Clinton Foundation ‘could Enron’ PricewaterhouseCoopers

By Jerome R. Corsi

NEW YORK – A respected Wall Street analyst who has been investigating the Clinton Foundation’s finances alleges the “Big Four” accounting firm PricewaterhouseCoopers was a willing participant in a scheme by the Clintons and their associates to become personally enriched by the foundation, a crime known as inurement.

Charles Ortel, a frequent guest on Bloomberg television and a contributor to the Washington Times and others, says in a draft report that he found “the PWC accounting work product for 2013 is riddled with uncorrected errors and falsehoods” as well as procedural defects so severe he has raised the possibility “the Clinton Foundation might be PWC’s Enron.”

His reference is to the fall of Arthur Andersen LLP, previously one of the “Big Five” accounting firms. Andersen surrendered its license to practice as a certified public accounting firm after being found guilty of criminal charges in its auditing of Enron, the Texas-based energy company that filed for bankruptcy in 2001.

PricewaterhouseCoopers has not replied to numerous requests from WND, by email and by telephone, to comment. Ortel also asked PWC a number of questions based on his investigation and has received no reply.

WND has previously reported in a series of stories, beginning in April, that Ortel has found “irregularities” of a “sufficient magnitude” that the Clinton Foundation should be shut down.

He says that “if any of the 50 state attorneys general should present the evidence to a federal district judge, I believe an injunction would be ordered, shutting down the Clinton Foundation and placing the organization in receivership.”

Arthur Andersen’s “descent from conscience of the accounting industry to accused felon didn’t happen overnight,” Wall Street Journal staff reporters Ken Brown and Ianthe Jean Dugan wrote in 2002. “Rather, it stemmed from a series of management miscues and compromises over the decades.”

As the “firm grew from a close-knit partnership to a globe-spanning behemoth, pressure to boost profits became intense,” Brown and Dugan wrote. “Andersen leaders responded by pushing partners to become salesmen – upsetting the delicate balancing act any auditor must perform between pleasing a client and looking out for the public investor.”

Ortel’s analysis of PWC concentrates on the most recent IRS Form 990 filing by the Clinton Foundation, for calendar year 2013, when the foundation replaced its previous auditor, BKD, with PWC.

The companion accounting prepared by PWC, contends Ortel, “is falsely and fraudulently held out by PWC and by the Clinton Foundation to be an ‘independent certified audit,’ when it is nothing of the sort.”

“Clinton Foundation filings for all years from inception through 2013 are materially incomplete, inaccurate, misleading and therefore fraudulent,” Ortel concludes in his report on PWC’s work with the foundation.

Ortel 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.

Peter Schweizer’s “Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich” is available at the WND Superstore!

According to Bill Clinton, 90 percent of the Clinton Foundation’s donors make small contributions.

Ortel stresses in his report that “these individuals, many of whom are not sophisticated financially and actually suffering economically, should be protected.”

“PWC has an ironclad duty to uncover irregularities and misstatements that PWC manifestly failed to discharge,” Ortel says.

“Ironically, the Clinton Family holds itself out for praise when Clinton Foundation financial statements are inaccurate and riddled with material, uncorrected errors,” he concludes. “Those who take requisite time to study public financial filings should see what I see – that the Clintons are playing ‘Robin Hood,’ but in reverse, now with a major accounting firm of PWC’s magnitude participating in the cover-up.”

‘Certified fraud as accurate’

Ortel explained to WND that PWC failed to adhere rigidly to generally accepted accounting practices defined by the American Institute of Certified Public Accountants.

“Before an accounting firm performs an audit for a new client, experienced accounting professionals must perform due diligence concentrating primarily upon whether the potential client has internal financial controls that seem reliable,” said.

He said that in his comparison of all audits procured by the Clinton Foundation from 2004 through 2012, he can only conclude that PWC “neglected to do basic homework and failed to adopt the mandated posture of ‘professional skepticism,’ producing a wholly deficient work product.”

