Anda di halaman 1dari 29

1

5 November 2015

FALSE PHILANTHROPY
Exhibits to the First and Second Foundation Reports
Volume 2
: General Exhibits
Important Disclaimer
Information concerning the Bill, Hillary & Chelsea Clinton Foundation (the Clinton
Foundation) that is analyzed in the First Interim Report (the First Foundation
Report), the Second Interim Report (the Second Foundation Report), and these
Exhibits is derived only from publicly available primary and secondary sources. No
attempt has been made to verify the accuracy of underlying source material;
however, every reasonable effort has been made to direct readers to public filings
and other documents evaluated and mentioned in the First Foundation Report, the
Second Foundation Report, and these Exhibits. The analysis contained herein,
together with accompanying Tables, Exhibits, and Appendices, does not constitute
expert advice of any kind, whether legal, financial, accounting, policy, or otherwise.
Readers are urged to evaluate relevant publicly available facts about the Clinton
Foundation, in appropriate context, and to form their own independently derived
conclusions. For the convenience of readers, Appendix I contains Selected Caveats,
Qualifications, and Definitions that are used and apply throughout materials issued
concerning the Clinton Foundation, its constituent elements, and affiliates.

by
Charles K. Ortel
www.charlesortel.com
5 November 2015
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

2
5 November 2015

Introduction
Starting today, General Exhibits useful in evaluating public disclosures of the Clinton
Foundation are published at
www.charlesortel.com
. Information is voluminous, so
Exhibits will be added intermittently and in sequence, rather than all at once.
Exhibits shown in bold below are now posted--note that page numbers shown for
unposted exhibits are estimates that will change until each Exhibit is posted in final
form.
Table 1: Index of General Topics Covered in Volume II of Exhibits
to the First and Second Foundation Reports
Exhibit
1
2

Description

Pages

Selected Considerations Concerning Financial Statement and Reporting Fraud:


Role of PwC

21

Special Reporting and Operating Considerations Involving Tax-Exempt


Organizations Required to Register under New York Law; Certain Related
Considerations

Known Legal Entities Associated with the Clinton Foundation

Links to Selected Public Filings of the Clinton Foundation, its Constituent


Elements, and Certain Affiliates

Reported Tax-Exempt Purposes of the Clinton Foundation

Persons in Position to Exercise Significant Influence over the Clinton Foundation


5

Reported Contributions and Grants to the Clinton Foundation

Marketing and Fundraising Across State and National Boundaries

Key Periods in the Known Clinton Foundation Timeline

10

Selected Commentary Concerning the Clinton Foundation

After the General Exhibits are posted, at least 18 Specific Exhibits will be posted.
After the Specific Exhibits are posted, at least 8 Appendices will be posted.
Thoughtful questions and constructive comments are most welcome.

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

10

3
5 November 2015

Exhibit 1: Selected Considerations Concerning Financial Statement and


Reporting Fraud; Role of PwC
Financial fraud is never easy to detect
; however, experienced auditors and financial
analysts are able to spot red flags that cry out for further, in-depth investigation.
http://www.breitbart.com/big-government/2015/03/16/with-so-many-red-flags-why-isnt-the-irs-aud
iting-the-clinton-foundation/

As too many cases already exposed in the public domain richly illustrate, financial
fraud perpetrated by charities supposedly engaged in disaster relief is rampant.
Here are a number of links worth following to learn additional background:
http://www.doj.state.or.us/consumer/Pages/disaster_relief.aspx
https://www.fbi.gov/sandiego/press-releases/2015/fbi-warns-public-of-disaster-scams
http://www.maine.gov/pfr/professionallicensing/professions/charitable/pub/Justice%20Department%
20Officials%20Raise%20Awareness%20of%20Disaster%20Fraud%20Hotline.pdf
http://www.fraud-magazine.com/article.aspx?id=4294978232
http://www.forbes.com/sites/causeintegration/2015/10/05/charity-scams-put-the-disaster-in-disaste
r-relief/

Even the Clinton Foundation warns about the dangers of fraud:


https://www.clintonfoundation.org/fraud-alert

Before getting into details, consider why disaster relief charities are rife with
potential for fraud.
Americans, and others in rich nations, are generous--now that is much easier to
solicit and raise sums rapidly via the internet, each new disaster sparks appeals by
existing and by new entities for donations that supposedly will be used to aid needy
victims.
Fraudsters regard these appeals as wonderful opportunities to profit, tax-free from
the misery of others.
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

4
5 November 2015

Judging by review of frauds that have been caught, disaster relief charity frauds
incorporate the following steps.
First, create an internet-based appeal page that routes contributions to a suspense
account, typically domiciled in a country where regulatory oversight is light.
In reports that are filed, if these end up getting filed, claim that you received much
less than you actually received and skim off the missing sums, free of tax.
When it comes time to spend the sums declared as charity receipts, fraudsters
then manufacture fake invoices and fake currency translation receipts that allow
them to argue they have spent sums on program service expenditures,
management and overhead expenses, and fundraising expenses.
Typically, the fraudsters actually spend much less than invoiced amounts and steal
portions of these amounts as well.
Charities such as the Clinton Foundation that solicit donations in rich countries, but
claim that they are performing charitable work in foreign nations are especially
vulnerable to fraud, particularly if international activities are conducted in remote
portions of poor nations.
How are trustees, typically based inside the home country of the charity, supposed
to check what really happened with regard to incoming and outgoing cash flows,
particularly if these are denominated in multiple currencies during periods of time
when foreign exchange rates are fluctuating outside normal historical bands?

