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How Do You Spell Apparent Fraud? The Clinton Foundation, Shady Accounting and AIDS

Ken Silverstein photo
Ken SilversteinWashington, DC
How Do You Spell Apparent Fraud? The Clinton Foundation, Shady Accounting and AIDS
The Clinton Foundation has until November 16 to amend more than ten years’ worth of state, federal and foreign filings, but it’s going to be virtually impossible to do so without acknowledging that it has engaged in massive accounting fraud since its inception

The Clinton Foundation has gotten a good deal of unflattering attention as of late, which isn’t surprising given that its best known namesakes are Bill, a former president and chronic philanderer, and Hillary, who hopes to be the nation’s next leader. Furthermore, the foundation portrays itself as do-gooder nonprofit organization but a cursory look reveals questionable and incomplete disclosures of its activities and accounts, as well as incredible misspending of donor money, virtually since its inception.

Naturally, this can’t be stated in polite society. For example, the New York Times just had a story on the Clinton Foundation that found highly questionable conduct but buried it under the bland headline, “Rwanda Aid Shows Reach and Limits of Clinton Foundation.” Other stories have mentioned that the foundation has partnered with assorted dictators and robber barons. Among the latter is Canadian “mining magnate” (read: "penny stock artist") Frank Giustra, who donated millions to the foundation after Bill Clinton helped him land a mining concession for him in Kazakhstan.

(Note: I have an upcoming story on the Clinton Foundation’s links to Giustra and to Washington-based consultant Alexander Mirtchev, who is a front-man for powerful Kazakh government officials.)

However, the problems appear set to catch up with the foundation (now formally known as the Bill, Hillary, & Chelsea Clinton Foundation), which has until November 16 to amend more than ten years’ worth of state, federal and foreign filings. According to Charles Ortel, a financial whistleblower, it will be difficult if not impossible for the foundation to amend its financial returns without acknowledging accounting fraud and admitting that it generated substantial private gain for directors, insiders and Clinton cronies, all of which is against the law under an IRS rule called inurement.

While inurement may sound obscure to the layman, it’s an ancient legal principle and the IRS is very clear that it is verboten. If you are familiar with it, it becomes immediately clear that Bill Clinton – and arguably Hillary and daughter Chelsea as family members and fellow Clinton Foundation trustees – could have big problems come November 16. So, too, could Clinton cronies like Ira Magaziner (see below) and Doug Band, a Clinton administration and former Foundation insider who subsequently became a founding partner of a bipartisan business swamp called Teneo Holdings.

In terms of Bill Clinton, consider that he received a $6.3 million to write his 2007 book “Giving: How Each of Us Can Change the World,” about his philanthropic activities and he made countless dollars more to give speeches on the topic. Not a bad deal, though admittedly that’s probably a bit less than the roughly $128 million the Clinton Foundation says it spent on all program services between 2001 and 2006, which includes its spending to provide relief to victims of the Tsunami in Asia and of Hurricane Katrina. The same pattern of taking in vast sums from donors and spending far less to help victims has continued ever since.

“It’s illegal to set up a foundation whose primary purpose is to create financial gain,” said Ortel – who helped expose massive financial fraud by GE, GM and AIG, thereby helping trigger the 2009 financial collapse. “That’s bright line illegal.” (Ortel wrote an article at earlier which showed how “associates of Bill and Hillary Clinton may have attempted to monetize their participation in Clinton family philanthropic activities.”)

Ortel, a former managing director of Dillon, Read & Co, said that under New York law tax authorities don’t have to show criminal intent to get convictions against foundation officials, they need only show that the foundation filed materially misleading financial information and kept fundraising nonetheless. "The essence of what a charity does is take your money and show you how they spend it,” he told me. “The Clinton Foundation takes your money and obscures how they spend it.” (Note that the Clinton Foundation only started disclosing its donors in 2008, in response to years of pressure.)

Foundation spokesman Craig Minassian did not reply to repeated requests for comment for this story.

Ortel is hardly alone in raising questions about the Clinton Foundation’s accounting practices. Earlier this year, the watchdog group Charity Navigator put the Clinton Foundation on its “watch list” of dubious non-profit groups and politely described its business practices as “atypical.” A New York Post story about the development noted that in 2013 the family’s foundation “took in more than $140 million in grants and pledges in…but spent just $9 million on direct aid.”

