NEW YORK – A prominent lawyer and a top government watchdog in the nation’s capital are calling for the Bill, Hillary, and Chelsea Clinton Foundation to be shut down as a Wall Street analyst prepares to issue a second report documenting what he believes is systematic financial fraud warranting a criminal investigation.
Wall Street analyst and investor Charles Ortel, in his first report of his in-depth probe of the Clinton Foundation, found what he characterizes as an elaborate system devised by the Clintons to enrich themselves through schemes such as skimming tens of millions of dollars from U.N. levies imposed on airline travelers.
His second report, some 300 pages of analysis set for release Monday on his website, documents what he calls material irregularities, errors and omissions in financial regulatory reporting since the foundation’s inception.
Ortel believes that once his findings have been studied, state and local law enforcement authorities will initiate multiple criminal investigations and charge the Clintons with “private inurement,” the crime of enriching themselves through a nonprofit organization.
He explained that the burden of proof, under state and federal laws, will be on the Clintons to demonstrate that their foundation was not operated as a systematic fraud designed to enrich themselves and their associates.
Peter Schweizer already has charged in his bestselling book, “Clinton Cash,” that the Clintons accepted foreign donations designed to influence U.S. policy when Hillary Clinton was secretary of state.
After examining Ortel’s first two reports, Tom Fitton, president of Washington-based Judicial Watch, told WND there is now enough evidence to warrant a grand jury investigation into the Clintons’ foundation and its various related charitable entities to examine evidence of extortion, bribery, money laundering, inurement and the destruction of documents.
“The question is no longer whether Hillary Clinton can win the Democratic primaries for president,” Fitton told WND. “The question now is whether Bill and Hillary Clinton can stay out of jail.”
Fitton said Judicial Watch is filing Freedom of Information Act requests in its ongoing investigations of the Clinton Foundations and Hillary Clinton’s withholding of emails through the use of a private server while she was secretary of state.
Washington-based attorney Cleta Mitchell, an expert in tax-exempt organizations who has represented tea-party and other conservative groups in the IRS scandal, agreed with Fitton.
“I am today going to call on New York Attorney General Eric T. Schneiderman to do his job and file proceedings to demand the Clinton Foundation and its various subgroups immediately stop fundraising in New York until [they] comply with New York law,” Mitchell told WND.
She noted Schneiderman has required that all charitable foundations in the country doing business in New York state be registered in New York and turn over their donor list.
“I am demanding the same standard must be applied to the Bill, Hillary, and Chelsea Clinton Foundation, as well as to the Clinton Global Initiative and Clinton Health Access Inc., as well as any other operational units the Clintons have constituted to raise charitable contributions in New York,” Mitchell said.
Ortel has reached the same conclusion.
“If the regulatory violations in filing financial reports that I’ve documented had occurred to anyone else other than the Clintons, the Clinton Foundation would have been closed years ago, with state and federal criminal investigations begun immediately,” he said.
Ortel alleges criminal fraud
In his second report, Ortel concentrates on the construction and architecture of Clinton Foundation financial statements and required independent audits filed for its largest constituent element, the Clinton Health Access Initiative, also known as CHAI.
Ortel distinguishes his analysis from Schweizer’s analysis of foreign contributions to the Clinton Foundation, noting Schweizer admits he does not have proof of a criminal quid pro quo.
Ortel points out that under New York state law, a tax-exempt organization “of a size that the Clinton Foundation attained long ago must file information returns that are wholly true and accurate, not false and misleading.”
“The Clinton Foundation’s declarations to authorities, and, therefore, to the public, are, therefore, fraudulent,” he writes.
In New York state, he notes, where the Clinton Foundation has operated for years, state law specifically exempts authorities from burdensome requirements of documenting intent or harm in efforts to prove charity defendants are guilty of criminal fraud.
Ortel’s second report, he says, documents the Clinton Foundation “has repeatedly made declarations that are false while also omitting to state relevant facts concerning the true nature of its endeavors.”
“These repeated falsehoods and omissions constitute a long-standing pattern of deception that appears to constitute a criminally fraudulent scheme,” he said.
In a table included in his second report, Ortel documents that Clinton Foundation audit statements in the years 2005 through 2009 were filed with regulators after the Clinton Foundation filed the IRS Form 990 tax reporting statement with the IRS, even though federal law requires the Form 990 to be derived from the audit statement.
