In an election season marred by controversy and allegations, it’s only fitting for the charitable foundations of the two major party candidates to get tangled in the mess.
Donald Trump and Hillary Clinton now find their foundations at the heart of the election discussion with roughly six weeks to go until election day in what can only be described as an “unprecedented” situation.
On Tuesday, David Fahrenthold of The Washington Post published a series of stunning revelations about the Trump Foundation, reporting that the Republican presidential nominee used hundreds of thousands from the charity to settle matters related to his businesses.
Elsewhere on Tuesday, Wall Street Journal reporter James Grimaldi published a story on Clinton’s husband, former President Bill Clinton, being paid $260,000 to give a speech in 2014 for a company that would later work on a project in Haiti directly alongside the Clinton Foundation.
“These [charitable] organisations are ripe for abuse until someone really digs in and looks,” Nick Mirkay, a professor of law and associate dean for planning and initiatives at Creighton University School of Law, told Business Insider, later adding that the allegations against both foundations, if true, are a “fundamental violation of why we allow these organisations to exist and give them tax exempt status.”
Both foundations have been grabbing headlines for similar topics for much of the summer. With less than 50 days to go until the election, here’s what you need to know about both the Trump and Clinton Foundations and the controversies surrounding both.
The Trump Foundation
As a private foundation, Trump’s charity is in unique territory. It’s run by a family, yet as Fortune reported this week, the foundation’s contributions have all come from sources outside the Trump family, which would be more common for a public charity.
The foundation, which has been in existence since the late 1980s, is now mired in both “self-dealing” and “pay-to-play” scandals.
This week’s Washington Post report, citing tax records, revealed Trump had not made a single donation to his charity since 2008 and sometimes used money from others through the foundation to pay off legal expenses.
The money relating to those expenses, which reportedly amounted to $258,000 from the Trump Foundation, may have violated “self-dealing” laws that prohibit nonprofit leaders from using charity money for self-benefit or the benefit of their for-profit businesses, according to The Post.
Trump, according to the report, also spent roughly $50,000 of foundation money on a pair of portraits, advertisements for his hotel chain, and a signed football helmet.
“I represent 700 nonprofits a year, and I’ve never encountered anything so brazen,” Jeffrey Tenenbaum, who advises charities at the Venable law firm in Washington, told The Post, describing the details as “really shocking.”
He continued: “If he’s using other people’s money — run through his foundation — to satisfy his personal obligations, then that’s about as blatant an example of self-dealing [as] I’ve seen in a while.”
Allegations of “pay-to-play” stem from the Manhattan billionaire recently having to pay a $2,500 fine to the Internal Revenue Service over a $25,000 campaign donation made through the foundation to a group backing Florida Attorney General Pam Bondi in 2013.
At the time, Bondi was considering whether to pursue fraud allegations against the defunct Trump University. She did not pursue the investigation.
The Washington Post found that the foundation did not list the contribution in its tax filings, and Trump later reimbursed the foundation for the donation. A Trump Organisation senior vice president told The Post that it was “an honest mistake” that the contribution wasn’t properly listed.
That $2,500 fine levied against Trump was a result of the IRS finding him in violation of “self-dealing” laws, which constitute a 10% penalty if a private foundation, which Trump’s charity is, is found to be in violation. Pending any further investigations into what the Post reported on this week, Trump could face IRS penalties that could amount to 10% of the total cash from transactions deemed impermissible, compounded for each year they occurred. Trump could also be forced to reimburse the foundation for the roughly $300,000 in cash that the Post reported on.
“[Self-dealing rules] basically explain who is a disqualified person, people that are connected to the foundation, and then give a laundry list of transactions that are not allowed between the foundation and the disqualified person,” Suzanne Friday, senior legal council and vice president of legal affairs at the Council on Foundations, told Business Insider. “So, such transactions would include using foundation assets to fulfil a personal obligation.”