Charity Navigator is described by the Chronicle of Philanthropy as the country’s “most prominent” nonprofit watchdog and “ranks more than 8,000 charities and is known for its independence,” New York magazine reported at the same time. That story noted that Charity Navigator’s new ranking of the Clinton Foundation placed grouped it together with other “scandal-plagued charities like Al Sharpton's National Action Network and the Red Cross.”

Detailed information provided to me by Ortel – and which I carefully reviewed and confirmed -- shows that the Clinton Foundation has received more than $1 billion over the years to purchase HIV/AIDS drugs for poor people in Africa, Asia and elsewhere. The leading donors to the foundation to support this admirable goal include the Bill & Melinda Gates Foundation and UNITAID.

However, a unit set up to receive the money – the Clinton Foundation HIV/AIDS Initiative Inc., which was run by Ira Magaziner, a Clinton administration veteran with close ties to Hillary – clearly spent far, far less than it took in. In fact, the unit’s accounting methods and operating practices were so shoddy that its license was revoked by the state of Massachusetts, where it was headquartered.

Furthermore, the accounting firm that handled much of the paperwork, BKD, has been implicated in a variety of misconduct. For example, last year the Securities and Exchange Commission sanctioned BKD for “violating auditor independence rules when they prepared the financial statements of brokerage firms that were their audit clients,” according to this story.

(As reported by the Washington Free Beacon, BKD was replaced as the foundation’s accountant by – no, I’m not making this up – PricewaterhouseCoopers, whose previous clients included Enron. That firm’s CEO, Kenneth Lay, died of a heart attack before he was shipped off to prison after engineering one of the biggest financial frauds in American history, with the help of accounting firms like PricewaterhouseCoopers.)

Ortel has issued two little-read reports that strongly suggest that the New York-headquartered Clinton Foundation has violated federal and state laws that bar charities from enriching board members, officers or donors. “The Clinton Foundation is like a Turkish bazaar,” Ortel told me. “You think you’re going into a carpet shop but you’re really going into the back of a truck.” (Ortel says he is politically closer to the GOP than to the Democrats, but says he mostly hates “crony capitalism” as practiced by both parties.)

Last April, Clinton Foundation acting CEO Maura Pally acknowledged “mistakes” in its tax filings and promised they would be corrected by November 16.

The problem, Ortel says, is that filing correct returns is impossible for the Clinton Foundation without admitting to criminal felonies. “The foundation has never filed a legitimate, independently certified and complete audit of their financial statements since it was founded, as is required under state, federal and foreign law” he told me during one of multiple phone conversations. “The IRS has let them get away with serious fraud.”

In 2001, Bill helped set up the Clinton Foundation within weeks of leaving office – after surrendering his law licenses in January for lying under oath during the Monica Lewinsky investigation. That’s not much of a qualification to help run a foundation since those in charge of charities are legally bound to always make truthful declarations.

Bill clearly was in position to exercise significant influence over the foundation and referred to it publicly as "his" charity on numerous occasions. And even though he was not an officer or director of the main foundation until 2013 he had from the very beginning signed legal agreements on the foundation’s behalf and traveled the globe bragging about its alleged good deeds.

Hillary and daughter Chelsea, who has accomplished little of note in her life but was made a foundation Vice Chair, basked in the glory. Note here that as board members and trustees, Bill, Hillary (from 2013 to early 2015) and Chelsea are legally accountable for any foundation misconduct.

From a branding standpoint, it’s been pure gold for the Clintons.

Anyway, the Clinton Foundation has quite apparently misspent billions of dollars intended for people in Haiti – a Bush family foundation played a cameo role here, by the way -- the most destitute in the Western Hemisphere. But, and it’s admittedly hard to measure this level of toxicity, the Foundation has perhaps outdone even this with its AIDS program.

The Clinton Foundation was initially authorized by the IRS to act as a library and research center about Bill Clinton’s presidency. It expanded its purposes and began raising billions of dollars without asking the IRS for permission to do so. That’s illegal.

According to the Clinton Foundation’s website, it started its efforts in the HIV/AIDS arena with the “transformational goal” of helping “save the lives of millions of people living with HIV/AIDS in the developing world by dramatically scaling up antiretroviral treatment.”

