Julius Genachowski, Joe Lieberman and Tim Geithner have all taken positions. | AP Photos Private equity and D.C.: A love story

The private equity industry took a beating during the 2012 presidential campaign when Democrats used Mitt Romney’s ties to Bain Capital to attack the GOP presidential candidate as a coldblooded capitalist.

But that political heat hasn’t stopped the industry from luring Washington heavyweights — including Democrats — with big paydays when they leave government.


This month alone, former Sen. Joe Lieberman (I-Conn.) signed up with Chicago-based Victory Park Capital in an advisory role, while recently departed former Federal Communications Commission Chairman Julius Genachowski joined PE giant Carlyle Group. Former Treasury Secretary Timothy Geithner will begin full time at Warburg Pincus as president in March.

( PHOTOS: Timothy Geithner’s career)

The hiring spree over the past year shows how the industry’s 2012 political black eye did little to dampen the mutual attraction between Washington insiders and private equity — where firms get to boost their reputations with high-profile hires and former officials from across the government can trade in their Washington-bred skills for lucrative private-sector careers.

“The Romney thing — did that cause some temporary publicity to be focused on the industry, given the nature of some of the ads and rhetoric? Was it noticed? Sure,” said former Sen. Evan Bayh (D-Ind.), who joined Apollo Global Management in January 2011. “But I think that’s largely subsided.”

The industry’s aggressive business tactics have at times attracted criticism — especially during the 2012 campaign.

Private equity firms acquire companies and restructure them to maximize profits, sometimes taking on substantial debt in the process. Critics of the industry accuse firms of gutting companies and laying off employees for the purpose of attaining the highest returns for investors. Its supporters say private equity firms can help businesses that are on the brink of collapse and that returns on investments help a wide range of beneficiaries, including pensioners.

( Sign up for POLITICO’s Morning Money tip sheet)

The industry’s newest members with Washington résumés say that beyond the handsome financial rewards, PE firms offer them a chance to be involved in areas they focused on in government because the industry invests across a broad swath of the economy.

For Lieberman, the decision to advise Victory Park Capital was based on his personal relationship with his former aide and co-founder of the firm, Brendan Carroll. The senator said in a recent interview that he hopes to help raise the company’s profile, and he offered a measured defense of the industry as a whole.

“Frankly, some have more admirable and constructive records than others,” Lieberman said of private equity firms. “But overall, I think the PE sector has contributed to the growth of the economy. And somebody once said — and I can’t believe I’m actually quoting this, but — if you took the ‘capital’ out of capitalism, you’d be left with only an ‘ism.’”

( Also on POLITICO: Full finance policy coverage)

The stream of government officials who have been snatched up by PE companies recently has raised inevitable questions about Washington’s revolving door and whether former officials are cashing in on their government connections.

“Without a doubt, the private equity firms hired Geithner, [David] Petraeus and Genachowski because of their close connections with federal policymakers in both the executive and legislative branches — and I suspect at a very high price,” said Craig Holman, a government affairs lobbyist at the public advocacy group Public Citizen. “These are examples of revolving-door abuse in which wealthy private businesses attempt to buy access to the government through well-connected former officials.”

Other Washington players who have signed on with PE firms over the past year include former CIA Director Petraeus at KKR’s Global Institute, Obamacare architect Nancy-Ann DeParle at health care PE firm Consonance Capital Partners and retired Army Gen. and former NATO Supreme Allied Commander in Europe Wes Clark at Blackstone.

Some in the industry pushed back against the argument that government officials are doing anything inappropriate.

“These people are too serious, they’re too professional, and they’ve been important in the past, and they want to be important in the future,” said Scott Meadow, who has been a partner in venture capital and private equity firms for over two decades and is also a professor of entrepreneurship at the University of Chicago Booth School of Business. “And the way they can be important in the future is by aiding the growth and development of the portfolio companies that these private equity companies have invested in.”

The industry found itself attracting unwanted attention in the 2012 presidential election when Democrats seized on Romney’s tenure at Bain Capital, the Boston-based firm co-founded by the former Massachusetts governor. A barrage of attack ads sought to paint the GOP presidential candidate as having been a ruthless executive who didn’t care about slashing people’s jobs as long as his firm’s business decisions made money for investors.

The onslaught, directed at Romney and an individual company, put the larger PE industry on the defensive.

Bain did not mount a vigorous response, and other PE firms also shied away from engaging in a harsh public debate, leaving it to the industry’s Washington trade group — The Private Equity Growth Capital Council — to play defense.

While it wasn’t enough to drown out the Barack Obama ads, the pushback further thrust the industry out of the shadows.

“2012 was really a culmination of an industrywide realization that private equity can no longer operate under the radar,” said one PE industry source.

But 2012’s PE-bashing did little to discourage public officials from across the government from joining the industry.

For Petraeus, who resigned as CIA director in November 2012 after an extramarital affair with his biographer came to light, joining KKR’s Global Institute offered him the chance to find his footing in the private sector in a role that would put to use his understanding of geopolitical and macroeconomic trends.

Clark said joining Blackstone in June as a senior adviser focusing on energy issues felt like a “natural” fit.

“I have an engineering background, and I’ve done study on energy back when I was a captain in the Army, so I understood a lot about it,” he said.

Geithner’s move to the private equity industry raised eyebrows recently with critics charging he was spinning quickly through the revolving door. A person close to the former treasury secretary, however, said part of private equity’s appeal — as opposed to banking — was that it allows Geithner to keep an arm’s length distance from some of the regulatory and policy issues that he worked on as treasury secretary and president of the Federal Reserve Bank of New York before that.

If private equity firms seem newly enthusiastic about hiring former policymakers, it’s not a new practice. The firm Cerberus Capital Management, for example, was headed by former Vice President Dan Quayle and ex-Treasury Secretary John Snow well before Obama’s Bain-bashing commercials ever ran. Also, former Govs. George Pataki of New York and Matt Blunt of Missouri have been advising PE firms for years.

While many who have recently joined firms said they don’t plan to lobby, the industry nonetheless has several issues it is trying to influence in Washington.

The debate over how private equity compensation is taxed — the so-called “carried interest” debate — could heat up in 2014 if there is movement in Congress on tax reform.

Since the passage of the 2010 Dodd-Frank law, the industry has also kept a close watch over new regulations that affect private equity firms. In December, the House passed legislation supported by the industry that would exempt certain private equity fund advisers from SEC registration and reporting requirements in Dodd-Frank.

Individual firms also have a stake in laws and regulations that affect the industries and individual companies that they invest in. For example, Geithner’s new firm Warburg Pincus invests in the for-profit education provider Bridgepoint Education, and education was one of the top issues that the firm lobbied on in 2013, according to the Center for Responsive Politics.

“Like any industry, the PE industry wants to try to have its voice heard in Washington as regulations are put in place, and as some folks seek to change them,” said Jonathan Foster, founder and managing director of Current Capital.