Who actually stands in the way of fraudsters?


The first line of defense is independent certified accountants--
properly trained,
honest, and competent accountants understand the risks posed by fraudsters
.
As you will discern, after you have read all General Exhibits, all Specific Exhibits, and
all Appendices,
accountants who performed work evaluating Clinton Foundation
financial and tax disclosures failed to discharge their professional responsibilities
concerning reports for calendar years 2001 through 2013
.

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

5
5 November 2015

For the benefit of those with limited exposure to financial fraud cases, set forth
below are selected excerpts from a publication of the American Institute of Certified
Public Accountants1 (the AICPA) that offers important and essential guidance for
certified public accountants practicing in the United States to consider as they
evaluate financial statements prepared by an enterprise they are charged with
auditing.
Interested readers are encouraged to follow the link below to the entire publication
including footnotes that are stripped out of the excerpts to make this Exhibit less
lengthy than it otherwise might be.
http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00316.pdf

While the excerpts below are written considering financial fraud at profit-seeking
companies, many concerns are relevant to informed analysis of financial statements
and independent audits of tax-exempt organizations.
Note: text that seems most relevant to evaluation of Clinton Foundation public
disclosures is presented in bold.
First Set of Excerpts from AICPA Publication
Three conditions generally are present when fraud occurs. First, management or
other employees have an incentive or are under pressure, which provides a reason to
commit fraud. Second, circumstances existfor example, the absence of controls,
ineffective controls, or the ability of management to override controlsthat provide
an opportunity for a fraud to be perpetrated. Third, those involved are able to
rationalize committing a fraudulent act. Some individuals possess an attitude,
character, or set of ethical values that allow them to knowingly and intentionally
commit a dishonest act.
However, even otherwise honest individuals can commit
fraud in an environment that imposes sufficient pressure on them. The greater the
incentive or pressure, the more likely an individual will be able to rationalize the
acceptability of committing fraud. [Emphasis added.]

According to its website (


www.aicpa.org
): ...the AICPA represents the CPA profession nationally
regarding rule-making and standard-setting and serves as an advocate before legislative bodies, public
interest groups, and other professional organizations. The AICPA develops standards for audits of
private companies and other services of CPAs, provides educational guidance to its members, develops
and grades the Uniform CPA examination, and monitors and enforces compliance with the professions
technical and ethical standards.

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

6
5 November 2015

Management has a unique ability to perpetrate fraud because it frequently is in a


position to directly or indirectly manipulate accounting records and present
fraudulent financial information. Fraudulent financial reporting often involves
management override of controls that otherwise may appear to be operating
effectively.
Management can either direct employees to perpetrate fraud or solicit
their help in carrying it out. In addition, management personnel at a component of
the entity may be in a position to manipulate the accounting records of the
component in a manner that causes a material misstatement in the consolidated
financial statements of the entity. Management override of controls can occur in
unpredictable ways.
[Emphasis added]

Typically, management and employees engaged in fraud will take steps to conceal
the fraud from the auditors and others within and outside the organization.
Fraud
may be concealed by withholding evidence or misrepresenting information in
response to inquiries or by falsifying documentation. [Emphasis added]
For example,
management that engages in fraudulent financial reporting might alter shipping
documents. Employees or members of management who misappropriate cash
might try to conceal their thefts by forging signatures or falsifying electronic
approvals on disbursement authorizations. An audit conducted in accordance with
GAAS rarely involves the authentication of such documentation, nor are auditors
trained as or expected to be experts in such authentication.
In addition, an auditor
may not discover the existence of a modification of documentation through a side
agreement that management or a third party has not disclosed. [Emphasis added]
Fraud also may be concealed through collusion among management, employees, or
third parties. Collusion may cause the auditor who has properly performed the audit
to conclude that evidence provided is persuasive when it is, in fact, false. For
example, through collusion, false evidence that controls have been operating
effectively may be presented to the auditor, or consistent misleading explanations
may be given to the auditor by more than one individual within the entity to explain
an unexpected result of an analytical procedure. As another example, the auditor
may receive a false confirmation from a third party that is in collusion with
management.
The Importance of Exercising Professional Skepticism
Due professional care requires the auditor to exercise professional skepticism. See
section 230, Due Professional Care in the Performance of Work, Because of the
characteristics of fraud, the auditor's exercise of professional skepticism is
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

7
5 November 2015

important when considering the risk of material misstatement due to fraud.


Professional skepticism is an attitude that includes a questioning mind and a critical
assessment of audit evidence. [Emphasis added.]
The auditor should conduct the
engagement with a mindset that recognizes the possibility that a material
misstatement due to fraud could be present, regardless of any past experience with
the entity and regardless of the auditor's belief about management's honesty and
integrity. Furthermore, professional skepticism requires an ongoing questioning of
whether the information and evidence obtained suggests that a material
misstatement due to fraud has occurred. In exercising professional skepticism in
gathering and evaluating evidence, the auditor should not be satisfied with
less-than-persuasive evidence because of a belief that management is honest.
A Presumption That Improper Revenue Recognition Is a Fraud Risk
Material misstatements due to fraudulent financial reporting often result from an
overstatement of revenues (for example, through premature revenue recognition or
recording fictitious revenues) or an understatement of revenues (for example,
through improperly shifting revenues to a later period). Therefore, the auditor
should ordinarily presume that there is a risk of material misstatement due to fraud
relating to revenue recognition. [Emphasis added.]
Additional Examples of Responses to Identified Risks of Misstatements Arising From
Fraudulent Financial Reporting
The following are additional examples of responses to identified risks of material
misstatements relating to fraudulent financial reporting:
Revenue recognition. Because revenue recognition is dependent on the particular
facts and circumstances, as well as accounting principles and practices that can vary
by industry, the auditor ordinarily will develop auditing procedures based on the
auditor's understanding of the entity and its environment, including the
composition of revenues, specific attributes of the revenue transactions, and unique
industry considerations. If there is an identified risk of material misstatement due to
fraud that involves improper revenue recognition, the auditor also may want to
consider:
Performing substantive analytical procedures relating to revenue using
disaggregated data, for example, comparing revenue reported by month and by
product line or business segment during the current reporting period with
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

