Two foundations are in the election news these days. One is the Clinton Foundation, the other is the Clinton Family Foundation. The Clinton Foundation is a tax exempt public non-profit chartered under the IRS rule 501c3. It gets special treatment as a Presidential Foundation and has an annual report online. The Clinton Family Foundation isn’t found with a Google search. ‘Family funds’ are subject to other IRS rules mostly regarding a required high level of distribution. The first is an operating foundation which means the staff does the charitable work. The second is supposed to be pure charitable giving. I doubt it should give funds to the first, but it does.
I had several problems in connection with protecting the tax exempt status of the Glide foundation. The first occurred when one of the lead staffers married his secretary. Another when this same staffer hired his brother. Still another when the brother was found embezzling. Lastly on my own staff I had many Yemeni maintenance employees; who because of the bizarre Arab family structures could all have been close relatives. (The embezzling brother was fired but not prosecuted.)
The problem that I was dealing with is an IRS prohibition on ‘self-dealing’. Having family members being paid by the foundation in any capacity, as consultants, grant recipients or employees presents a question of self-dealing. The solution was to get a ruling in writing from the lawyers and to discuss the matter with the Board of Directors and put it in the minutes. The Board was legally expected to make sure that no one with a close relationship was getting extra benefits that others would not be entitled to.
Glide had 50 employees, the Clinton Foundation has 2,000.
I was careful to make sure that the Board understood and recorded all major grants received to make sure we weren’t being used as a coverup for self-dealing. That was only a potential problem when Warren Buffett’s wife gave a large donation. But she didn’t get any special treatment in return. After she died her husband turned the donation into an auction for a lunch with Warren. Again, the donors never knew they would win. Self-dealing wasn’t a problem when the only reward was discussion at a lunch with a person not connected to the foundation.
The Glide Foundation supported many radical causes, and a close friend in the IRS told me about the entire file cabinet on us and an entire file drawer on me. It was true when we finally got the material under the Freedom of Information Act, but it was 100% lined-out; redacted. We never broke the law.
Of course I followed IRS rules and was very careful knowing we were a radical operation. The Nixon IRS team of six came out to San Francisco to look at our file and discuss the level of scrutiny by the local office. But the Nixon team was broken up after 3 months of its short life.
None of my type caution appears to be the case with the Clinton’s or the Clinton Foundation.