Hillary Clinton. (Credit: Shutterstock)
Two years ago The American Lawyer tried and failed to persuade the Clinton Foundation to disclose how much it had paid its lawyers at Simpson Thacher & Bartlett to conduct a review of the charity’s governance and operations.
Thanks to WikiLeaks emails hacked from Hillary Clinton’s campaign manager and longtime adviser John Podesta, we now have some answers. But some of the emails between the Clinton foundation and its lawyers also raise questions about whether Simpson Thacher and executives at the organization went out of their way to mask both the scope and cost of the review.
As noted recently by The Litigation Daily’s Jenna Greene, Simpson Thacher counsel Jennifer Reynoso wrote in a January 2012 email that she preferred the term “corporate review over corporate audit” to describe the firm’s work, as the latter phrase has “negative connotations, as if we started this because we knew something was wrong.” (The Clinton campaign has not verified the authenticity of the leaked emails.)
Similar unease also extended to the firm’s billings. In one exchange from December 2011, Simpson Thacher partner Victoria Bjorklund suggested to Clinton Foundation chairman Bruce Lindsey that the firm could split its $176,412 legal fees—already discounted from an estimated $200,000—across two fiscal years.
The reason? “Optics,” according to the phrasing by Bjorklund, a founder and former head of Simpson Thacher’s exempt organizations group.
“Since the Clinton Foundation’s taxable year is a calendar year that ends 12/31/11, I thought you might want a portion of this total amount billed and paid this year,” Bjorklund wrote to Lindsey. “In that way, we and you could for optics purposes spread the billing and payment cycle over two Form 990 reporting years 2011 and 2012.”
Bjorklund told Lindsey that she could prepare an invoice for governance review services for “half of the total which the foundation could pay before 12/31 and then a second bill in January 2012 for the remainder (and any new work you might ask us to do).” Lindsey, a former deputy counsel to President Bill Clinton who served as the Clinton Foundation’s first general counsel, agreed with the proposal.
Federal law requires that nonprofits disclose their five largest annual expenditures to outside contractors. By splitting its fees to Simpson Thacher across two fiscal years, the Clinton Foundation could have kept its spending on the review below the radar. Copies of the Clinton Foundation’s Form 990 tax filings with the IRS for the relevant years do not list any outside legal fees to Simpson Thacher among the nonprofit’s five-largest vendors.
If Simpson Thacher’s $176,412 fee had been listed in full on the Clinton Foundation’s Form 990 for 2011, it would have been the fourth-largest expense to an outside contractor by the organization that year, sandwiched between $180,000 paid to advertising media agency McCulloch+Company for fundraising support and $149,815 to La Habra, California-based International Sustainable Systems for “program service.”
The $176,412 fee would not have appeared on the Clinton Foundation’s 2012 tax filing, which lists a $213,406 payment to ISS as its fifth-largest outside contractor. It remains unclear exactly what Simpson Thacher’s final fee is for its work, as Bjorklund indicates in her emails with Lindsey that the firm still has some work to do. The emails archived by WikiLeaks—including tranches uncovered from Hillary Clinton’s time as U.S. Secretary of State and those hacked from the Democratic National Committee—do not include any mention of Simpson Thacher’s work.
Peggy Morrison Outon, a founding executive director of the Bayer Center for Nonprofit Management at Robert Morris University in Pittsburgh, said the email exchange between Bjorklund and Lindsey is unusual. For one thing, it potentially suggests that the Clinton Foundation, with the help of its lawyers, hoped to keep the costs of the governance review below a level that would trigger federal financial disclosure requirements.
Neither the Clinton Foundation nor Simpson Thacher agreed to answer questions about Form 990 disclosures or the WikiLeaks emails. Scott Curran, the foundation’s general counsel until leaving earlier this year to start his own consulting firm, declined to comment. Lindsey, now of counsel at Little Rock, Arkansas-based Wright, Lindsey & Jennings, did not respond to a request for comment. The Clinton presidential campaign, now dealing with another email-related matter, did not return a similar inquiry.
Outon praised Bjorklund, who is now retired, as a “noted governance expert” and “exemplar” in the nonprofit sector. She said it is a fairly common practice for those doing governance audits to bill clients in phases that often straddle fiscal years.
But if the purpose of splitting the fees was to mask the Clinton Foundation’s spending on an internal review that some thought could be embarrassing to its namesakes, it would undermine “the meta-intention of doing a governance audit which is intended as a tool for assuring transparency and attention to best practices,” Outon said. “This feels counter to those intentions.”
The Clinton Foundation’s operations in countries like Rwanda were covered in detail by The New York Times last year, although the organization was recently forced to let go of at least 74 staffers as it prepares to shutter its Clinton Global Initiative conference arm.
Simpson Thacher’s corporate governance review is publicly available, and the nonprofit has a four-star rating from Charity Navigator and an “A” rating from CharityWatch. The BBB Wise Giving Alliance has given the nonprofit an incomplete rating. Bennett Weiner, COO of the BBB WGA, did not respond to a request for comment.