by Peter Schweizer
The Clinton Blur (I)
BILL AND HILLARY’S
GLOBAL NEXUS OF
PHILANTHROPY, POWER, AND PROFIT
On a beautiful evening in October 2011 the Clinton Foundation held an elaborate gala at the Hollywood Bowl in Los Angeles called “A Decade of Difference.” The night’s entertainment featured “socially responsible artists in music, film, and television” brought together to “celebrate the work and impact of President Clinton.” A company called Control Room, which modestly bills itself as “the world’s leading producer of massive global events,” put the events together. 1
Lady Gaga sang a song. Looking over at Bill, she said “I just love you and your hot wife.” She praised the Clintons and promised the crowd, “Tonight, I thought we’d get caught up in a little Bill romance.” She then proceeded to belt out her hit “Bad Romance,” but made it Clinton specific. 2
The Clinton Foundation is not your traditional charity. A traditional charity doesn’t have a globetrotting ex-president, an ex–secretary of state, and their daughter running the show. But for all the benefits that derive from such star power, the real problem is delineating where the Clinton political machine and moneymaking ventures end and where their charity begins.
The stated purpose of the Clinton Foundation is to “strengthen the capacity of people throughout the world to meet the challenges of global interdependence.” It was founded in 2001 and boasts a staff of 350. Out of the foundation springs a hydra of projects including the Clinton Health Access Initiative, Clinton Climate Initiative, the Clinton Giustra Sustainable Growth Initiative (CGSGI), and Clinton Hunter Initiative.
But while the window-display causes of the Clinton Foundation, such as alleviating AIDS suffering, preventing obesity, and promoting economic growth in the developing world, are commendable, and while the foundation has done some legitimately good work, the moral authority of these works seems to provide a screen and pretext for a storehouse of private profit and promotion.
Some might argue that since the Clinton Foundation is a public charity, the flow of funds—even from questionable foreign sources seeking favors—is not really such a big deal. After all, the funds go to help people and the Clintons don’t directly profit from the money that gets raised. But it is a big deal, at least according to federal law. If the donors are giving money to the Clintons to influence them, it should still be considered a bribe. American corporations that steer contributions to politically connected charities overseas in hopes of currying favor are violating the Foreign Corrupt Practices Act (FCPA). American corporations have been dinged for giving money to legitimate charities linked to politicians. In 2002, for example, the pharmaceutical company Schering Plough settled with the SEC over charges that it had violated the FCPA by donating $76,000 to a legitimate charity in Poland called the Chudow Castle Foundation. It’s a well-respected charity, but that was besides the point. The SEC said the donation was made to influence a Polish government health official who sat on the charity’s board. The company settled the claim with the feds for $500,000. 3
As secretary of state, Hillary Clinton supported aggressive enforcement of the FCPA. When some business organizations tried to water down the law, she declared she was “unequivocally opposed to weakening” it. Hillary took a “strong stand when it comes to American companies bribing foreign officials.” 4 [yeah,because that's the Clinton's turf.D.C]
So the fact that the Clinton Foundation is a charity should not deter us from investigating and exploring the flow of foreign money into its coffers. Indeed, a charity deserves special attention because it is the perfect tool of influence. Foreign governments, corporations, and financiers who can’t legally contribute to American political campaigns can write large checks to the Clinton Foundation in addition to paying high fees for speeches.
The Clintons frequently elide the distinction between their philanthropic work, their self-promotional and public relations efforts, and their moneymaking ventures. As Fortune puts it in an eyebrow-raising sentence, the Clinton Foundation is “a new turn in philanthropy, in which the lines between not-for-profits, politics, and business tend to blur.” 5
Bill Clinton has said as much himself. In describing the foundation’s role, he positions it as a unique go-between for businesses, governments, and nongovernmental organizations (NGOs). The result is the creation of what he calls “public-goods markets.” He sees this as the wave of the future: “This is the kind of thing I believe will be a critical component of all philanthropic activity for the foreseeable future,” he told one reporter. “I believe that in the years ahead, the organization and expansion of public-goods markets will become one of the most important areas of philanthropy, and will be an area where philanthropy sometimes blurs into strict private enterprise.” 6
In short, what the Clintons have attempted to do is create a crossroads for government, business, and NGOs, with the Clinton Foundation squarely in the middle. The Clinton Foundation calls this Bill’s “convening power,” his ability to bring together elites from business, politics, and the nonprofit world. 7
There is nothing intrinsically wrong with this approach, which, if pursued in a scrupulous way, has the capacity to do a lot of good. The Clintons’ ability to convene various public and private interests around a common cause or project does create leverage for getting things done in the global arena. But the blur also creates opportunity for moving a lot of money around with very little accountability. Being a convening power has another useful benefit: it means that the organization doesn’t actually need to get its hands dirty. While there are plenty of photos of Bill, Hillary, or Chelsea holding sick children in Africa, the foundation that bears their name actually does very little hands-on humanitarian work. “When President Clinton’s foundation was formed, the first thought was to run its own projects,” says Harvard professor Rosabeth Moss Kanter. But then they came up with the convening power model. “What’s brilliant is that President Clinton provides the platform and enlightening speakers, but other people do the actual work of change.” 8
This causes confusion about who is actually doing what. As relief work and humanitarian veteran Miles Wortman explains, “The Clinton Foundation ‘partners’ with other foundations in the provision of services. When the Gates Foundation, for example, provides revenue to the Clinton Foundation, and it in turn partners with the Gates Foundation in the provision of say, antiretroviral drugs, is this double accounting of activity?”
