Charity Case

How Bill Clinton’s donors pose a conflict of interest for Hillary.

Bill and Hillary Clinton

Now that Barack Obama’s selection of Hillary Clinton as secretary of state is pretty much set, all that remains is the small print about office décor, letterhead font … and her husband’s continued solicitation of millions of dollars from foreign business interests.

Bill Clinton resisted pressure before and during Hillary’s primary campaign to release the names of the 208,000 donors to the Clinton Foundation. Now Bill is cooperating with the Obama transition team by giving them the foundation’s donor list. But that won’t be enough. The only solution may be for the former president to dissolve his foundation entirely.

When public officials face conflicts of interest, there are two standard remedies: disclosure and recusal. But—to the former president’s credit—the Clinton Foundation has larger array of activities and programs in more nations than any other presidential foundation. For Clinton’s post-presidency, as for his presidency, the usual rules don’t apply.

Clinton’s position as head of the foundation is similar to that of secretary of state—he travels the world, schmoozes foreign leaders, talks global economics. But instead of advocating U.S. interests, he asks for money for his foundation. If he were in charge of the foundation while Hillary served as secretary of state, donors might assume that giving money to the foundation would buy them Hillary’s ear—or, at least, an ear that rests on the same pillow as Hillary’s.

Bill could, and undoubtedly would, do his best to disabuse them of that assumption. And he can be very convincing. But the assumption of influence would persist—and no amount of persuasion or disclosure could ever erase it. Disclosure, after all, does not eliminate conflict of interest. It merely exposes it. People would still give to the Clinton Foundation because they think they’re buying influence.

It’s not a crazy supposition. In 2005, Canadian mining executive Frank Giustra gave the foundation $31 million a few months after Bill Clinton helped facilitate a lucrative deal with the government of Kazakhstan. All told, that arrangement was relatively benign: Clinton was simply using his influence as an ex-president, as many ex-presidents do. If Clinton’s wife were secretary of state, though, the exercise would be less innocent.

Financial scandal—or what passes for it with the Clintons—would be inevitable. The only variable is how hard it will be to unearth. If the foundation discloses the donors, potential conflicts of interest will be a Google search away. If it doesn’t, they will dribble out one leak at a time. But, you say, the donors haven’t leaked so far. Well, some have. And that was before reporters had much incentive to dig. Every foreign government or business with interests in U.S. policy would have reason to give to the Clinton Foundation. And every donation—even well-meaning ones—would therefore be suspect.

Another option is to have a third party vet the foundation’s donations for conflicts of interest. Stephen Gillers, who teaches legal ethics at New York University, suggests that Obama set up an independent commission to be run out of the White House, perhaps reporting to the White House ethics officer. If a contribution is deemed too large or too sensitive—say, $1 million from a donor in Iran—the office could veto it. The trouble here is where to set the bar. Most countries do have some interest or another in U.S. policy. And as anyone familiar with accounting scandals can tell you, it’s not the amount that matters—it’s the fact of it.

The last option is for Bill Clinton simply to recuse himself from any official role with the foundation. Or he could stay out of its international transactions and focus on the domestic side. But these arrangements would be legal fictions. Presumably some portion of the Clinton Foundation’s donors gives money to that charity, as opposed to any other, to curry favor with the former president. Others may donate because they believe a former president will have the clout to make a difference with their favored cause.

Either way, the involvement of a former president is what matters. So long as the foundation retains Clinton’s name, many prospective donors will see it as a way to win favor—or at least notice—from world’s most influential former president. Plus, Clinton is the foundation’s top fundraiser. (The charity raised $124 million in 2007.) Who is going to fill his shoes? Chelsea?

If Obama wants to avoid awkward associations, the Clinton Foundation effectively has to close shop. This isn’t an attempt to be holier than the pope. It’s a recognition that given Clinton’s broad pool of foreign donors, there’s a chance—a likelihood, even—that some of them will look, and potentially be, very bad. Nor, it should be noted, is Bill to blame. Trawling for global cash is his job now, and his intentions are good. But there’s real room for actual influence-peddling. Giustra has pledged to give half of his profits to the foundation. If foreign governments think they can win Clinton’s favor by helping Giustra, they will. There are ways around it—for example, Giustra could pledge a flat amount instead or give to a different charity. But then multiply the problem by 208,000.

Obama’s campaign mantra—”no drama”—has so far carried over into the transition. No administration can be expected to avoid drama entirely. But by picking Clinton as his secretary of state and allowing her husband to keep the Clinton Foundation alive, Obama ups the chances of drama.