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Why Hillary Clinton's foundation problem isn't going away

Spencer Platt/Getty Images

The Clinton Foundation is destined to be at the center of the fight for the presidency in 2016.

That's become increasingly evident over the last few days, as Newsweek broke a story alleging that top foundation benefactor Victor Pinchuk's company has engaged in trade with Iran and the New York Times reporting that a forthcoming book by Peter Schweizer argues that U.S. policy decisions coincided with contributions to the foundation from foreign entities.

The new reporting shines an even brighter spotlight on the question of who benefits the most from a charitable organization branded with the former president's seal of approval.

The Clintons' advocates see it as an expression of everything they like about the former — and perhaps future — first couple: their lifelong dedication to public service, their tireless work on behalf of the poor and dispossessed, and their standing as global icons who would walk into the White House with deep, personal relationships with world leaders.

"The foundation needs to continue to exist because it provides a valuable service to third-world countries," said Rep. G. K. Butterfield (D-NC).

But the Clintons' critics see it as proof of the fundamental corruption that follows two lifelong politicians. The foundation rakes in money from wealthy individuals, corporations, and even foreign countries, many of which have business before a federal government that Hillary Clinton wants to run. Because they're giving money to a charity, the contributions have a "cleaner" feel to them than campaign checks. But they're a form of access to the Clintons all the same. Oh, and all that money pays for the creature comforts of the Clintons and their inner circle.

"They try to pretend they're something they're not," said one Republican aide on Capitol Hill, who accused Hillary Clinton of engaging in "faux populism" in her early days on the campaign trail. "They're surrounded by special interests."

For weeks, there's been a steady stream of news stories about the foundation and its funding, from reports of foreign contributions to Bill Clinton defending his eponymous charity.

For many Democrats — even those supporting Clinton's campaign — the solution seems clear: All three Clintons should back away from the foundation for the duration of Hillary's campaign and (possible) presidency.

But the Clintons aren't willing to sacrifice their foundation for the White House — at least not yet.

What is the Clinton Foundation?

The Clinton Foundation is a tax-exempt charitable organization that acts as the umbrella for the Clintons' wide variety of philanthropic efforts. There are currently 11 "initiatives" in the Clinton Foundation, including the Clinton Global Initiative and two projects, No Ceilings and Too Small to Fail, started by Hillary.

CGI is the marquee initiative. Rather than collecting money from donors and spending it on projects around the world, CGI's model is to direct deep-pocketed contributors toward needy enterprises. In the process, both CGI and the donors get credit for making the world a better place.

For example, in 2011, Rwanda, the United Kingdom, and Nike Foundation teamed up through CGI to create a program for providing health information to 12-year-old girls in a nation ravaged by conflict. Other projects have focused on clean drinking water, school lunches in India, and shoes for Haitian children. It's hard to argue with the goals, even if there's a perception that the contributors are seeking access to the Clintons.

In contrast to CGI, the parent foundation takes direct contributions and spends it on overhead and programs. There are seven donors who have given $25 million or more since the foundation's inception, according to its disclosures. That set includes longtime Clinton political giver Fred Eychaner. Haim Saban, another big Clinton fundraiser, has given between $10 million and $25 million over the years. He has said he'll spend whatever it takes to make Hillary Clinton president. Kuwait and the Coca-Cola Foundation are among the entities that have given between $5 million and $10 million.

There's a tendency to underestimate the significant differences between campaign contributions and donations to charities run by politicians. First, even in the Super PAC era, checks to campaigns are sharply limited, while charities can accept unlimited contributions. It's hard to write a head-turning check to a campaign. Second, charities enjoy a patina of holiness that campaigns do not. Better for someone seeking access or favor to give a big check to the Clinton Foundation than a small one to the Clinton campaign. The hybrid is a big donation to a Super PAC supporting Clinton. Plenty of folks will give those, too.

Why do people think the Clinton Foundation is corrupting?

Critics of the Clinton Foundation portray it as an ingenious backroom pay-to-play scheme obscured by the mom-and-apple-pie work going on at the front desk. One concern is that US individuals and corporations gain access to the Clintons, curry favor with them, and use their affiliation with the former first couple to launder their brands. They've collected money from folks who turned out to be pretty unsavory, including Jeffrey Epstein. In return, the Clintons get money for projects that help the underprivileged, burnish their own brands, and continue to build their political network.

The other major point of contention is the foundation's longtime practice of accepting contributions from foreign countries. Bill and Hillary Clinton agreed to suspend most of those donations while Hillary was secretary of state, but at least one — a $500,000 check from Algeria for Haitian earthquake relief — slipped through the cracks. And the Clintons resumed taking money from foreign governments after Hillary resigned from the Obama administration in early 2013. Saudi Arabia and Norway have each given between $10 million and $25 million to the Clinton Foundation since its inception, according to the organization's records.