This approach positions the Clinton Foundation in a way a politician could especially love: with little direct responsibility, it is able to take credit for good results and avoid blame for bad ones.
Another important function of the Clinton Foundation appears to be employing longtime Clinton associates. Like any political machine, jobs must be provided to those who served the Clintons when in power and who may serve them again in the future. This may help to explain why the foundation’s senior ranks are populated with so many former political aides and associates, as opposed to those with extensive experience in charitable work. 42S
Ira Magaziner, who served the Clintons when Bill was in the White House—among other things, he was the author of Hillary’s famously convoluted health care reform proposal—has played a central role in the foundation. 9 As he put it in 2009, “The biggest part of the Foundation includes four operating initiatives, accounting for about 90 percent of the Clinton Foundation budget, all of which I started and run.” 10 These include the Clinton Health Access Initiative, which deals with matters related to HIV/AIDS around the world; the Alliance for a Healthier Generation, a domestic program focused on nutrition and health; the Clinton Hunter Initiative, which focuses on agriculture in Africa; and the Clinton Climate Initiative, which focuses on issues related to climate change. Even with structural changes in 2011 that diminished Magaziner’s administrative control, he still plays a key role.
These Clinton Foundation initiatives are part and parcel of the Clinton Foundation apparatus. The CGSGI, for example, despite being ostensibly based in Canada, has an executive director based in New York City. An examination of CGSGI’s financial records indicates that the bulk of the money it collects gets transferred to the Clinton Foundation itself. It largely functions as a pass through. Senior positions in the foundation have been filled by Clinton insiders like Bruce Lindsey, Bill’s longtime friend and political adviser; John Podesta, who was Bill’s chief of staff at the White House; Valerie Alexander, a senior communications adviser for Hillary’s 2008 campaign; Amitabh Desai, former legislative aide to then senator Clinton; and Laura Graham, a deputy assistant in Bill’s administration from 1995 to 2001. 11
The chief development officer at the Clinton Foundation is Dennis Cheng, who previously served as national finance director and New York finance director for Hillary’s run for the Democratic presidential nomination in 2007–2008. When Hillary became secretary of state, Cheng joined her at Foggy Bottom, where he served as the deputy chief of protocol of the United States. That gave him the ability to ensure that Clinton financial supporters were well represented in the pecking order when foreign heads of state made their official visits to Washington. 12
The Clinton Foundation also hands out honorary titles such as “adviser” to businessmen and investors who are ostensibly involved in the activities of the foundation (and who are contributors). As we have already seen, investors operating in the developing world regularly use the title of “adviser to the Clinton Foundation” on their résumés. They travel with Bill when they visit developing countries in which the Clinton Foundation has activities and where the investors have or are seeking investments.
The Clinton Foundation board of directors (or board of trustees as it has sometimes been called) is largely made up of the Clintons and their closest political aides and advisers. The tightness of the board has raised alarm bells at places like the Better Business Bureau (BBB). In 2013 the BBB conducted a charity review of the Clinton Foundation and found that it failed to meet minimum standards of accountability and transparency. It dinged the organization on its management and financial controls and pointed out that, despite having a staff of 319, the board of directors at the time had only three board members, who did not actually review the performance of the CEO. The BBB also said that board members did not receive information about financial arrangements with outside fundraising firms and consultants. 13 Similarly, Charity Navigator, which evaluates and ranks philanthropic groups, will not rank or grade the Clinton Foundation. The explanation? The foundation’s “atypical business model” makes it difficult, if not impossible, to evaluate. 14
The Clinton Foundation has added corporate executives or business investors to its board of trustees from time to time, especially if they are major contributors. One can only wonder how tight the screening process is, given that at least four Clinton Foundation trustees have either been charged or convicted of financial crimes including bribery and fraud.