8
5 November 2015

comparable prior periods. Computer-assisted audit techniques may be useful in


identifying unusual or unexpected revenue relationships or transactions.
Confirming with customers certain relevant contract terms and the absence of
side agreements, because the appropriate accounting often is influenced by such
terms or agreements. For example, acceptance criteria, delivery and payment terms,
the absence of future or continuing vendor obligations, the right to return the
product, guaranteed resale amounts, and cancellation or refund provisions often are
relevant in such circumstances.
Inquiring of the entity's sales and marketing personnel or in-house legal counsel
regarding sales or shipments near the end of the period and their knowledge of any
unusual terms or conditions associated with these transactions.
Being physically present at one or more locations at period end to observe goods
being shipped or being readied for shipment (or returns awaiting processing) and
performing other appropriate sales and inventory cutoff procedures.
For those situations for which revenue transactions are electronically initiated,
authorized, processed, and recorded, testing controls to determine whether they
provide assurance that recorded revenue transactions occurred and are properly
recorded.
Second Set of Excerpts from AICPA Publication
Appendix Examples of Fraud Risk Factors
This appendix contains examples of risk factors [previously] discussed. Separately
presented are examples relating to the two types of fraud relevant to the auditor's
considerationthat is, fraudulent financial reporting and misappropriation of assets.
For each of these types of fraud, the risk factors are further classified based on the
three conditions generally present when material misstatements due to fraud occur:
(a) incentives/pressures, (b) opportunities, and (c) attitudes/rationalizations.
Although the risk factors cover a broad range of situations, they are only examples
and, accordingly, the auditor may wish to consider additional or different risk
factors. Not all of these examples are relevant in all circumstances, and some may
be of greater or lesser significance in entities of different size or with different
ownership characteristics or circumstances. Also, the order of the examples of risk
factors provided is not intended to reflect their relative importance or frequency of
occurrence.
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

9
5 November 2015

Risk Factors Relating to Misstatements Arising From Fraudulent Financial Reporting


The following are examples of risk factors relating to misstatements arising from
fraudulent financial reporting.
Incentives/Pressures
a. Financial stability or profitability is threatened by economic, industry, or entity
operating conditions, such as (or as indicated by):
High degree of competition or market saturation, accompanied by declining
margins
High vulnerability to rapid changes, such as changes in technology, product
obsolescence, or interest rates
Significant declines in customer demand and increasing business failures in either
the industry or overall economy
Operating losses making the threat of bankruptcy, foreclosure, or hostile
takeover imminent

Recurring negative cash flows from operations and an inability to generate cash
flows from operations while reporting earnings and earnings growth [Emphasis
added.]
Rapid growth or unusual profitability, especially compared to that of other
companies in the same industry
New accounting, statutory, or regulatory requirements
b. Excessive pressure exists for management to meet the requirements or
expectations of third parties due to the following:
Profitability or trend level expectations of investment analysts, institutional
investors, significant creditors, or other external parties (particularly expectations
that are unduly aggressive or unrealistic), including expectations created by
management in, for example, overly optimistic press releases or annual report
messages
Need to obtain additional debt or equity financing to stay competitiveincluding
financing of major research and development or capital expenditures
Marginal ability to meet exchange listing requirements or debt repayment or
other debt covenant requirements
Perceived or real adverse effects of reporting poor financial results on significant
pending transactions, such as business combinations or contract awards

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

10
5 November 2015

c. Information available indicates that management's or those charged with


governance's personal financial situation is threatened by the entity's financial
performance arising from the following:
Significant financial interests in the entity
Significant portions of their compensation (for example, bonuses, stock options,
and earn-out arrangements) being contingent upon achieving aggressive targets for
stock price, operating results, financial position, or cash flow
Personal guarantees of debts of the entity
d. There is excessive pressure on management or operating personnel to meet
financial targets set up by those charged with governance or management,
including sales or profitability incentive goal
Opportunities
a. The nature of the industry or the entity's operations provides opportunities to
engage in fraudulent financial reporting that can arise from the following:

Significant related-party transactions not in the ordinary course of business or


with related entities not audited or audited by another firm [Emphasis added.]
A strong financial presence or ability to dominate a certain industry sector that
allows the entity to dictate terms or conditions to suppliers or customers that may
result in inappropriate or non arm's-length transactions
Assets, liabilities, revenues, or expenses based on significant estimates that
involve subjective judgments or uncertainties that are difficult to corroborate
Significant, unusual, or highly complex transactions, especially those close to
period end that pose difficult "substance over form" questions

Significant operations located or conducted across international borders in


jurisdictions where differing business environments and cultures exist [Emphasis
added.]
Significant bank accounts or subsidiary or branch operations in tax-haven
jurisdictions for which there appears to be no clear business justification
b.
There is ineffective monitoring of management as a result of the following:
Domination of management by a single person or small group (in a non
owner-managed business) without compensating controls
Ineffective oversight over the financial reporting process and internal control by
those charged with governance [Emphasis added]