As a consequence, Ortel alleges, PWC certified as accurate what amounted to fraudulent financial statements reported to federal and state regulators.

Ortel argues rules that apply to directors and to auditors of the Clinton Foundation when they make legally required submissions to the IRS and other disclosures to the public are “strict, precise and simple to understand.”

“Answers to questions posed in these filings,” he writes, “must be wholly complete, truthful and make reference, when it comes to financial statements, to supporting details that can be, and actually are verified by competent, empowered teams of independent, thoroughly professional accounting professionals who are versed in the special rules that apply to U.S. tax-exempt organizations, that must exclusively serve the public interest.”

He emphasizes that directors, including each of the Clinton family members, bear ultimate responsibility for Clinton Foundation filings.

Ortel writes that directors “cannot successfully disclaim legal responsibility when a tax-exempt organization submits materially misleading public filings or, worse, when it proceeds with an aggressive fundraising campaign across state lines while the only available annual financial reports and audited financial statements concerning its historical operations are riddled with materially misleading statements.”

He notes that sometime after Nov. 15, 2013, when it submitted its Annual Report on Form 990 to the IRS, the Clinton Foundation decided to bring in the globally prominent accounting firm PWC to replace a regional firm, BKD.

He emphasizes that an accounting firm brought in to produce a first audit has “important responsibilities, and a close review of the work performed by PWC shows that PWC failed to discharge these responsibilities.”

Close examination of the Clinton Foundation Financial Report for 2013 reveals that IRS Form 990 concerning 2013 was filed on or about Nov. 15 2014, the final deadline for calendar year-end filers.

Ortel points to the Clinton Foundation 2013 Annual Report and the Clinton Foundation 2013 IRS Form 990 to prove that the PWC audit was completed after the Form 990 was filed. It’s a reversal of what would have been expected had the 2013 Price Waterhouse audit formed the basis for the IRS Form 990 financial reporting.

“A key requirement for Foundations the size of the Clinton Foundation is to submit an independent, certified audit of its financial statements as part of each annual return to the IRS,” Ortel writes.

“Evidently, the Clinton Foundation did not even bother to submit an audit when it submitted its IRS Form 990, since the 2013 PWC audit letter is dated Dec. 16, 2014, approximately one month after the Clinton Foundation 2013 Form 990 was electronically filed with the IRS, and 31 days following the final IRS deadline for submitting comprehensive annual returns,” he continued.

Ortel concludes:

Because it did not submit a final version of PWC’s audit by 15 November 2014, the Clinton Foundation and its directors tendered an IRS Form 990 concerning 2013 that was materially deficient in that key financial information entered into Form 990 and supporting financial schedules was not independently vetted by an informed, competent firm of professional accountants, as is clearly mandated by applicable laws.

Ortel points out the date of the completed PWC 2013 audit is one month later than the date the Clinton Foundation submitted the 2013 Form 990 to the IRS. He finds it difficult to understand how 2013 IRS Form 990 could have been based on the 2013 PWC audit that was not completed until a month after the Form 990 had been completed and filed with the IRS.

‘Highly misleading’

Ortel argues the PWC 2013 audit of the Clinton Foundation “inaccurately claims to rely on another auditing firm and does not independently verify key financial information for 2012, resulting in failures that gut the integrity of the PWC work product.”

He begins his analysis by noting the PWC title page for the firm’s 2013 audit of the Clinton Foundation reads:

Bill, Hillary & Chelsea Clinton Foundation
Consolidated Financial Statements
December 31, 2013 and 2012

Ortel alleges the title is highly misleading, pointing out that in the first paragraph of the audit letter, PWC explains the audit covers the year ending Dec. 31, 2013.

The first page of the PWC 2013 “Independent Auditor’s Report” reads as follows:

We have audited the accompanying consolidated financial statements of the Bill, Hillary & Chelsea Clinton Foundation (the “Foundation”), which comprise the consolidated statements of financial position as of December 31, 2013 and the related consolidated statements of activities, and of cash flows for the year then ended.