Vinod Gupta, the founder and chairman of the database firm InfoUSA, was a major Clinton financial supporter who served as a foundation trustee. In 2008 he was charged with fraud by the Securities and Exchange Commission (SEC) for using company funds to support his luxurious lifestyle. He was alleged to have used more than $9.5 million in corporate funds to pay for personal jet travel, millions for his yacht, personal credit card expenses, and the cost of twenty cars. He settled with the SEC for $4 million. 15
Company shareholders also filed suit against him for misuse of corporate funds, including paying Bill a $3 million consulting fee, and using corporate assets to fly the Clintons around. Gupta defended his relationship with the Clintons, saying that those payments and his relationship with the Clintons earned huge dividends for Infogroup. The company settled with shareholders to the tune of $13 million. 16
Sant Chatwal, whom we met in the previous chapter, was another foundation trustee who has been in legal trouble over the years, including his conviction for illegal campaign financing, obstruction of justice, and other charges. 17
Victor Dahdaleh, another trustee, was charged by the Serious Fraud Office (SFO) in Great Britain with paying more than 35 million pounds in bribes to executives in Bahrain to win contracts of more than 2 billion pounds. He has worked for the American aluminum company Alcoa as a “superagent.” 18 (The billionaire had his bail revoked in the case because he contacted prosecution witnesses.) 19 Dahdaleh was found not guilty after the SFO offered no evidence against Dahdaleh because a key witness, Bruce Hall, pleaded guilty to conspiracy to corrupt but refused to testify. 20 Alcoa ended up pleading guilty in the US case arising out of the transaction and settled with the US Justice Department for $384 million. Dahdaleh was not charged in the United States individually. 21
Current Clinton Foundation board member and trustee Rolando Gonzalez Bunster has been named in a fraud case in the Dominican Republic involving his company InterEnergy. The charges were filed by the Dominican government’s Anti-Corruption Alliance (ADOCCO). 22 In 2013 Bunster was charged along with officials of a government agency concerning alleged “ballooned” fees charged to the government. The company dismisses the charges as “baseless allegations.” 23
The flow of funds into the Clinton Foundation comes from a variety of sources. While the foundation boasts that it has hundreds of thousands of contributors, it relies heavily on a group of high-dollar donors to fund its operations. Since it reports contributions in ranges, not exact amounts, it is difficult to know precisely how dependent it is on those donors. But approximately 75 percent of its money has come from contributions of $1 million or more. And as we will see, many of these contributions came from foreign nationals who decided to give large gifts or make large pledges at times when they had business before the US government.
As we have seen, the Clinton Foundation failed to report multimillion-dollar contributions from foreign entities like Ian Telfer’s Fernwood Foundation. Another Canadian mining investor whose contributions were never disclosed by the Clinton Foundation is Stephen Dattels. This mines-tometals tycoon has donated millions of shares of stock to the foundation.
On June 8, 2009, Dattels donated two million shares of stock in his company Polo Resources— worth about $40,000 at the time. Eight weeks later, on July 29, according to WikiLeaks, the US ambassador in Bangladesh urged the prime minister and energy minister to reauthorize the Phulbari Mines for the use of “open pit” coal mining. Dattels’s Polo Resources is an investor in the mine. 24
By donating shares in small mining companies, Dattels is creating a powerful incentive for the Clintons to help his companies succeed. If the stock price rises, the value of the foundation’s shares will rise. In the case of Dattels, this potentially creates a significant conflict of interest for Hillary Clinton.
This was not the first contribution Dattels made to the Clinton Foundation. Back in 2007 he had committed extensive financial support to CGSGI over a five-year period. He committed to do the same in 2012. The Dattels Family Foundation’s private website mentions the Clinton Foundation as a recipient of its support. But the name Dattels appears nowhere on Clinton donor disclosures nor does that of his company, Polo Resources. Again, the Clinton Foundation has failed to report a foreign contribution. How many more undisclosed foreign donors might there be? It is impossible to know. But this was a basic and simple requirement that demands further investigation. And we will meet more undisclosed donors later in this book.
The flow of funds into the Clinton Foundation, which was supposed to be transparent, is far from it. As we saw in the previous chapter, even when contributions are disclosed, as in the case of an obscure Indian politician, he was apparently not really the source of those funds. Is this happening on other occasions?