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

11
5 November 2015

c. There is a complex or unstable organizational structure, as evidenced by the


following:
Difficulty in determining the organization or individuals that have controlling
interest in the entity
Overly complex organizational structure involving unusual legal entities or
managerial lines of authority
High turnover of senior management, counsel, or board members [Emphasis
added.]
d. Internal control components are deficient as a result of the following:
Inadequate monitoring of controls, including automated controls and controls
over interim financial reporting (where external reporting is required)
High turnover rates or employment of ineffective accounting, internal audit, or
information technology staff
Ineffective accounting and information systems, including situations involving
significant deficiencies or material weaknesses in internal control [Emphasis added.]
Attitudes/Rationalizations
Risk factors reflective of attitudes/rationalizations by those charged with
governance, management, or employees, that allow them to engage in and/or
justify fraudulent financial reporting, may not be susceptible to observation by the
auditor. Nevertheless, the auditor who becomes aware of the existence of such
information should consider it in identifying the risks of material misstatement
arising from fraudulent financial reporting.
For example, auditors may become aware of the following information that may
indicate a risk factor:
Ineffective communication, implementation, support, or enforcement of the
entity's values or ethical standards by management or the communication of
inappropriate values or ethical standards
Nonfinancial management's excessive participation in or preoccupation with the
selection of accounting principles or the determination of significant estimates

Known history of violations of securities laws or other laws and regulations, or


claims against the entity, its senior management, or board members alleging fraud
or violations of laws and regulations [Emphasis added]
Excessive interest by management in maintaining or increasing the entity's stock
price or earnings trend
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

12
5 November 2015

A practice by management of committing to analysts, creditors, and other third


parties to achieve aggressive or unrealistic forecasts

Management failing to correct known significant deficiencies or material


weaknesses in internal control on a timely basis [Emphasis added.]
An interest by management in employing inappropriate means to minimize
reported earnings for tax-motivated reasons

Recurring attempts by management to justify marginal or inappropriate


accounting on the basis of materiality [Emphasis added.]
The relationship between management and the current or predecessor auditor is
strained, as exhibited by the following:
Frequent disputes with the current or predecessor auditor on accounting,
auditing, or reporting matters [Emphasis added.]
Unreasonable demands on the auditor, such as unreasonable time constraints
regarding the completion of the audit or the issuance of the auditor's report
Formal or informal restrictions on the auditor that inappropriately limit access to
people or information or the ability to communicate effectively with those charged
with governance
Domineering management behavior in dealing with the auditor, especially
involving attempts to influence the scope of the auditor's work or the selection or
continuance of personnel assigned to or consulted on the audit engagement
[Emphasis added.]
Risk Factors Relating to Misstatements Arising From Misappropriation of Assets
Risk factors that relate to misstatements arising from misappropriation of assets
are also classified according to the three conditions generally present when fraud
exists: incentives/pressures, opportunities, and attitudes/rationalizations. Some of
the risk factors related to misstatements arising from fraudulent financial reporting
also may be present when misstatements arising from misappropriation of assets
occur.
For example, ineffective monitoring of management and weaknesses in
internal control may be present when misstatements due to either fraudulent
financial reporting or misappropriation of assets exist. [Emphasis added.]
The following are examples of risk factors related to misstatements arising from
misappropriation of assets.

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

13
5 November 2015

Incentives/Pressures
a. Personal financial obligations may create pressure on management or employees
with access to cash or other assets susceptible to theft to misappropriate those
assets.
b. Adverse relationships between the entity and employees with access to cash or
other assets susceptible to theft may motivate those employees to misappropriate
those assets. For example, adverse relationships may be created by the following:
Known or anticipated future employee layoffs
Recent or anticipated changes to employee compensation or benefit plans
Promotions, compensation, or other rewards inconsistent with expectations
Opportunities
a. Certain characteristics or circumstances may increase the susceptibility of assets
to misappropriation. For example, opportunities to misappropriate assets increase
when there are the following:
Large amounts of cash on hand or processed
Inventory items that are small in size, of high value, or in high demand
Easily convertible assets, such as bearer bonds, diamonds, or computer chips
[Emphasis added.]
Fixed assets that are small in size, marketable, or lacking observable identification
of ownership
b. Inadequate internal control over assets may increase the susceptibility of
misappropriation of those assets. For example, misappropriation of assets may
occur because there is the following:
Inadequate segregation of duties or independent checks
Inadequate management oversight of employees responsible for assets, for
example, inadequate supervision or monitoring of remote locations
Inadequate job applicant screening of employees with access to assets
Inadequate recordkeeping with respect to assets
Inadequate system of authorization and approval of transactions (for example, in
purchasing)
Inadequate physical safeguards over cash, investments, inventory, or fixed assets
Lack of complete and timely reconciliations of assets
Lack of timely and appropriate documentation of transactions, for example,
credits for merchandise returns
Lack of mandatory vacations for employees performing key control functions
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

14
5 November 2015

Inadequate management understanding of information technology, which


enables information technology employees to perpetrate a misappropriation
Inadequate access controls over automated records, including controls over and
review of computer systems event logs. [Emphasis added.]
Attitudes/Rationalizations
Risk factors reflective of employee attitudes/rationalizations that allow them to
justify misappropriations of assets, are generally not susceptible to observation by
the auditor. Nevertheless, the auditor who becomes aware of the existence of such
information should consider it in identifying the risks of material misstatement
arising from misappropriation of assets.
For example, auditors may become aware of the following attitudes or behavior of
employees who have access to assets susceptible to misappropriation:

Disregard for the need for monitoring or reducing risks related to


misappropriations of assets
Disregard for internal control over misappropriation of assets by overriding
existing controls or by failing to correct known internal control deficiencies
[Emphasis added.]
Behavior indicating displeasure or dissatisfaction with the company or its
treatment of the employee

Changes in behavior or lifestyle that may indicate assets have been


misappropriated [Emphasis added.]