Yet, on the second page of the PWC audit letter, under the caption “Other Matters,” PWC in the first paragraph notes that another firm conducted the audit of the 2012 financial information.

The paragraph reads:

The consolidated financial statements of the Foundation as of December 31, 2012 and for the year then ended were audited by other auditors whose report, dated September 10, 2013, expressed an unmodified opinion on those statements.

Ortel observed that PWC, in this paragraph, under the caption “Other Matters,” failed to explain it relied for the Clinton Foundation 2012 financial information on the work product of accounting firm BKD. PWC, he said, adjusted BDK’s work product without explaining the basis on which PWC changed financial statements for 2012.

“PWC states that the firm relied upon the work product of BKD for 2012, implying that in preparing the 2013 audited financial statements PWC accepted the BKD financial statements without modification,” Ortel explains.

“This is certainly not the case,” Ortel continues, “as can be clearly seen by comparing BKD’s financial statement for the Clinton Foundation for year-end 31 December 2012, with the consolidated balance sheet for the Clinton Foundation that PWC used as a starting point on 1 January 2013 in its 2013 audit.”

The table below compares key balance sheet amounts for the Clinton Foundation in the BKD audit ending Dec. 31, 2012, and the PWC audit beginning the next day, Jan. 1, 2013:


“Though PWC does not explain its conclusions, apparently PWC determined that the Clinton Foundation’s cash balance was approximately $3.2 million lower than BKD had calculated on 31 December 2012,” Ortel observed.

“PWC also determined that investments were higher by approximately $1.8 million and that inventories and prepaid expenses were higher by a modest amount,” he continued. “All told, according to PWC, total assets were lower by $1.3 million and this drop was precisely offset by a corresponding decline in accounts payable and accrued expenses.”

Ortel says the adjustments made by PWC to BKD’s audit of the Clinton Foundation’s financials at Dec. 31, 2012, raise several troubling questions:

  • How did $3.1 million in cash disappear?
  • Cash is by far the easiest asset to quantify and verify – what did BKD miss in its audit and what explains PWC’s conclusion?
  • How loose are the financial controls over the Clinton Foundation’s cash accounts at headquarters and in the many foreign locations in which it operates?
  • What factors led PWC to place a significantly higher value on the Clinton Foundation’s investments as of Dec. 31, 2012 ($3,449,166 as compared to $1,638,057)?
  • What entities agreed to lower the stated value of obligations owed to them by the Clinton Foundation as of Dec. 31, 2012, and what were the specific reasons for these downward adjustments?
  • How did the total downward adjustment in liabilities happen to equal precisely the net amount by which the Clinton Foundation’s assets were reduced by PWC as of Dec. 31, 2012?

On May 19, following a telephone conversation with PWC, Ortel posed additional questions by email that the accounting firm has yet to answer.

Ortel wrote to PWC:

In considering our telephone conversation of last week, I decided to take another look comparing the BKD work product for 2012 for the Foundation with PWC entries for 2012 in the income statement, cash flow statement and balance sheet, which PWC explains in its letter constitute BKD audited statements.”

Ortel listed in the email what he described as “quite surprising results”:

  • BKD’s audit explains that it consolidates CGI into the Foundation for 2012, while PWC explains that CGI was merged into the Foundation in March 2013 – both approaches should yield precisely equivalent results for 2012 for the Foundation.
  • For a set of reasons that is not explained in PWC’s work product, Total Inflows and Total Outflows for 2012 are slightly different from BKD work product for 2012, and there are major differences in amounts shown for Contributions, Grants and other income. Still, the amount shown for Change in Net Assets is the same, $7,532,693.
  • All important line items for Cash Flow Statement details are precisely the same in the BKD and PWC treatments for 2012, save for the extremely important entry for cash and equivalents as of the start of 2012, which BKD has as $107,066,637, whereas PWC has it as $103,873,526.
  • If PWC relied on BKD for its 2012 audit, why and how did PWC determine that the correct starting place for cash and equivalents was $3,193,111 lower at the start of 2012?
  • What happened to this cash?
  • Looking more closely at the balance sheets for year-end 2012, investments are higher in the PWC version by $1,811,109 – how and why did PWC reach this determination?
  • And why are accounts payable and accrued expenses lower in PWC’s version by $1,302,468?
  • Moreover, how could these balance sheet discrepancies arise yet the income statements and cash flow statements reconcile? This seems highly irregular.