Perhaps the most important function of the foundation is to bolster Bill and Hillary’s reputations as global humanitarians by bringing relief and care to people all over the world. This reputation not only flatters the ex-president’s ego and benefits Hillary’s political career, but it also has real value both in terms of global influence and financial reward. But how much good has the Clinton Foundation actually done?
At the Hollywood Bowl event, the publicity material included some sweeping claims about the Clinton Foundation’s accomplishments. “Over the past ten years,” it reads, “President Clinton’s vision and leadership have resulted in nearly 4 million people benefiting from lifesaving HIV/AIDS treatments.” 25 This is perhaps the most popular and oft-repeated success of the foundation, and it stems from Bill’s efforts to negotiate and help create an international system whereby the cost of treatment drugs for HIV/AIDS victims would be radically reduced. “We set out to organize a drug market to shift it from a high-margin, low-volume, uncertain payment process . . . we were able to lower the price to just under $140 a person a year.” 26
The claim is repeated when he is introduced for speeches around the country and when he is interviewed in the media. But what exactly does “we were able to lower” mean?
The Clinton Foundation did sign some compacts, but prices were already dropping quickly because generic versions of treatment drugs were coming on the market. 27 According to public health experts, the foundation piggybacked on the efforts of other organizations. “He may take a little more credit than is due,” admits Princeton Lyman, who served in the State Department under Hillary and dealt with issues related to HIV/AIDS in Africa. 28
Here’s how the Center for Global Development explains how HIV/AIDS drugs prices were lowered: “Essentially, policy entrepreneurs like Peter Piot of UNAIDS—along with activists based within organizations as Doctors without Borders, Partners in Health and later the Clinton Foundation [emphasis added]—brought together the pharmaceutical manufacturers with developing world governments by negotiating the lower prices.” 29
Another claim often advanced by Bill himself is that the Clinton Foundation is on the frontlines of the HIV/AIDS crisis in the developing world. As Magaziner puts it, “The Clinton Foundation is now involved in treating over two-thirds of the world’s children who are on treatment for AIDS.” 30
But what exactly does “involved” mean? You might get the impression, if you look at the impressive photo displays on the Clinton Foundation website, that they are actually administering drugs to sick people. But the foundation doesn’t actually get involved in directly treating people. While organizations such as Doctors Without Borders, the Red Cross, or Samaritan’s Purse establish their own health care infrastructures— Doctors Without Borders had more than 300,000 HIV patients directly under their care in 2012—the Clinton Foundation effectively has none. 31
Instead it serves as a middleman. “They’ve gone around in a very deliberate process of finding what they call ‘care partners,’” says JimYong Kim, who cofounded Partners in Health, which works with the Clinton Foundation. “That’s what Partners in Health is—our specialty has been working in rural areas.” 32
The world needs its middlemen, of course. But what this really means is that in practice, the foundation’s work is heavily geared toward managing relief agency funds provided by foreign governments, such as Ireland, and dealing with health ministry bureaucrats in the developing world. In the relief world the Clinton Foundation works like a management consulting firm, such as McKinsey. But unlike McKinsey or another management firm, specific metrics on specific work by the foundation itself is hard to come by.
Clinton’s motivation for taking on AIDS as a philanthropic cause has raised serious debate. Many who have been working in the field say he did a lousy job as president regarding the AIDS issue, largely ignoring it. As Greg Behrman, the author of a definitive book on the global AIDS crisis put it to the New York Times, “As president, though, the record is clear. Clinton was not a leader on global AIDS and the consequences have been devastating.” 33 Andrew Jack of the Financial Times, who traveled with Clinton to see his work on AIDS, asks whether, in light of his poor record as president, he is seeking some kind of “atonement.” 34
According to Bill, his interest in working on AIDS issues stems primarily from a conversation he had with Nelson Mandela shortly after leaving the White House. Clinton says Mandela asked him to work on these issues to help Africa.
Does Clinton’s motivation matter? It does if his ultimate purpose is to make himself look good. If that is the case, he will focus on appearances rather than actual results. And making the Clintons look good is clearly central to the foundation’s purpose. Its website is replete with pictures of Bill, and increasingly of Hillary and Chelsea, on humanitarian missions in remote locales in Africa or Asia. The press office also churns out media releases announcing foundation news or the activities of the Clinton family.
The Clinton Foundation’s media machine focuses heavily on the family’s activities. One of its projects involved helping to pay for the refurbishment of a pediatric clinic in the African country of Lesotho. When Bill showed up in July 2006, he was greeted at the Maseru airport with a red carpet and a receiving line of government officials. For good measure, “cultural groups performed dances and songs,” according to US diplomatic cables. The king of Lesotho gave Bill a knighthood.