Role of PwC
Unlike other accounting firms that may have audited the Clinton Foundation
financial statements and assisted with filing public disclosure forms inside and
outside the United States concerning calendar years 2001 through 2012, PwC had
and still has robust global auditing resources and should, itself, have been able to
spot numerous red flags arising in historical disclosures and through work done,
from the inside, auditing books and records.
But, concerning 2013 financial statements, the Little Rock office of PwC evidently
did
not
exercise required professional skepticism. Instead, a false and materially
misleading PwC audit was issued past the final IRS deadline in December 2014.
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

15
5 November 2015

In May and in June 2015, specific concerns and questions were addressed directly to
PwC, in communications reproduced below
To date, no answers from PwC resulted.
If PwC is still auditing the consolidated books and financial records of the Clinton
Foundation for 2014, PwC will have to complete its audit so that the audit can be
attached to the Clinton Foundation Annual Report owed to the IRS and in key U.S.
states, that is due by midnight on 16 November 2015.
Moreover, PwC will have to reconcile whatever approach it takes concerning 2014
with the approach PwC took concerning 2013.
If a replacement auditor is now performing work, this firm will also wish to get
answers to these and related questions.
Unanswered Questions Addressed to PwC
In May 2015, telephone and email communication started with an authorized
representative of PwC to register specific concerns and pose detailed questions
about that firms work product issued in connection with 2013, and other work
product issued in connection with prior calendar years.
The text of these emails [with minor corrections of typographical errors] follows:
Following publication of an article in World Net Daily, PWC requested insertion of
this language:
Clarification: PwC has audited the consolidated financial statements of the Bill,
Hillary & Chelsea Clinton Foundation for the year ended December 31, 2013, not
2012, as originally reported in this article. PWC prepared the Forms 990 for 2013 for
the Bill, Hillary & Chelsea Clinton Foundation and the Clinton Global Initiative. They
were filed on or before November 15, 2014 and are publicly available on
www.guidestar.org
.
This was promptly done.

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

16
5 November 2015

Three weeks have passed with no follow up of any kind and I am reaching a point
where my patience is close to being exhausted. If I do not hear back soon, I shall be
forced to go directly to the Public Company Accounting Oversight Board with my
unanswered questions and concerns, and to take additional steps to try to protect
the general public.
http://pcaobus.org/Enforcement/Tips/Pages/default.aspx
On 14 May 2015, I tendered the following list of questions to PWC--please note,
corrected words from original emails are bracketed]:
1. Please explain the basis for accepting BKD's "consolidated" results for 2012 as a
reasonable starting place for your 2013 audit of the Clinton Foundation, in view of
the following:
(a) BKD, was replaced as auditor for CHAI (the largest single constituent element of
the Clinton Foundation) in connection with the 2012 audit for CHAI.
(b) MHM determined that accounting for the largest single known cumulative donor
towards the Clinton Foundation (UNITAID) had been incorrect during 2012, and by
May of 2013 had restated UNITAID's inflows as agency transactions for 2012 and for
2011.
(c) the consolidated net worth of CHAI at the start of 2012 through the end of 2013
was significantly lower than for the Foundation, so that this decision re: agency
treatment of the purported UNITAID transactions with CHAI was [at] all times
material to the MHM audits in 2012 and 2013, to the BKD audit in 2012 and to the
PWC audit in 2013.
(d)BKD seems to have reversed MHM's May 2013 treatment in its "consolidated"
statements for 2012, used as the starting point for your 2013 audit.
2. Why are "consolidating" schedules in 2013 apparently issued by PWC but
obscured in the Clinton Foundation Financial Report section on their website and
also not part of the package available in the NY State Charity Bureau files?
3. How closely did you investigate the starting point for the Foundation's opening
balance sheet in 2013?
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

17
5 November 2015

4. Since 2004, did the Clinton Foundation employ consistent standards in


consolidating elements under the control and direction of the Clinton Foundation?
[Note: Here, I am concerned about amounts supposedly received and then sent to
known entities such as the Bush-Clinton Katrina Fund, the Clinton-Bush Haiti Fund,
the UK Fundraising Entity, and the Swedish Fundraising entity. I am also concerned
about any other entities, formal or informal, that procured funds in the name of the
Clinton Foundation, directly and/or indirectly.]
5. On what date did the Foundation secure prior written approval from the New York
State Attorney General to prepare its financial statements combining/consolidating
the entities that may have been combined and consolidated, as is required under
New York State law for entities required to register such as the Clinton Foundation
that was so heavily engaged in solicitation to the public, particularly during 2013
and during 2014?
6. CHAI refiled its 990s for 2010 and for 2011 in November 2013, along with the 990
for 2012, reflecting MHM's views of UNITAID's inflows being agency transactions--in
connection with this:
(a) Why were CHAI's and the Clinton Foundation's audits left alone for 2010 through
2012, when it would seem that they should have been restated?
(b) How closely did PWC investigate the opening balance sheet of CHAI in 2010 and
its relevance to the opening balance sheet of the Clinton Foundation in 2010,
flowing [through] to the opening balance sheet in 2013?
(c) DId PWC review the application to form New CHAI submitted close to year end
2009 and also compare this application to consolidated and consolidating financial
statements prepared by BKD for 2007, 2008, and 2009 that are available through
the New York State Charity Bureau Service?
(d) What evidence has PWC obtained that New CHAI, and that the Clinton
Foundation were validly authorized by the IRS to engage in tax exempt purposes
other than those approved in May 2002?
(e) With UNITAID removed, why didn't the Schedule B disclosures (donor amounts of
2% or more) change for all affected years?
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

