Charity Case? Clinton Foundation Can’t Escape Malfeasance Charges

Even before Peter Schweizer’s book Clinton Cash hit bookshelves, Hillary Clinton and her campaign team repeatedly attacked the book’s findings and may have coordinated with major media outlets in an attempt to discredit it.

The efforts to discredit the book and the related news stories from organizations such as Media Matters and Politico have been extensive and determined.

Once the information about Clinton Foundation malfeasance was made public, it sent shockwaves through the not-for-profit community. Philanthropy has not only become big “business” over the decades, but the industry has worked hard to build extensive standards and ethical guidelines intended to protect the public from fraud and abuse.

The Lilly Family School of Philanthropy at the Indiana University campus in Indianapolis has become the MIT of philanthropy studies. Its Chronicle of Philanthropy is the guidepost for professional philanthropic activity. And many websites have emerged to help evaluate and rate private charities and give the public solid information to help them make wise decisions in their generous giving. CharityNavigator.org is considered the gold-standard for this information. And as the allegations against the Clintons began to emerge as valid criticism, Charity Navigator found itself in the crosshairs of the Clintons and their surrogates.

In March of 2015, Charity Navigator, reviewing the organization’s activity and in light of the news reports surrounding the release of Clinton Cash, placed the Clinton Foundation on its red-flag watch list. This initially gave credibility to the concerns raised in the book, and put Bill and HIllary Clinton in a precarious situation because of the website’s pristine reputation.

New York Magazine reports that the Clintons and their surrogates put heavy pressure on Charity Navigator trying to get the Foundation off the watchlist. The pressure seems to have been heavy and persistent, and apparently had the desired effect.

Last year, Charity Navigator removed the Foundation from its watch list after it released its 2014 IRS statement (Form 990). The group kept the initial warning page up for a time but eventually took it down. Speculation arose over the release of the 990 about fixing the books of the Foundation. This claim is denied, but new evidence has come to light which seem to reveal problems within the organization were widespread and greatly concerning.

In recent WikiLeaks revelations, problems exposed within the Clinton Foundation may be showing Charity Navigator’s first instinct was correct. New revelations about a “governance review” of the Clinton Foundation reveal the breadth of problems within the Foundation’s operations which in key points confirm the findings of Clinton Cash. And it includes the fact that donors to the Foundation had an expectation of a “quid pro quo” return from the Clintons because of their gifts.

The audit, commissioned by Chelsea Clinton, was conducted by New York law firm Simpson, Thacher & Bartlett, LLC in December 2011, revealed major problems with financial irregularities, board makeup, accountability standards and potential misuse of funds. It started a feud between Chelsea and Clinton Foundation executive Doug Band.

Bombshell revelations in the report were revealed in the report. The firm’s findings of pay-for-play contributions to the Foundation and its criticism of the “small insider board” which provided little or no oversight of the operations of the Foundation including the appropriate use of funds.

The review points to numerous areas where the Clinton Foundation ignored “best practices” for a not-for-profit. This prompted recommendations by Simpson, Thacher & Bartlett for serious changes in their operations. This included establishing an independent Advisory Board to initiate independent audits, implementing controls for how money is spent, implementing a conflict-of-interest policy and changing the way employees are compensated and correcting the conflicts of their employment with outside organizations.

The firm stressed that the board provide stronger management of the organization. They pointed to the fact that the board rarely met and gave little guidance to how the Foundation should be managed. The problem was so concerning to employees that they rated the effectiveness of the organization in the “low 1-4 level” on a scale of 1 to 10.

The review pointed to a lack of management of conflicts-of-interest with severe improvements needed to improve internal controls on spending and expense reimbursements pointing to a concerning misuse of funds. This included a concern that the Foundation might be running afoul of IRS rules requiring non-business related expenses be reported as taxable income.

The report stated that, “numerous [employees] commented that they believe that the Board
needs to take a more active role in overseeing and managing the Foundation and its finances,
programs, and activities.”

The report also pointed to concerns that the Foundation could be running afoul of the law if it did not expand the board moving from one “comprised solely of ‘insiders’” to one made up of outsiders who could better review the activities of the organization.

They urged them to appoint an independent Audit Committee which could hire an outside auditing firm to review problems of a lack of controls, develop a system to allow for “whistleblower complaints involving financial matters,” and review conflict-of-interest policies.

A major red flag they pointed to was that the board didn’t meet until the middle of the year to review the budget. And they strongly asserted “this weakness was not corrected even after being noted by auditors.”

Jim Pfaff is a former Chief of Staff on Capitol Hill and is President and CEO of Innovative Research and Data Solutions, a political, business and telecommunications consulting firm.


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