned by Carlyle, received lucrative government contracts from the administration of George W. Bush, who once sat on the board of directors of Caterair, an early Carlyle acquisition, while his defense secretary was Donald Rumsfeld, Carlucci's wrestling partner and roommate at Princeton University. Carlyle profited enormously, thanks to those contracts, when it took United Defense public in late 2001.

Carlyle is also known for its affiliation with investors most private equity firms would shy away from -- for example, the bin Laden family of Saudi Arabia. The most infamous incident in Carlyle's history was the investor conference held in Washington, D.C. on September 11, 2001. The conference's guest of honor was Shafiq bin Laden, the brother of Osama bin Laden, the mastermind behind that day's attack on the World Trade Center and the Pentagon, which killed almost 3,000 people. The night before, the conference was addressed by George H.W. Bush, a Carlyle advisor, leaving some to question the link between the Bush and bin Laden families through Carlyle.

With such a past, it's no wonder Biden would not want to be connected to Carlyle. As it happened, Delta Airlines, which acquired a refinery near Philadelphia in 2012, was having similar financial concerns caused by RINs. So Delta executives approached Congressman Patrick Meehan, a Republican, in whose district the refinery is located. Meehan hand-delivered a letter to Sperling, who had helped Carlyle with its refineries. Sperling raised the issue of RFS with senior Obama officials.

The end result came in November 2013 when, in a stunning policy reversal, the EPA proposed lowering requirements for all biofuels -- the first time the requirements had been softened since the law was passed in 2005. The proposed numbers will be finalized this summer. How did this happen? The Obama administration was lobbied by various agents for Carlyle and Delta, but Congressman Brady was especially effusive about the role Biden played. Once Biden was made aware of the RIN issue, Brady said, "we fixed it." According to some, then, Biden was the key player in lowering renewable fuel standards.

While oil companies were ecstatic, the biofuel industry was livid. In addition to cutting ethanol -- which is made from corn -- the White House also cut biodiesel, an advanced biofuel that doesn't compete with food sources and burns significantly cleaner than diesel made from oil.

Watchdog groups were incensed. Citizens for Responsibility and Ethics in Washington complained to the EPA inspector general. On May 22, Melanie Sloan, CREW executive director, demanded an investigation into Carlyle and Delta because they "improperly influenced the Renewable Fuel Standards proposed by the EPA...to financially benefit oil refineries the companies own.... These standards...should not be manipulated for the benefit of a small group of politically-connected special interests." CREW has also sent a Freedom of Information Act (FOIA) request with the EPA to find out exactly what role Carlyle played in this decision.

In April 2012, a senior Obama official confirmed the administration's commitment to renewable fuels by saying the RFS "is a critical tool to promote growth in renewable fuels production in the years ahead." However, one year later, the administration -- led by Vice President Biden at the behest of the Carlyle Group -- pulled an about-face and gutted biofuel requirements. No wonder the Obama administration -- and in particular Biden -- wanted all of this kept out of the headlines. If Biden runs for president in 2016, it's the kind of issue that will destroy his credibility with the progressives in the Democratic Party, a constituency he desperately needs if he hopes to be taken seriously as a candidate.