18
5 November 2015

(f) Please reconcile foreign grants and contributions disclosed in the First 990 for
CHAI for 2010 (filed in 2011) with the second one (filed in 2013)--why were there
not more changes and how do you explain the changes shown?

(g) How closely has PWC investigated the year by year statements repeatedly made
in UNITAID's annual financial reports (available online) concerning monies sent
towards the Clinton Foundation with Clinton Foundation disclosures concerning
UNITAID grants (year by year and within each year), particularly in Schedule B for
each year?

Clinton

Potential

Potential

UNITAID

Foundation

Annual

Cumulative

Disbursements

Receipts

Diversion

Diversion

2006

9,100,000

9,289,897

(189,897)

(189,897)

2007

62,700,000

34,743,141

27,956,859

27,766,962

2008

140,352,889

82,740,318

57,612,571

85,379,533

2009

84,973,897

115,397,489

(30,603,592)

54,775,941

2010

129,348,206

108,868,409

20,479,797

75,255,738

2011

56,432,000

105,665,622

(49,233,622)

26,022,116

2012

61,569,200

67,861,583

(6,292,383)

19,729,733

2013

21,609,400

28,647,779

(7,038,379)

12,691,354

(f) How many of the large donors were contacted to verify, independently, the
amount, timing, and intended purposes of each donation in 2013? Were donors
asked about previous years?
(g) Did PWC cross-check by country, currency, time period, and donor the amounts
said to be spent on pharmaceuticals with intended purposes stated for each major
donation?

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

19
5 November 2015

7. How closely has PWC reviewed the activities of the Foundation internationally in
numerous countries since July 2002---[see] the book Giving by Bill Clinton for
several pages starting on page 179?
8. How closely did PWC consider related party disclosures and then cross-check
them for example, concerning:
(a) Doug Band (director of CGI through March 2013) and Teneo?
(b) Mustapha Bakali (COO CHAI) and Leapfrog (a Mauritius investment pool)
(c) Huma Abedin, an employee of the Foundation and of Teneo during 2013.
9. Why did PWC fail to bring down its "[subsequent] events" [disclosures] to the
issuance date of the audit letter?
10. Who signed the management representation letter? And, did you review the
certification that management should have made to New York State when the
Clinton Foundation's Annual Report/Filings were made there?
11. On what dates did PWC meet with the audit [committee] of the Clinton
Foundation Board and [whole] Board, with and without management and any
conflicted directors having been present?
12. Is PWC auditing the Clinton Foundation results for 2014?
For now, I am restricting my questions, primarily to the largest piece of the
Foundation (Old and New CHAI)--I have many others.
On 19 May 2015, I tendered the following additional questions:
Please confirm that you received my email of last week and please give me a sense
of when I can expect to receive your responses.
(By BHC I mean the parent company of New CHAI and CGI, and its various
predecessors.)
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.
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

20
5 November 2015

The comparison yields 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 being $107,066,637,
whereas PWC has as being $103,873,526.
If PWC relied upon 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.
One further set of points--BHC at all times controlled New CHAI and New CGI--what
steps did PWC take to establish that BHC was legally authorized to carry on (Via
New CHAI and New CGI) their stated tax exempt purposes.

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

21
5 November 2015

How closely did PWC investigate disclosures made and authorizations received from
the IRS that BHC was actually a duly constituted tax exempt organization in each
year it operated?
Why did BHC file to create New CHAI in December 2009 but wait to file to create
New CGI until August 2010?
How closely did PWC compare answers made in IRS 1023 applications with state
filings for BHC entities, particularly those made in NY, in MA, in FL, and in CA?
How closely did PWC investigate the "audit" history of BHC, back to its original
founding in 1997? I cannot find any audits for the years through 2003 and I have
serious questions about all BKD work product dealing with 2004 forward.
How closely did PWC examine each entity that may have worked in league with BHC,
including the various named joint ventures as well as special purpose efforts
purportedly led by BHC, perhaps as agent, for foreign governments and other
donors beginning as early as in July 2002.
Please let me know when I may [respect] your answers to the previous and to these
questions.
As of now, I have received no answers to any of my questions, nor even confirmation
that you have received my questions.
From 31 December 2013 onwards, the Clinton Foundation has actively solicited
contributions for its annual operations and for an endowment fund, continuously
holding out PWCs audit as independent certification of the Clinton Foundations
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.
If PWC stands by its original work, without modification, please confirm this to be
the case.
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
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