Ortel summarized his findings:
- For 2005, the IRS filing for the Clinton Foundation was submitted 35 days past the final legally mandated deadline, in violation of federal and state laws.
- For 2006, the IRS filing was made just before the final legally mandated deadline; however, the companion, required independent audit was evidently filed 56 days following the IRS filing, which is in violation of federal and state laws.
- For 2007, the IRS filing was again made just before the final legally mandated deadline; however, the companion, required independent audit was filed 30 days following the IRS filing, which is in violation of federal and state laws.
- For 2008, the IRS filing was made just after the final legally mandated deadline; however, the companion, required independent audit was filed 45 days following the IRS filing, which is in violation of federal and state laws.
- For 2009, the IRS filing and the companion audit were submitted by the final legally mandated deadline; however, contends Ortel, these documents and all documents previously mentioned concerning 2005 through 2009 are riddled with material, uncorrected, false, misleading and incomplete statements and financial disclosures.
Ortel explains in his report that “unlike individual taxpayers who stand a small chance of being audited by the IRS after they volunteer information concerning income and expense on relevant tax forms, all public charities of the size the Clinton Foundation has been since its original authorization as a tax-exempt organization must procure an independent audit of their financial statements by a competent and empowered firm of accounting professional who have access to all relevant supporting schedules.”
Ortel notes the independent audit must be attached to the tax-exempt organization’s IRS filing as elements of the IRS Form 990 and supporting schedules call for reconciliation of numerous financial figures with information contained in the independent audit.
He finds that for calendar years 2005 through 2009, the Clinton Foundation “filed false and materially misleading informational returns to governmental authorities.”
“In addition, the Clinton Foundation submitted documents it held out to authorities and to the general public as being independent certified audits of its financial statements – these documents (repeatedly submitted after Forms 990 were filed) were neither ‘independent,’ nor ‘audits’ within accepted meanings contemplated under applicable laws.”
Despite an extensive search, Ortel was unable to find on the Clinton Foundation website or on any state or federal government website an independent audit of the Clinton Foundation since inception that validates revenue or expense-line items.
Instead, Ortel notes the BKD accounting firm reliance letters submitted with the Clinton Foundation financial statements for the years 2005-2009 are characterized by BKD as “audit reviews.” This suggests the accounting firm limited the audit to reviewing financial statements produced by the Clinton Foundation without attempting to reconstruct or validate the statements independently.
‘Minimal resources to accounting and legal’
Ortel further documents that in the years 2007 through 2013, the Clinton Foundation allocated what he considered minimal financial resources to discharge financial reporting requirements, compared to resources spent for travel and conference expenses for the Clintons and other unspecified foundation staff or related persons.
Clinton Foundation expenses for legal and accounting versus travel and conferences, 2007-2013:
Ortel argues the allocation of such minimal resources to legal and accounting constituted fraud.
“The Clinton Foundation failed to exercise proper care in operating a sprawling multinational organization prudently to serve valid public interests,” he writes.
‘Misleading statements pleading innocence’
Since April 20, when Ortel issued his first report on the Clinton Foundation, credible representatives of the foundation quickly admitted that publicly available filings submitted in connection with one or more fiscal years contain errors and promised that any material errors found as part of a renewed self-examination would be corrected.
“I also want to address questions regarding our 990 tax forms,” said Maura Pally, acting CEO of the Clinton Foundation, in a statement on the foundation’s website on April 26.
“We have said that after a voluntary external review is completed, we will likely re-file forms for some years,” she said. “While some have suggested that this indicates a failure to accurately report our total revenue, that is not the case. Our total revenue was accurately reported on each year’s form – our error was that government grants were mistakenly combined with other donations. Those same grants have always been properly listed and broken out and available for anyone to see on our audited financial statements, posted on our website.”
Pally continued: “So yes, we made mistakes, as many organizations of our size do, but we are acting quickly to remedy them, and have taken steps to ensure they don’t happen in the future. We are committed to operating the Foundation responsibly and effectively to continue the life-changing work that this philanthropy is doing every day. I encourage you to read more about that good work at www.clintonfoundation.org.”
Ortel accused Pally of trying to mislead the public by suggesting the Clinton Foundation irregularities, errors and omissions in filing financial reports were minor, technical mistakes of no material nature.