Next month, the foundation is holding an event in Morocco for which a state-owned company ponied up a contribution of at least $1 million. Reporting on that conference preceded the foundation's decision to again limit foreign government donations.

The truth is the foundation has undergone significant changes in management in recent years, after Chelsea Clinton was sent in to clean up what many in the Clintons' inner circle saw as a mess. Even with those changes, the whole construct leaves Hillary Clinton vulnerable to political attack. Here's why:

  1. It reinforces a series of powerful memes against Hillary Clinton: Republicans say she's unwilling to play by the same rules as everyone else, and her populist turn on the campaign trail is at odds with her big-dollar fundraising, much of it from foreign governments and individuals.
  2. Perhaps more important — since most Republicans aren't inclined to vote for her — it reminds Democrats of two toxic perceptions about Clinton within the Democratic Party: she's too cozy with, perhaps even co-opted by, the very Wall Street and corporate titans who are most reviled on the left (Barclays, Citi, Goldman Sachs, ExxonMobil, and Walmart are all foundation supporters), and she exercises poor judgment around both the money she raises and the company she keeps.

"It fuels a narrative that's not positive," one House Democrat who supports Clinton's presidential bid said in an interview Thursday on Capitol Hill. "They [the Clintons] show a real tin ear when it comes to their own behavior."

What have the Clintons done to distance themselves from the foundation?

"While it’s common for global charities to receive international support, it’s rare to find an organization as transparent as the Clinton Foundation," Craig Minassian, a spokesman for the organization, said in a statement issued after the board decided to alter its treatment of foreign contributions and disclosure of donors. "Our current policy already goes above and beyond what’s required by voluntarily disclosing our more than 300,000 donors on our website for anyone to see."

From the foundation's perspective, new rules put in place by the board should satisfy those who are concerned about transparency and potential conflicts of interest. Here's what the board decided to do:

  1. Disclose donors quarterly rather than annually.
  2. Stop collecting contributions from most foreign governments, except meeting attendance fees, which run $20,000. Australia, Canada, Germany, the Netherlands, Norway, and the United Kingdom are exempted from the foreign contribution rule because of their ongoing donations to existing projects.

The foundation is "reinforcing its commitment to accountability while protecting programs that are improving the lives of millions of people around the world," Minassian said.

The first Democrat to call serious attention to the possible conflicts of interest between Bill Clinton's fundraising and Hillary Clinton's work in government was Barack Obama, who insisted that the foundation reveal its donors as part of the deal to appoint Hillary Clinton as secretary of state in 2009. Under that arrangement, Bill agreed to spin off the most prominent of the foundation's arms, the Clinton Global Initiative, give up control over its operations, and refrain from directly soliciting contributions. That agreement lasted only until Hillary resigned from her post as secretary of state in 2013.

She later joined the Clinton Foundation, which was renamed the Bill, Hillary, and Chelsea Clinton Foundation, and then stepped down from its board this month.

Hillary understands that she can't raise money for the foundation and her presidential campaign at the same time — she's got to focus on political fundraising. And there's a certain ick factor to letting wealthy donors and corporations with interests in Washington give "clean" donations to the charity of a presidential contender.

So when the foundation began building an endowment last year, it seemed like an acknowledgment that Bill, Hillary, and Chelsea Clinton would be sidelined from buckraking for their nonprofit. But the Clintons haven't backed off from the foundation altogether, or even come very close. More to the point, even if they did back away from it now, that wouldn't somehow erase all the money they've raised for it in recent years — years when they, and everyone else, knew Hillary Clinton was likely to run for president.

Why won't the Clintons simply give up the foundation?

Don't expect the Clintons to shut down their charity or even to really distance themselves from it. It's easy to forget that Bill Clinton has a huge personal stake in what he's built, a modern post-presidency that has fortified and improved his reputation.

Last year, Gallup reported that Bill Clinton had the highest favorability rating among living US presidents, at 64 percent. He's bobbed between 60 percent and 66 percent in recent years. The foundation's work is an important part of his legacy, possibly more important than what he did in office, and it is well-positioned to outlive him.

The fact that critics are trying to tear down what he's built makes him all the more likely to hold on tighter. And, as Hillary Clinton has been known to say, incoming fire is evidence that you've been hitting the right targets.

So while there is a fundamental competition between the best interests of the foundation and those of Hillary Clinton's campaign, the Clintons' instinct is to manage the damage rather than remove the threat to her campaign altogether. If they can get away with it, they'd like to win the presidency back without giving up the reins of the foundation.

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