22
5 November 2015

statements for 2013, together with complete and explicit footnotes, as well as all
relevant consolidating financial statements.
I appreciate that the Clinton Foundation is not required to file its audited financial
statements with the U.S. Securities and Exchange Commission (SEC). That said, so
far in my interactions with PWC on this matter, definitions of improper conduct
before the SEC seem relevant:
201.102 Appearance and practice before the Commission.
*****
(e) Suspension and disbarment. (1) Generally. ***
(iv) With respect to persons licensed to practice as accountants, "improper
professional conduct" under 201.102(e)(1)(ii) means:
(A) Intentional or knowing conduct, including reckless conduct, that results in a
violation of applicable professional standards; or
(B) Either of the following two types of negligent conduct:
(1) A single instance of highly unreasonable conduct that results in a violation of
applicable professional standards in circumstances in which an accountant knows,
or should know, that heightened scrutiny is warranted.
(2) Repeated instances of unreasonable conduct, each resulting in a violation of
applicable professional standards, that indicate a lack of competence to practice
before the Commission.
https://www.sec.gov/rules/final/33-7593.htm

This is my final communication to you before contacting appropriate authorities,


including the Internal Revenue Service, the Federal Trade Commission, the Attorney
General of the State of Arkansas, the Attorney General of the State of New York, and
representatives of foreign donor governments, including the following
nations/organizations: Australia, Canada, Denmark, the Dominican Republic, France,
Ireland, Norway, Sweden, Switzerland, the United Nations, UNITAID, the United
Kingdom, and the World Health Organization.
As before, and despite your repeated previous failures to respond promptly, please
respond as soon as possible, minimally indicating receipt of this communication
and, ideally, answering my questions.

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

23
5 November 2015

Sincerely,
Charles K. Ortel

Continuously during the term of PwCs auditing and other work, the Clinton
Foundation has been soliciting donations across state and national boundaries using
the mails, telephones, and digital media, while false and materially misleading public
disclosures and accounting work product remained in the public domain.

Subject to Disclaimer
Copyright asserted by Charles K. Ortel

24
5 November 2015

Exhibit 2: Special Reporting and Operating Considerations Involving


Tax-Exempt Organizations Required to Register Under New York Law:
Certain Related Considerations
According to information contained in its Annual Report to the IRS on Form 990 for
2001 and for 2004, the Clinton Foundation claimed that it was
not required
to
register and to make certain disclosures to state authorities, particularly to those in
New York state.
Beginning in 2001, individuals claiming association with the Clinton Foundation
conducted fundraising activities from multiple locations, including some based
within the state of New York. Also from 2001 forward, Bill and Hillary Clinton
maintained a primary residence inside New York state and each was in position to
exercise influence over the Clinton Foundation, though neither was a named officer
or director until years after 2001.
State laws governing concerning solicitation for an operation of a nonprofit
organzization appear to be stricter in New York, than in other U.S. states. Here are
links to some reference materials:
http://www.charitiesnys.com/pdfs/Right%20From%20the%20Start%20Final.pdf
http://www.npccny.org/info/gti5.htm
http://www.charitiesnys.com/pdfs/char023.pdf
http://www.charitiesnys.com/pdfs/statute_booklet.pdf
http://www.charitiesnys.com/pdfs/char410i.pdf

Ongoing review suggests that the Clinton Foundation and its constituent elements
have been in breach for years, and continue now to be in uncured breach of
numerous New York state laws and regulations.
Requirement to File an Annual Financial Report
Every charitable organization registered or required to be registered pursuant to
section one hundred seventy-two of this article which shall receive in any fiscal year
gross revenue and support in excess of five hundred thousand dollars shall file with
the attorney general an annual written financial report on forms prescribed by the
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

25
5 November 2015

attorney general, on or before the fifteenth day of the fifth calendar month after
the close of the fiscal year.

Review of Annual Reports available through the New York State Charity Bureau
website portal reveals numerous inaccurate, misleading, and false entries for
Clinton Foundation entities. In addition, reports for numerous Clinton Foundation
entities that solicited in coordinated operation with New York-based personnel are
either missing or inaccurate.
http://www.charitiesnys.com/RegistrySearch/search_charities.jsp

Requirement to File an Independent Certified Public Accountants Audit Report


The annual financial report shall be accompanied by an annual financial statement
which includes an independent certified public accountants audit report containing
an opinion that the financial statements are presented fairly in all material respects
and in conformity with generally accepted accounting principles, including
compliance with pronouncements of the financial accounting standards board and
the American Institute of Certified Public Accountants that establish accounting
principles relevant to not-for-profit organizations.

The Clinton Foundation and constituent entities have


never
filed audit reports that
meet the requirements set forth above.
Requirement to Explain Changes
Such financial report shall include a statement of any changes in the information
required to be contained in the registration form filed on behalf of such
organization. [See Section 172 (a)-(j) and 2]

The Clinton Foundation and constituent entities have


never
filed reports that explain
material changes in registration statement information.
Requirement for Sworn Certifications
The financial report shall be signed by the president or other authorized officer and
the chief fiscal officer of the organization who shall certify under penalties of
perjury that the statements therein are true and correct to the best of their
knowledge, and shall be accompanied by an opinion signed by an independent
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

26
5 November 2015

public accountant that the financial statement and balance sheet present fairly the
financial operations and position of the organization.

Sworn certifications by Clinton Foundation officers are false and materially


misleading.
Combined Written Reports
4(a) Upon prior written authorization by the attorney general any charitable
organization registered pursuant to section one hundred seventy-two of this article,
which is the parent organization of one or more affiliates thereof, and such
affiliates, may comply with the reporting requirements of subdivision one, two,
two-a or three of this section, by filing a combined annual financial report upon
forms prescribed by the attorney general.