“Ms. Pally’s comments are themselves materially misleading for many reasons,” Ortel continues to argue, “including that the Clinton Foundation has neither procured nor published independent audits of any financial statements that were prepared by fully informed and professional accounting firms, and done so on a rigorously considered and consolidated basis in the approximately 15 years since the foundation was created.”
Ortel says Pally should know from her previous work with New York Mayor Mike Bloomberg’s charitable endeavors, which are much larger than the Clinton Foundation, that prominent public charities “devote appropriate resources, both financial and otherwise, to explain fully how they are actually meeting their authorized tax-exempt purposes, how they protect and serve the interests of their donors, and how they take great pains to comply, on a timely and thorough basis with informational report requirements in relevant legal jurisdictions.”
At Bloomberg Philanthropies, Pally provided strategic direction for programmatic activities and oversight of operational management, according to her bio on the Clinton Foundation website.
Ortel further points out that even more recently, Bill Clinton compounded errors in the evolving Clinton Foundation narrative when he stated there was nothing “sinister” in the management or operation of the foundation.
In an interview that aired on NBC’s “Today” show May 4, he said, “There’s almost no new fact that’s known now that wasn’t known when she ran for president the first time.”
Ortel insists otherwise.
“Actually, there is something sinister when donors with modest means make contributions to a suspect enterprise which they could have sent to one or more properly organized and validly operating tax-exempt organizations,” he writes.
“Moreover, repeatedly making demonstrably false, materially misleading, and incomplete informational filings concerning the activities of tax-exempt organizations to relevant governmental authorities and to the general public is illegal,” he stresses, “particularly when these are made by someone such as Bill Clinton who is a lawyer, serves as a director and officer, and certainly is in position to exercise significant influence over the Clinton Foundation and over its constituent entities.”
In his second report, Otel contends that “given its alleged and continuing offenses,” the “malefactors operating the Clinton Foundation be removed and disciplined, in the process of shutting down the Foundation altogether.”
“So far, the Clinton’s and their supporters have been able to deflect pubic criticism by pointing out that Schweizer’s allegations amount to charging the Clintons with using their foundation to commit bribery, a criminal offense with a very high threshold of proof in a criminal court,” Ortel says.
“My charges involve financial mismanagement and gross irregularities, inaccuracies and other errors in financial reporting, alleging the Clintons were guilty of inurement.”
He says inurement is an offense “so antithetical to the purpose of government allowing tax-favored status to charitable offenses that state and federal law requires closing a foundation found to have committed material errors in financial reporting, with the burden of proof shifting to the foundation to prove financial reporting was done correctly and not done in error as a means of perpetrating a criminal fraud.”
The IRS defines “inurement” in strict terms: “A section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization.”
Inconsistent, incomplete and confusing
A search of relevant government databases showed considerable inconsistency and confusion regarding whether or not the Clinton Foundation (listed also as the William J. Clinton Foundation and the Bill, Hillary, and Chelsea Clinton Foundation), the Clinton Global Initiative and the Clinton Health Access Initiative are separately structured corporations registered with the relevant departments of state.
The Clinton Foundation website lists the address of the offices of the Clinton Foundation and CGI as 1271 6th Avenue in New York City. No address is listed for the Clinton Health Access Initiative Inc.
The Clinton Foundation website lists no address for the Clinton Foundation, CGI or CHAI, indicating only that the Clinton Presidential Center is located “along the Arkansas River in Little Rock,” consisting of a museum, a library and archives.
The Bill, Hillary, and Chelsea Clinton Foundation 2013 IRS Form 990, the most recent such form posted on the Clinton Foundation website, lists the address as 610 President Clinton Avenue, 2nd Floor, Little Rock, Arkansas, with the name of the principal officer, Eric Braverman, listed at 1271 6th Avenue in New York City. The IRS Exempt Organizations Select Check shows the Bill, Hillary, and Chelsea Clinton Foundation listed as a tax-exempt foundation but has no listing for either the Clinton Global Initiative or the Clinton Health Access Initiative Inc.
Separately filed IRS 990s are not available for either the Clinton Global Initiative or the Clinton Health Access Initiative Inc.