Following the “celebratory reception,” Bill headed to the pediatric clinic his foundation had helped equip where he was serenaded by “choirs and children.” 35 Ignored in foundation releases and related press reports was the fact that months earlier, in December 2005, the Baylor College of Medicine and Bristol-Myers Squibb had opened a pediatric clinic in the same town. But there was no parade or celebration. “No one has star power like Clinton,” noted Dr. Mark Kline, president of the Baylor International Pediatric AIDS Initiative. “But the casual observer might be led to believe that no one else is doing anything, and that may draw resources away from others.” 36
But beyond good publicity, the foundation serves other purposes as well. As we have already seen, Clinton’s visits to foreign locales frequently mix business with charitable work. When Bill flies into a country with an entourage, which may include businessmen with matters before the local government, he is there ostensibly to do (or simply talk about) his philanthropic work. But these visits often involve making useful introductions that coincide with major business deals in which Clinton Foundation donors are involved.
The Clinton Foundation also provides opportunities for foreign leaders and foreign investors to burnish their (sometimes shaky) reputations and images by association with its praiseworthy activities.
Dictators like Nursultan Nazarbayev in Kazakhstan, Meles Zenawi from Ethiopia (whom we will meet in chapter 7), and Paul Kagame of Rwanda might have terrible reputations when it comes to human rights, but they are invited guests at Clinton Foundation events where they are praised for their leadership. Kagame, for example, was a “Clinton Global Citizen of the Year” in 2009. He was praised by the foundation as a “brilliant military commander” and given the award for “leadership in public service.” What you won’t read in his bio is the fact that Kagame arrests his political opponents and censors journalists. Nor is there mention of the fact that the United Nations accuses Kagame’s militias of raping and slaying thousands of Hutu. It is widely believed that Kagame is largely responsible for fueling the civil war going on in the neighboring Democratic Republic of Congo. 37
Whenever Kagame speaks before the Clinton Foundation or meets with Bill, he is quick to publicize it. He clearly recognizes that partnering with an ex-president grants him added legitimacy. 38
The Clintons point out that neither Bill, Hillary, nor Chelsea take a salary from the Clinton Foundation. This is true—the hundreds of millions that pour into the foundation do not benefit the Clintons directly. But they profit from the foundation in a way that is both indirect and far more lucrative: by taking enormous speaking fees for talking about their charitable work.
In his early post-presidential years Bill’s speeches were largely about his views of the world or his experiences in office. But in more recent years many of his speeches involve talking about the work of the foundation.
In October 2006, for example, Bill was paid $150,000 for a speech to the Mortgage Bankers Association for “discussing world events and his work on behalf of the William J. Clinton Foundation.” 39 In September 2006 he was paid $450,000 to speak at the Fortune Forum, which is a charitable fundraising event in London. These are just a few examples among many instances. Clinton’s go-to speech, entitled “Our Common Humanity,” is largely about the work of the foundation.
The Clintons’ charitable work puts money in their pockets in other ways, too. In 2007 Bill released a book called Giving that highlighted the charitable work of the Clinton Foundation and those who work with it. He made $6.3 million from sales. 40 The book was widely criticized. Peter Baker, now of the New York Times, called it an “extended public service announcement masquerading as a book.” 41
Blurring their charitable, political, and financial interests has served the Clintons well. When Hillary became secretary of state, the practice continued. Indeed, it reached a whole new level.
The Clinton Blur (II)
THE VIEW FROM FOGGY BOTTOM
In 2009 Hillary Clinton was in Russia, where she pushed Russian officials to sign a multi billion dollar airplane agreement with Boeing. The $3.7 billion purchase was a big deal for the aerospace company. Two months after Boeing won the contract, the company pledged $900,000 to the Clinton Foundation. The Washington Post called it “an indicator of a mutually beneficial relationship between one of the world’s major corporations and a potential future president. Clinton functioned as a powerful ally for Boeing’s business interests at home and abroad, while Boeing has invested resources in causes beneficial to Clinton’s public and political image.” 1
When Hillary became secretary of state she announced a new commitment to what she called “commercial diplomacy” or “economic statecraft.” The idea was simple: she would use her diplomatic leverage to help American companies be more competitive overseas. If they needed help in a foreign country, Hillary would be there as a supportive partner.