In his email to PWC, Ortel noted that from 2013 onward, the Clinton Foundation “has actively solicited contributions for its annual operations and for an endowment fund, continuously holding out PWC’s audit as independent certification of the Clinton Foundation’s financial results for 2013.”

“What specific steps has PWC taken in 2015 to revisit its audit of the 2013 Financial Statements for the Clinton Foundation?” he asked. “If PWC stands by its original work, without modification, please confirm this to be the case.”

Ortel asked further: “If PWC intends to adjust its work product and its conclusions, please explain why and please tender a thorough and fully vetted amended set of consolidated financial statements for 2013, together with complete and explicit footnotes, as well as all relevant consolidating financial statements.”

Responsibilities in a first audit

Ortel’s first-draft report focusing on PWC audit work for the Clinton Foundation notes guidance from the American Institute of Certified Public Accountants “explains in explicit detail why an auditor must take special care in performing its first audit of a new client to ensure that financial information prepared by management and directors is free from material misstatement and also that such information doe not omit to state relevant facts whose omission would be misleading.”

He cites AU-C Section 510 of the AICPA “Clarified Statements on Auditing Standards,” SAS No. 122, titled “Opening Balances – Initial Audit Engagements, Including Reaudit Engagements.” Effective for audits of financial statements ending after Dec. 15, 2012, it defines the responsibilities of a new auditor to obtain sufficient appropriate audit evidence to determine whether financial statements prepared by a predecessor auditor contain misstatements that materially affect the current period’s financial statements.

The section further specifies procedures required to correct possible material misstatements in financial statements reported on by a predecessor auditor.

“If the auditor becomes aware of information during the audit that leads the auditor to believe that financial statements reported on by the predecessor auditor may require revision,” it states, “the auditor should request management to inform the predecessor auditor of the situation and arrange for the three parties to discuss this information and attempt to resolve the matter.”

Ortel further cites AICAP AU-C Section 316, SAS No. 99 and 103, superseding SAS No. 82 in pointing out auditors have “affirmative responsibilities to examine for and to prevent fraud by making sure in all audits that financial statements are free of material misstatement, whether caused by error or fraud.”

‘Shut it down’

WND reported last month the Clinton Foundation has provided no explanation for continuing to list the principal business address of its Arkansas-registered Clinton Health Access Initiative in Massachusetts, where its registration was revoked under a previous name.

WND also reported that before Hillary Clinton completed her first year as President Obama’s secretary of state in 2010, Ortel calculates $17 million went missing from Clinton Foundation financial reports.

WND reported May 14 Ortel has concluded that while Hillary Clinton was appointed to the board of directors of the Clinton Foundation in 2013, after she had resigned as secretary of state, she is complicit in what he has described as systematic financial fraud warranting a criminal investigation. WND reported May 13 that Ortel found the Clinton Foundation’s explanation for why it was divided into three, legally separate tax-exempt organizations to be “misleading and false.” As WND reported May 12, based on Ortel’s findings, a prominent lawyer and a top government watchdog in the nation’s capital are calling for the Clinton Foundation to be shut down. In his first report, Ortel 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.

As WND reported, the Clinton Foundation’s IRS determination letter dating back to the foundation’s creation in 2001 is not archived on the Clinton Foundation website. The Clinton Foundation’s 2002 IRS Form 990, Part III filing lists the organization’s “primary exempt purpose” in narrowly defined terms. It specifies the Clinton Foundation was created “to design, construct, and initially endow a presidential archival depository to house and preserve the books, correspondence, documents, papers, pictures, and other [memorabilia] of President Clinton.”

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