The Foundation geared up to make HIV/AIDS drug purchases beginning in 2002. Its activities were omitted and hidden in its 2002 and 2003 tax filings, presumably because it was not legally allowed to engage in such activities at the time.

Incidentally, the Clinton Foundation’s website says it is committed to transparency, but the organization omits much key information from its website, including audits for 2001-2004. Its application to form the Clinton Foundation HIV/AIDS Initiative Inc. and the IRS determination letter for that entity are also omitted.

Since the early-2000s, the Clinton Foundation has taken in at least $1 billion in donations to fight AIDS -- from groups like the Bill & Melinda Gates Foundation, the Children’s Investment Fund Foundation and UNITAID, as well as governments including, Australia, Canada, France, Ireland, Sweden and the United Kingdom – Ortel estimates.

The Clinton Foundation’s tax forms are so opaque and convoluted that there’s no way to know for sure; Ortel bases this number on his review of statements and filings from foundations and governments that have donated to the Clinton’s charity.

Meanwhile, the Clinton Foundation set up a related non-profit -- the Clinton Foundation HIV/AIDS Initiative, Inc. -- to take in cash for its anti-AIDS initiatives. It was an Arkansas non-profit corporation based in Massachusetts and Magaziner – a chief healthcare policy advisor under President Clinton – got paid an undisclosed amount of money to run it out of the offices of his private consulting firm. (Incidentally, it was also illegal for Magaziner to run an ostensibly non-profit entity out of his private, for-profit consulting firm.) In addition to the U.S., the Clinton Foundation set up anti-AIDS entities offshore in at least a score of other countries.

(The Clinton Foundation has reportedly failed to disclose transactions and deals with insiders, which is illegal. One example is that Magaziner started providing consulting services to the Foundation in 2012, but that was not disclosed until 2013, in a revised filing. That revision did not make it retroactively legal.)

Getting back to the question for money, and to make a long story short, there’s no way of knowing how much the Clinton Foundation HIV/AIDS Initiative Inc. spent to buy HIV/AIDS drugs because its accounting procedures were so inadequate, but it was a whole lot less than what it took in.

Simply compare what UNITAID donated to the Clinton Foundation between 2006 and 2009 (see last page at this link), and contrast it with the amount that the foundation claims it spent for all anti-AIDS drug purchases and you will discover numbers that that are difficult to reconcile with the law or common sense or simple human decency. To be fairly precise, UNITAID alone reported donations to the Clinton Foundation of about $341.5 million during that period while the Clinton Foundation claims it spent about $215.4 million.

The fact that that UNITAID apparently donated about $126 million more to the Clinton Foundation for ant-AIDS pharmaceuticals than the Clinton Foundation spent on them is alarming enough. And based on this analysis by Judicial Watch, that understates the magnitude of the problem dramatically.

When asked for comment, Andrew Hurst, a spokesman for UNITAID said the group was "satisfied" that its disbursements to the Clinton Foundation "have always been fully reconciled and expenditures made in line with grant agreements. Consistent with standard policy, UNITAID commissions independent assessments, audits and programmatic reviews of its grants."

When Massachusetts shut down the HIV/AIDS Initiative unit, the Clinton Foundation simply folded its operations into its own and pretended nothing had happened. All of this was flatly illegal, but the IRS, whose tax-exempt wing was led during most of the relevant period by Lois Lerner, did zero. Obama’s Justice Department investigated Lerner on unrelated charges, but never filed charges.

The general shadiness of the whole Clinton Foundations AIDS initiative may well explain why Sir Elton John turned down without explanation an award for fighting AIDS from Bill Clinton during the recent Clinton Global Initiative annual meeting in New York.

“Using a charity that exploits victims of AIDS for your personal gain and advancement puts you in the lower circles of hell, but New York and the IRS haven’t done anything to stop them,” Ortel said.

A version of this story was co-published with 100Reporters.

#Clintons, #Clinton Foundation, #Fraud, #Charities/foundations, #Hillary Clinton


Sheila Panettiere

3 years ago

I can't find the clinton foundation on the watchlist mentioned in the article

Gail Newman

4 years ago

Wow! Just WOW!

I knew there was a dark side, but I had no idea how dark. Thank you so much for your EXCELLENT reporting.


4 years ago

But why would anyone with an IQ above room temperature expect financial integrity from a low bred,draft dodging serial rapist?