This was no idle commitment. As Businessweek put it in a retrospective look at her tenure, “There’s no doubt Clinton has had success using her personal clout to help a handful of companies close a handful of deals.” 2
Hillary’s commitment to commercial diplomacy was laudable to the extent that she was committed to helping American firms be competitive in the global marketplace. But in practice it would prove difficult to distinguish the personal and political aspects of this kind of activity.
In State Department parlance Hillary’s commercial diplomacy was executed as part of what it called “public private partnerships.” And the public-private partnerships came in many forms. The goals of these partnerships were often praiseworthy. But they often benefited friends of the Clintons.
Power Africa, for example, like all such partnerships, has a noble goal: to help African countries develop large energy projects. 3 But as Forbes magazine points out, initiatives like Power Africa tend to favor politically connected firms. Winners include firms like Symbion Power, which counts former ambassador Joe Wilson as a member of its board. (Wilson, who we will meet again in chapter 8, is a Clinton friend and political ally.) 4 Another firm involved with Power Africa is Hecate Energy. Its founder David Wilhelm has no background in the field. For most of his professional life he served as a lobbyist and partner in Wilhelm and Conlon Public Strategies. Before that, he was the manager for Bill Clinton’s 1992 presidential campaign. 5
The pursuit of commercial diplomacy required a new infrastructure within the State Department. Shortly after her confirmation as secretary of state, Hillary created the Office of Global Partnerships. The director of this office would serve as the “chief liaison between corporate America, the State Department, and governments around the world.”
To run this sensitive office, she turned not to a diplomat, a former corporate executive, or even someone with NGO experience overseas but to longtime political operative Kris Balderston. 6
Balderston had served for eight years on Hillary’s Senate staff and also did a stint in Bill Clinton’s White House. His most famous role in Clinton World involved keeping the infamous List, which rated people as friends or enemies on a point system. 7 In a December 8, 2008, memo Balderston had suggested the idea for a State Department “corporate office” to create a series of public-private partnerships matching private capital with public governmental power. Hillary loved the idea and adopted it immediately, putting Balderston in charge, despite his having no background in the area of international business. 8
Other senior positions were given to political aides who had more experience in the world of Washington than in global affairs. Indeed, during her tenure both the State Department and the United States Agency for International Development (USAID), which fell under Hillary’s control, saw a substantial rise in staff. Staffing at the State Department increased 17 percent from 2008 to 2012, and USAID staffing was up 30 percent. 9
One can hardly blame Bill and Hillary for seeking to place friends and supporters in jobs under their control. Like other prominent political figures, the Clintons need to keep a large constellation of aides, advisers, and friends gainfully employed. Some of this employment, as indicated above, is handled by way of the Clinton Foundation. But the State Department was a convenient place for rewarding supporters as well. To enhance her scope of patronage, Hillary made extensive use of what is called the special government employee (SGE) rule. This special category of staff allowed the Clintons to have their aides simultaneously involved with the Clinton Foundation, State Department, and various outside commercial interests.
The SGE rule was originally designed to ensure that experts like scientists and engineers could be tapped for their expertise by the federal government without giving up their regular jobs at a research lab or university. The assignment was also supposed to be temporary—totaling no more than 130 days out of 365.
But Hillary used the SGE status not for scientists or academics but for political aides, some of whom simultaneously held jobs at Clinton-affiliated firms. Take Huma Abedin, who served as Hillary’s deputy chief of staff at State. As an SGE, Abedin was able to remain on the payroll of the Clinton Foundation, as well as on that of a corporate consulting firm called Teneo, which was started in 2009 by Bill’s longtime aide Doug Band.
Teneo, where Bill was a paid adviser, represented firms who had often either paid for Bill’s speeches or donated to the Clinton Foundation. Also involved in Teneo was Declan Kelly. An SGE at State for a while, Kelly joined Teneo in 2011. Teneo’s clients included Fortune 500 companies, governments, and high-net-worth individuals. The companies it represented included Coca-Cola, UBS, and Standard Chartered.
The arrangement worked seamlessly until March 2012, when Bill ceased to be a Teneo adviser. One of Teneo’s clients was MF Global, the commodities brokerage run by Clinton friend John Corzine. 10 MF Global collapsed after a series of highly leveraged trades. Some customers accused the firm of raiding their private accounts to shore up its finances after risky bets went sour. When news broke that MF Global was a client, Bill apparently felt it best to sever his ties.