The Clinton Foundation and its constituent elements have not produced evidence
they were allowed to submit combined reports, nor are combined reports, compliant
with New York law, in evidence through links at the New York State Charity Bureau
website.
Definition of Affiliate
4(b) As used in this subdivision the term affiliate shall include any chapter,
branch, auxiliary, or other subordinate unit of any registered charitable
organization, howsoever designated, whose policies, fundraising activities, and
expenditures are supervised or controlled by such parent organization.

The Clinton Foundation has not made property identification of its affiliates.
Requirement to Describe Activities of Affiliates
4(c) There shall be appended to each combined annual financial report a schedule,
containing such information as may be prescribed by the attorney general,
reflecting the activities of each affiliate, which shall contain a statement signed
under penalties of perjury, by the president or other authorized officer certifying
that the information contained therein is true.

The Clinton Foundation has not described activities of all of its affiliates.
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

27
5 November 2015

Cancellation of Registration
5 The attorney general shall cancel the registration of any organization which fails
to comply with subdivision one, two, two-a or three of this section within the time
prescribed, or fails to furnish such additional information as is requested by the
attorney general within the required time; except that the time may be extended by
the attorney general for a period not to exceed one hundred eighty days. Notice of
such cancellation shall be mailed to the registrant at least twenty days before the
effective date thereof.

It is not clear with the Attorney General of the state of New York has allowed the
Clinton Foundation and its affiliates to operate from bases inside New York in
apparent violation of the above laws, for years.
Section 172 d 1
Prohibited Activity-Misleading Statements
1. Make any material statement which is untrue in an application for registration,
registration statement, a claim of exemption, financial report or any other forms or
documents required to be filed or filed pursuant to this article; or fail to disclose a
material fact in an application for registration, registration statement, claim of
exemption, financial report or any other forms or documents required to be filed or
filed pursuant to this article.

Numerous material statements to authorities of New York state made by and on


behalf of the Clinton Foundation and its constituent elements are untrue and
remain uncorrected in the public domain.
Prohibited Activity-Fraud
2. Engage in any fraudulent or illegal act, device, scheme, artifice to defraud or for
obtaining money or property by means of a false pretense, representation or
premise, transaction, or enterprise in connection with any solicitation or with the
registration, reporting, and disclosure provisions of this article. The term fraud or
fraudulent as used herein shall include those acts which may be characterized as
misleading or deceptive including but limited to those acts covered by the term
fraud or fraudulent under subdivision twelve of section sixty-three of this
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

28
5 November 2015

chapter.
To establish fraud neither intent to defraud nor injury need to be shown
[emphasis added].

The Clinton Foundation and constituent elements continually obtain money or


property in connection with solicitations that are coordinated from locations inside
New York state.
Prohibited Activity-False Claims
3. Use or intend to use false or materially misleading advertising or promotional
material in connection with any solicitation.

The Clinton Foundation continually uses false


and
misleading advertising
and
promotional material.
Prohibited Activity-Diversion
4. Fail to apply contributions in any manner substantially consistent with the
solicitation of the registration statement of the charitable organization or the
purposes expressed therein.

Since inception of its operation within New York state, the Clinton Foundation and
constituent elements have diverted contributions from authorized to unauthorized
tax-exempt and other purposes.
An Enumerated General Duty of the New York State Attorney General--Prosecuting
Fraud or Illegal Acts
Pursuant to N.Y. EXC. LAW Section 63: NY Code-Section 63: General Duties:
12. Whenever any person shall engage in repeated fraudulent or illegal acts or
otherwise demonstrate persistent fraud or illegality in the carrying on, conducting
or transaction of business, the attorney general may apply, in the name of the
people of the state of New York, on notice of five days, for an order enjoining the
continuance of such business activity or of any fraudulent or illegal acts, directing
restitution and damages and, in an appropriate case, canceling any certificate filed
under and by virtue of the provisions of section four hundred forty of the former
penal law or section one hundred thirty of the general business law, and the court
may award the relief applied for or so much thereof as it may deem proper.
Subject to Disclaimer
Copyright asserted by Charles K. Ortel

29
5 November 2015

It is possible that the Attorney General of the state of New York, until now, has not
been aware of alleged illegal actions by the Clinton Foundation and its constituent
elements that likely began by January 2001 and have only escalated in scale and
scope to the present.
Key Definitions
[12 continuation] The word fraud or fraudulent as used herein shall include any
device, scheme or artifice to defraud and any deception, misrepresentation,
concealment, suppression, false pretence, false promise or unconscionable
contractual provisions. The term persistent fraud or illegality as used herein shall
include continuance or carrying on of any fraudulent or illegal act or conduct. The
term repeated as used herein shall include repetition of any separate and distinct
fraudulent or illegal act, or conduct which affects more than one person. In
connection with any such application, the attorney general is authorized to take
proof and make a determination of the relevant facts and to issue subpoenas in
accordance with the civil practice law and rules. Such authorization shall not abate
or terminate by reason of any action or proceeding brought by the attorney general
under this section.

Within the meaning of New York law, the Clinton Foundation would appear to have
engaged in persistent, repeated, illegal, fraudulent activity.
Many other U.S. states have registration and reporting requirements--some of
these are even tougher than New Yorks requirements. In certain of these U.S. states,
the Clinton Foundation and its constituent elements are required to make
disclosures and sworn representations to government authorities concerning the
status of their filings throughout the United States.
Many foreign nations require U.S. domiciled charities such as the Clinton Foundation
and its constituent elements to make detailed disclosures and sworn
representations concerning their authorities to act and organization within the
United States and to ensure that these are updated and corrected as and if
circumstances change.

Subject to Disclaimer
Copyright asserted by Charles K. Ortel