Mirkay said the IRS could even go as far as removing the Trump Foundation’s tax exempt status if it determines the recent revelations are indicative of “a pattern of behaviours.”
But, he said he doesn’t know if “there’s enough for that to happen.”
The Republican nominee is also facing scrutiny from the state of New York and Attorney General Eric Schneiderman, according to the Post, and Mirkay said the state attorney general’s office could also force Trump to reimburse the money, or it could remove him from the board of directors.
The latter would be tricky with the Trump Foundation. Trump is the president of the charity, but does not sit on the board. However, his adult children are all board members.
Responding to the latest report, the Clinton campaign took the opportunity to compare the foundation to Trump’s much-maligned “university.”
“Clearly the Trump Foundation is as much a charitable organisation as Trump University is an institute of higher education,” Christina Reynolds, the campaign’s deputy communications director, said in a statement. “Trump’s version of charity is taking money from others to settle his own legal issues and buy at least two pictures of himself, which experts say is a clear violation of laws governing charitable organisations.”
“Once again, Trump has proven himself a fraud who believes the rules don’t apply to him,” she continued. “It’s past time for him to release his tax returns to show whether his tax issues extend to his own personal finances.”
Trump’s campaign responded to the story in a lengthy statement Tuesday night, taking the opportunity to smear the Post reporter, Fahrenthold.
“In typical Washington Post fashion, they have gotten their facts wrong,” senior communications adviser Jason Miller said in the statement. “The Post’s reporting is peppered with inaccuracies and omissions from a biased reporter who is clearly intent on distracting attention away from the corrupt Clinton Foundation, a vehicle for the Clintons to peddle influence at the expense of the American people.”
Looking at the broader scope, Mirkay tried to put the latest round of revelations into context.
“Although these amounts are not insignificant from a charity perspective, I get the feeling that they’re fairly insignificant from a personal perspective, right?” he said, making note of Trump’s claimed “massive” wealth. “I would say probably not. But like most people, that would require me being able to look at his tax returns.”
The Clinton Foundation
Clinton has faced allegations of encouraging a “pay-to-play” system, where donors who provided vast sums of money to the Clinton Foundation were granted special access with Clinton while she ran the State Department under President Barack Obama. And, such as in the Journal story, payments for both Clinton’s speeches and those payments connections to foundation work have sparked continued questioning.
Although the foundation had been under scrutiny from early-on in her primary bout with Sen. Bernie Sanders of Vermont, the allegations of impropriety against the foundation reached a high-point after Judicial Watch, a conservative watchdog organisation, published emails that it said proved Clinton gave donors special access to the State Department while she was running it.
Clinton in July denied such allegations, and her campaign chairman dismissed them in an August statement.
“The foundation has already laid out the unprecedented steps the charity will take if Hillary Clinton becomes president,” campaign chair John Podesta wrote.
Last week, Donna Shalala, the president of the Clinton Foundation and the former secretary of health and human services, told CNN that the foundation does “magnificent work” and that “there was a process set up to make sure their lines were not crossed” while the former secretary of state was in power.
But, Shalala explained that “when she’s president” the foundation will have to “actually eliminate any aspect of conflict of interest.”
Multiple newspaper editorial boards, including The New York Times, have called for Clinton to cut ties with the foundation, and Trump, along with his campaign, has seized on the controversy in his attacks against the former secretary of state, with Miller calling it proof of the Democratic nominee’s “use of government authority and influence for personal gain.”
The foundation, which was created in 1997, backs initiatives such as economic development in impoverished areas, fighting climate change, improving lives for women and girls, and making HIV and AIDS drugs more accessible to patients around the world. A public charity, which is subject to a different set of rules than Trump’s private foundation, the Clinton Foundation has raised close to $2 billion from a wide array of sources that include corporate leaders, foreign officials, and donors who cross over into the Clinton’s political activities.
The assets held by the Clinton Foundation dwarf those under control of Trump’s charity, and the appearance of conflicts of interest between the Clinton’s charitable, political, and personal goals is what opponents have latched onto.
