State Officials: Carlyle Group Promised High Ethical Standard

The state Department of Transportation took “very seriously” the roles played in two public pension fund scandals in Connecticut and New York by the private equity firm behind the plan to renovate and run 23 highway rest stops here, according to the agency’s spokesman.

Spokesman Judd Everhart added that DOT officials were left “satisfied” and “comfortable” with their decision to award a 35-year contract to the Washington-based Carlyle Group because the firm submitted ethics affidavits attesting that there would be no “collusion, gifts, or campaign contributions.”

He added that Carlyle, which technically is the principal investor in Doctor’s Associates, Inc — the joint venture contracted to overhaul the rest stops — agreed to submit the affidavits even though such forms only are required of state contractors and vendors.

Everhart said the DOT specifically required Carlyle to make “certain representations” in its response to the agency’s request for proposal. He said that when the agency learned of “the Carlyle issue in New York,” it reviewed the firm’s legal settlement six months ago with New York Attorney General Andrew Cuomo and asked for a separate affidavit.

The spokesman also pointed out that if the affirmations made to the DOT by Carlyle are found to be false, the agreement “is in default.”

The DOT “took this matter very seriously and required assurances every step of the way that no such issues would arise in Connecticut and in connection with this agreement,” he said.

Christopher W. Ullman, a spokesman at Carlyle’s Washington, D.C., headquarters, said that the firm had responded to the DOT’s concerns and expects to take over the rest stops Dec. 7.

“The way we look at it is that they asked questions and we were happy to answer them, and that they were pleased with the response,” he said.

The documents submitted by Carlyle show that to assist the firm in its negotiations with the DOT it hired lawyers, ethics specialists, architects, engineers, environmental consultants, and a public relations firm.

The lawyers included Thomas J. Regan, a partner in the Hartford office of Brown Rudnick, where former state House Speaker Thomas J. Ritter is also a partner.

Everhart said Carlyle told officials that it had not paid any placement agents or hired any lobbyist to obtain the rest stop contract.

Among those submitting both an “affirmation of receipt of state ethics law summary” and a personal affidavit was Daniel A. D’Aniello, the managing director of TC Group Infrastructure LLC, which is the general partner of Carlyle Infrastructure Partners LP.

He wrote that the firm’s contract proposal had been submitted without collusion or fraud and that none of his firm’s subcontractors or employees had bribed or attempted to bribe a state employee in connection with the deal.

Carlyle a decade ago figured prominently in what was known as the “Silvester scandal,” in which it and other investment firms paid lucrative “finder’s fees” to associates of the corrupt former state Treasurer Paul Silvester to secure hundreds of millions of dollars in state pension fund investments.

Silvester, who was sent to federal prison after his conviction on federal racketeering and money laundering charges, testified that in connection with one such deal he had Carlyle pay a prominent lobbyist and major Republican fundraiser, Wayne L. Berman. Berman subsequently hired Silvester and his mistress after Silvester lost his 1998-election bid, but Berman fired them both as the FBI’s investigation of the scandal deepened.

Similarly, Carlyle in May agreed to pay $20 million to stop Cuomo’s investigation of “pay-to-play” practices involving the New York state pension fund.

The firm also pledged to adopt what Cuomo called a code of conduct banning investment firms from paying placement agents, lobbyists, or other third-party intermediaries to communicate with pension fund officials.

Under the agreement unveiled last week, Carlyle is expected to invest $178 million in the joint venture to rebuild and operate the service plazas on four of Connecticut’s major highways.

Gov. M. Jodi Rell has said she expects the deal to bring as much as $500 million in benefits to the state. But the co-chairman of the General Assembly’s Judiciary Committee, Sen. Andrew J. McDonald, D-Stamford, said he was skeptical of the figure given his understanding of how much would be returned in royalties from concession and gasoline sales.