For 2013, there is no separate address, IRS Form 990 or separate financial report filed on the Clinton Foundation website for either CGI or CHAI, both of which are reported along with the foundation in the same IRS Form 990 and consolidated in financial statements for the Dec. 31, 2013, report that Price Waterhouse Coopers LLP prepared for the Bill, Hillary & Chelsea Clinton Foundation. [Editor’s note: After this article was published, Price Waterhouse Coopers clarified to WND that it has audited the consolidated financial statements of the Bill, Hillary & Chelsea Clinton Foundation for the year ended Dec. 31, 2013, not 2012, as originally reported. The accounting firm prepared the Forms 990 for 2013 for the Bill, Hillary, and Chelsea Clinton Foundation and the Clinton Global Initiative. They were filed on or before Nov. 15, 2014, and are publicly available at Guidestar.org].
A search of the New York Department of State Division of Corporations database on the Internet found no filings in New York state for the Bill, Hillary, and Chelsea Clinton Foundation, the William J. Clinton Foundation or the Clinton Health Access Initiative Inc. But it found a listing for CGI Global International Inc., registered as a New York corporation with an initial filing date of March 18, 1999, with a New York Department of State process address in Albany, the only listed address.
The New York Department of State corporation database list the “current entity status” for CGI Global International Inc. as “Inactive – Dissolution by Proclamation/ Annulment of Authority (June 25, 2003).”
The New York Attorney General’s Office lists the Bill, Hillary, and Chelsea Clinton Foundation as a registered charity incorporated in Arkansas with an address at 610 President Clinton Avenue, Little Rock, Arkansas. The Clinton Health Access Initiative Inc. is registered as an Arkansas corporation with an address at 383 Dorchester Ave., Suite 400, Boston, Massachusetts. The Clinton Global Initiative is not registered as a New York charity.
Despite the Clinton Global Initiative not being registered with the New York secretary of state as a corporation licensed to do business, or with the New York attorney general as a charitable foundation registered to do business, the Clinton Foundation website documents the CGI 2014 Annual Meeting was held in New York City on Sept. 21, 2014.
A search of the Arkansas Secretary of State Corporations website under the William J. Clinton Foundation listed as a “fictitious name” produced a listing for the Bill, Hillary, and Chelsea Clinton Foundation at 610 President Clinton Avenue in Little Rock, that detailed 23 “fictitious names,” including the Clinton Foundation HIV/AIDS Initiative and the Clinton Global Initiative. A search of the same database for the Bill, Hillary, and Chelsea Clinton Foundation produced no listing.
A search of the Arkansas Secretary of State Corporations website for the Clinton Health Access Initiative Inc. found an Arkansas corporation under that name with a board of directors different than the board of directors listed in the Arkansas database for the Bill, Hillary, and Chelsea Clinton Foundation. The Arkansas Secretary of State Corporations website listed the Clinton Health Access Initiative Inc. as a having its principal address at 383 Dorchester Avenue, Suite 400, in Boston, Massachusetts, with John R. Tisdale, Bill Clinton’s lawyer, listed as the local registered agent at 200 West Capitol, Suite 2300, Little Rock, Arkansas.
WND previously reported Ortel’s concern the agreement to extend former Clinton Foundation CEO Braverman’s employment contract in December 2014, combined with his subsequent and sudden departure just days later in January, is suspicious.
On March 1, investigative reporter Kenneth P. Vogel, writing in Politico magazine, found that in December 2015 the board of the Bill, Hillary, and Chelsea Foundation had approved a salary of more than $395,000 plus bonuses to hire the Yale-educated Braverman, while voting to extend his board term through 2017.
Vogel noted that Braverman, who had worked with Chelsea Clinton at McKinsey & Company consultancy had been recruited “with the former first daughter’s support to help impose McKinsey-like management rigor to a foundation that had grown to a $2 billion charitable powerhouse.”
Braverman’s sudden departure shook the New York financial world.
Ortel, a frequent guest on Bloomberg television and a contributor to the Washington Times and others, began his Wall Street career in 1980 with Dillon, Read, & Co., followed by the Bridgeford Group and Chart Group.
His international investment analysis frequently centers on complex legal and financial structures. He is currently managing director of Newport Value Partners LLC, which provides independent investment research to professional investors. He is a graduate of the Horace Mann School, Yale College and the Harvard Business School.
In an article published Aug. 4, 2009, demonstrating the financial analysis for which Ortel is perhaps best known on Wall Street, Forbes magazine noted he first broadcast his concerns about General Electric’s earnings quality in 2008, when the stock was trading above $30 a share. A year later, GE’s market value had plunge by about $200 billion, to $13 a share.