SGE Abedin played a central role in everything Hillary did. She assured a Senate committee that there was no cross-pollination between her job at the State Department and her other work at Clinton connected entities. She explained that she provided “strategic advice and consulting services” to Teneo’s management team but did not provide “insights about the department, my work with the secretary or any government information to which I may have had access.” But public concerns were not so easily allayed. As the New York Times put it, “the lines were blurred between Ms. Abedin’s work in the high echelons of one of the government’s most sensitive executive departments and her role as a Clinton family insider.” 11
SGE Caitlin Klevorick, who worked as a consultant to Bill Clinton and the Clinton Foundation, joined the State Department in 2009 as a special assistant to Cheryl Mills. In that capacity she “provided expert knowledge and advice to the counselor and the chief of staff and other department officials on a variety of important foreign policy issues,” according to the State Department. SGE status allowed her to keep her firm CBK Strategies, where she simultaneously worked for corporate clients.
Cheryl Mills herself, Hillary’s longtime chief of staff, was also granted SGE status so she could continue to direct Haiti relief efforts at the State Department while returning to work for the Clinton Foundation after Hillary resigned.
SGE Elizabeth Bagley, who married into the RJR Reynolds tobacco fortune, was a longtime Hillary fundraiser who joined the State Department as a “special advisor to the Secretary” and then “special advisor for Secretary initiatives.” Bagley and her husband had kicked in more than $1 million to the Clinton Foundation. At State, she was paid a $129,000 salary (the highest possible) and allowed to continue her other commercial activities.
Ann Gavaghan, a former member of Hillary’s Senate staff, was also granted SGE special status. Gavaghan served as the chief of staff in the State Department’s Office of the US Global AIDS Coordinator.
One value of SGE status is that ethics rules are looser than those that apply to regular public employees. SGEs can “work on a matter if you have a personal relationship with one of the parties.” 12 They are also able to work for clients with matters before the office they work in. And they can raise money for political candidates (or entities like the Clinton Foundation) “if you do so only during non-duty hours and if you do not use a government resource.” 13
As the Boston Globe put it, this kind of arrangement is “fraught with potential conflicts and abuses.” 14
Propublica, a nonprofit news organization, investigated the use of SGE status in the federal government and asked numerous government agencies to send them lists of SGEs at their agencies. According to Propublica’s Justine Elliott and Liz Day, many of them did. But the State Department balked. So Propublica filed a Freedom of Information Act (FOIA) request. The State Department responded after several months that assembling the list would require “extensive research,” finally handing it over four months after that. State Department officials would not explain why they were so reluctant to share the information.
The other tool Hillary used to create payroll opportunities for Clinton friends and allies was the S-class designation. S-class positions were under the direct purview and financial control of the secretary of state and no one else. This allowed Hillary to exclude State Department bureaucrats, Foreign Service officers, or civil servants from involvement or control over certain projects or activities, including everything from economic diplomacy to health care issues. As reporters Jonathan Allen and Amie Parnes put it in a sympathetic portrait of her tenure, Hillary appointed “a cluster of special ambassadors, envoys and representatives and senior advisers who exercised tremendous power to circumvent the department bureaucracy.” 15
Hillary further centralized control over the awarding of government grants, contracts, and consulting agreements by dramatically reducing the independence of USAID, which was part of the State Department apparatus. Dubbed the “Foggy Bottom Smackdown” by some in Washington, Hillary effectively took away power from USAID administrators and in her Quadrennial Diplomacy and Development Review made clear that the agency’s budget would remain under the State Department. As the New Republic reported, not only were USAID programs further put under her control, but she populated the agency with loyalists who had little or no relevant experience. 16
The practice of appointing special status employees throughout the State Department bureaucracy effectively blurred the lines between American diplomatic initiatives and the interests of the Clintons and their friends.
Consider the case of Laureate Education—a typical example of the Clinton Blur in action.
Laureate Education began as part of Sylvan Learning Systems but branched out to become one of the largest for-profit university systems in the world. Founded in Baltimore in 1999, it now comprises a sprawling network of campuses, including six in Saudi Arabia, a dozen in Brazil, three in China, and even one in Cyprus. 17 In Brazil alone, there are 130,000 students paying tuition to attend ten Laureate International schools on forty different campuses. 18
Laureate recruits students through telemarketing. The call centers are often on the campus themselves and those making the calls are university students. 19 The university system spends more than $200 million a year on advertising, including television commercials, online campaigns, and billboards that dot the developing world.
In early 2010 Bill signed on as “honorary chancellor” of Laureate. The title might have been “honorary,” but Bill got paid for his services. How much? It’s hard to know. Government disclosure forms did not require him to specify, only that it was “more than $1,000.” But part of his job included speaking at half a dozen or so Laureate schools every year, which, based on his typical fee scale, meant perhaps $1 million per year.