“Just because something is a conflict of interest, doesn’t mean the foundation can not do it,” Friday said, calling that a misconception held by many and adding that “in an ideal situation people connected to the foundation will abstain from any decision that involves a conflict of interest.”
“If it’s a conflict, it must be disclosed and the interested party must disclose the decision making,” she continued. “The board can vote to do it. The Clinton Foundation has a larger board that can make decisions about things that happen with conflicts of interest.”
When it comes to allegations of “pay-to-play,” where foundation donors supposedly got increased access to the former secretary of state while she held the post, Friday said “it is not always illegal or improper,” when a donor receives something in return for a gift.
She added, it mostly falls on the donors shoulders to list what of value they received in return for making a charitable contribution while filing their taxes.
But where it becomes murky is when the thing of value received is not something tangible. Like, for instance, access.
“Because how do you value that?” she said. “How do you report that? And, it’s probably good practice to avoid that whole situation — having a donor get something in return that you can’t possibly report.”
It’s also tricky when the donors are from foreign nations and often not subject to filing their own taxes within the US, she said.
Looking at the speeches, Mirkay said the bigger issue is whether they should have been listed as income.
“Because it’s kind of a quid-pro-quo where I’ll speak if you give money to the foundation,” he said. “At least one difference between that situation and here, again also, so, you know, [this is] not really what we want to be going on, at least arguably there is less of a personal benefit or at least direct personal benefit in that situation than with Trump actually paying off expenses with foundation assets.”
“Still, not something we shouldn’t be concerned about and not serious, but I guess the benefit is that there is potential evasion of tax there and whether or not there was actually a true gift,” he continued. “Because when something was received in return, that’s not a true gift.”
During a recent interview with Business Insider, billionaire businessman and Clinton supporter Mark Cuban said two important questions regarding the foundation controversy have not been asked: What the market for the former president’s speeches are? And, what was the sales pitch he was giving?
“I know how much I get paid,” the owner of the NBA’s Dallas Mavericks said. “I can get $250,000 for a speech if it’s a big organisation. And I’ll ask for more if you’re making my arse travel somewhere f—– up.”
Cuban said that if Clinton were engaging in a pay-to-play, he’d be asking for a lot more than market value for those speeches and engagements on behalf of the foundation.
“If you’re doing pay-for-play, you better get a whole lot more than the market value for the risk you’re taking,” he said. “Why hasn’t anybody asked the question?”
“What’s the sales pitch? Why are they giving you the money?” he asked.
Whether any sort of pay-to-play was in practice comes down to whether a “premium” was paid for engagements through the foundation.
“If there’s no premium, then either the guy’s an idiot or there’s no pay-for-play,” Cuban said.
In comparing both controversies, Mirkay said there’s “definitely some similarity,” but said Trump’s “disregard for the rules” was more “conscious.”
“I think in both instances it really does show the ability of people with wealth to have organisations and essentially manipulate income,” he said. “There seems to be much more of a personal benefit going to Trump in that he’s paying off personal expenses or debts that he’s incurred with foundation assets that there is at least more of a conscious disregard for the rules there.”
He called the Clinton Foundation’s situation “a little bit murkier.”
“Not a lot,” he said. “I would hate to say somehow that her’s is not at all significant because if [pay-to-play] truly happened, obviously that is a problem.”
Both controversies, he said, paint an interesting picture of not only the current presidential election, but of the elections to come.
“I think that the uniqueness of both of these candidates having these issues with related charitable organisations shows that when the presidency is now really only attainable by people with wealth, you’re going to have these questionable transfers going on between persons of wealth and their charitable organisations,” he said. “I think that’s probably what’s most unprecedented. It clearly shows that we’re at an era now where presidential candidates all typically have some type of accumulated wealth.”
“The average person would have absolutely no idea,” he added. “Most average people wouldn’t have the ability to do what they’re doing.”
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