Bill sparked tremendous excitement when he showed up in 2012 to address throngs of students and faculty at Laureate schools in Tegucigalpa, Honduras, and Mexico City. He also visited campuses in Germany, Spain, Turkey, Malaysia, Brazil, Peru, and the United States. 20 Bill’s face and name have been plastered on Laureate marketing materials and pictures of him have lined the walkways at campuses like Laureate’s Bilgi University in Istanbul, Turkey. 21
The relationship between Laureate chairman Douglas Becker and the Clintons formed in the years before Hillary became secretary of state, when Becker started showing up at Clinton Global Initiative (CGI) events. In 2008 Laureate became a partner with CGI. By 2009 Becker was paying Bill to give speeches at Laureate campuses in Spain, Brazil, and Peru. 22
Other Clinton friends were soon brought in. Henry Cisneros, who served as secretary of housing and urban development during Clinton’s presidency, became chairman of Laureate’s National Hispanic University advisory board. Cisneros delivered commencement addresses in San Jose, California, where he praised Laureate as a “pioneer in higher education for Hispanics.” 23
But Laureate’s business practices have faced serious legal scrutiny and criminal investigations in some countries. In Mexico, Chile, and Turkey, where Laureate operates, for-profit universities are actually illegal. Laureate has put money into a struggling nonprofit school, getting positions on the board, then getting the school to hire Laureate for a variety of “services,” including computer advisory services and English courses. Laureate has also received funds for the use of its trademark.
According to Chile’s economic crimes unit, Laureate’s Chilean schools transferred more than $80 million out of the country between 2011 and 2013. A national commission found that there were irregularities regarding Laureate’s activities. 24 In its financial filings with the US Securities and Exchange Commission (SEC), Laureate admitted that the service agreements are a way to “efficiently transfer funds out of the universities in these countries.” 25
Becker, in addition to running Laureate, is also the chairman of the International Youth Foundation (IYF). This nonprofit sister organization (whose offices are less than a mile from Laureate’s in Baltimore) runs numerous programs through Laureate, including something called YouthActionNet, which has fellows on Laureate’s campuses in Brazil, Mexico, Spain, Peru, Chile, and Turkey. 26 Becker’s company announced its YouthActionNet commitment at the CGI annual meeting in 2010. Bill heartily approved: “I am pleased that Laureate International Universities and the International Youth Foundation have partnered on this commitment to empower young social entrepreneurs to take on pressing challenges in their own communities and around the world.” 27
Shortly after Bill became honorary chancellor in April 2010, Hillary made Laureate part of her State Department Global Partnership. In October 2010 the State Department held a gala reception on the twentieth anniversary of IYF’s founding. The featured speaker was Maria Otero, the undersecretary of state for democracy and global affairs, who praised the group for “doing such important work.” 28
IYF had already received financial support from USAID before Hillary became secretary of state, going back to 2001. 29 But the amount of its grants has exploded since Bill became chancellor of Laureate. According to IYF tax filings, in 2010 government grants accounted for $23 million of its revenue, compared to $5.4 million from other sources. It received $21 million in 2011 and $23 million in 2012. 30 In June 2011 IYF joined with the State Department and USAID in holding a Youth Partnerships Employability Conference in Washington. 31
During Hillary’s tenure at State, IYF received USAID grants to work in Mexico, Mozambique, Senegal, Tanzania, the Kyrgyz Republic, Uganda, Jordan, the Caribbean, the West Bank and Gaza, and Algeria, and to address “good governance” issues worldwide. In 2012 it also received its first grant directly from the State Department: $1.9 million for work on a Middle East Partnership Initiative.
In January 2013, just before Hillary left her post as secretary of state, the International Finance Corporation (IFC) made a $150 million equity investment in Laureate, the first time the development organization had ever done so. IFC is part of the World Bank. The head of the World Bank at the time was Jim Kim, a Clinton friend and cofounder of Partners in Health, a partner of the Clinton Foundation.
Isn’t it troubling that while Bill Clinton was being paid by a private corporation, that corporation was also benefiting from State Department actions? Isn’t it troubling that an affiliate of that corporation is also receiving tens of millions in taxpayer money? Isn’t it troubling that this seeming conflict of interest was not disclosed?
Troubling State Department conflict of interest questions hardly end here. But now let us turn the camera to the man behind the podium (and Foggy Bottom)
Podium Economics WHAT WAS BILL BEING PAID FOR?
footnotes page 107 here at the source