Clinton Foundation auditor also in Global Crossing scandal – WND.com

Hillary, Chelsea and Bill Clinton at a Clinton Global Initiative event

NEW YORK – The Clinton Foundation did not heed the warnings of its hired private auditor, leaving the organization vulnerable to accusations of "pay-to-play" and personal enrichment, according to emails from the account of Hillary Clinton campaign Chairman John Podesta released by WikiLeaks.

The accounting firm hired by the Clinton Foundation – Simpson, Thacher & Bartlett – also was the auditor for Global Crossing, the telecommunications company that infamously skyrocketed in value in the late 1990s before going bankrupt in 2002.

Longtime Clinton ally Terry McAuliffe, the Democratic governor of Virginia, turned a $ 100,000 investment in Global Crossing into a profit of more than $ 8 million before the company's stock crashed. News of McAuliffe's contributions of $ 675,000 to the election campaign of the wife of the FBI deputy director who oversaw the investigation of Hillary Clinton's use of a private email server rocked the Clinton campaign this week.

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In 2002, just before the bankruptcy, Simpson Thacher's internal audit of Global Crossing concluded the company was not engaging in questionable financial accounting practices. Simpson Thacher was forced to pay $ 19 million in a bankruptcy settlement accepted by the federal courts.

While Simpson Thacher, an international law firm based in New York City, has not been accused of wrongdoing in the Clinton Foundation scandal, it appears that its recommendations did not get implemented, largely because of internal Clinton Foundation politics.

The Wikileaks emails regarding the Simpson Thacher audit show a power struggle developed between Chelsea Clinton and Doug Band, the former Clinton White House "body man" who formed Teneo. Conflicts of interest emerged over Band's continuing role in the foundation and Bill Clinton's role as a paid adviser and consultant to Teneo and its corporate clients, many of whom were also donors to the Clinton Foundation.

In the tangled web that always seems to surround the Clintons in the scandals that have plagued the couple since Bill Clinton was governor of Arkansas, players such as McAuliffe play recurring roles.

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'500 conflicts of interest'

Attached in a Podesta email is a draft of the Simpson Thacher corporate review of the Clinton Foundation dated Jan. 30, 2012. The document shows Simpson Thacher presented its preliminary recommendations to President Clinton, the foundation's board and Podesta on Nov. 23, 2012.

In an email Wikileaks released Tuesday, Cheryl Mills, Hillary Clinton's chief of staff at the State Department, who also doubled as a Clinton Foundation employee, wrote to Podesta on Dec. 17, 2011, that Simpson Thacher had recommended creating a new CEO office at the Clinton Foundation that would hire someone other than Bill Clinton and would be unaffiliated with Teneo, the consulting group founded by Band.

Attached to that email was a document titled "Proposed WJC [William Jefferson Clinton] Infrastructure Model," dated Nov. 25, 2011, authored by Mills. The Clinton counsel recommended the formation of an "Independent Personal Office [PO] of WJC," to be established outside the Clinton Foundation and outside Teneo.

The Wikileaks Podesta emails show Band went ballistic when Chelsea Clinton in 2011 attempted to implement the Simpson Thacher recommendations. Consequently, Bill Clinton had to quit his lucrative position on the Teneo board of directors, assuming the position of consultant to Teneo clients, with restraints placed on Band's open ability to hit Clinton Global Initiative corporate contracts for Teneo consulting agreements.

"I signed a conflict of interest policy as a board member of cgi (sic) [Clinton Global Initiative]," Band wrote Podesta in an email Nov. 17, 2011, drafted at the same time the Simpson Thacher governance review was coming to its preliminary conclusions.

"Oddly, wjc (sic) does not have to sign such a document even though he is personally paid by 3 cgi sponsors, gets many expensive gifts from the, some that are at home etc," Band continued. "I could add 500 different examples of things like this."

There is nothing in the public record to indicate that the Simpson Thacher recommendations were ever fully implemented or that an executive office for Bill Clinton was ever created and staffed outside the Clinton Foundation to reduce conflicts of interest capable of creating pay-to-play conflicts, or opportunities for inurement, the crime of the using a charity for personal enrichment.

Campaign 'vulnerable'

On Feb. 2, 2015, Robby Mook, Hillary Clinton's 2016 presidential campaign chairman, wrote an email Wikileaks released on Tuesday addressed to Mills, Podesta and Huma Abedin on "Foundation vulnerability points."

The email made clear the Simpson Thacher recommendations to resolve Clinton Foundation problems regarding the management and operational problems – including establishing audit procedures to monitor Clinton Foundation financial statements – were never fully implemented.

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Specifically, as vulnerabilities arose from "donations and candidate participation," Mook listed the following points:

• Money from foreign governments;
• Domestic or foreign individual donors with vetting issues (i.e. the campaign and foundation should agree on vetting criteria and jointly discuss any donors who fall outside the criteria);
• HRC [Hillary Rodham Clinton] attending Foundation events; and
• HRC's name remaining in the Foundation name.

Regarding "operational issues," Mook noted:

• Travel on corporate or donated planes (these should be vetted against SD [State Department] and Senate work);
• Especially lavish/high-end hotels for events;
• Overseas events with foreign leaders or government officials;
• If the Foundations issue reports that are critical of its own progress or indicate that there may not have been progress on projects; and
• Potential conflicts from overseas-owned organizations (UK and Sweeden) (sic).The reference to the U.K. and Sweden appears to be to "shadow" Clinton Foundations separately formed and registered in each of those countries, with virtually no disclosure to be found in Clinton Foundation audited financial statements or regulatory filings.

Finally, in a series of "process questions," Mook made clear he was nervous the Clinton Foundation could create media problems for the campaign.

Mook asked:

• Who presents information to HRC and the family on vulnerabilities and press issues?
• Who needs to be engaged in discussing press matters regarding the foundation?
• Who has the ultimate say on press language?
• Who is engaged in the sign off process? (note: the Foundation will be the on the record voice on Foundation issues)
• Is the campaign engaged in discussing Foundation donor vetting?
• Is the campaign engaged in discussing Foundation operations like foreign events, domestic events to avoid vulnerabilities?

What was clear from Mook's summary of potential Clinton Foundation liabilities was that the recommendations of the Simpson Thacher audit had not been implemented.

Teneo conflicts revealed

An attachment to an email Wikileaks released Wednesday contained an internal memorandum noting conflicts of interest between the Clinton Foundation and Teneo were going to be difficult, if not almost impossible, to resolve.

The Nov. 16, 2011, memorandum, titled "Background on Teneo and Foundation Activities," was authored by Doug Band and addressed to key Simpson Thacher lawyers involved in the Clinton Foundation audit.

Copies went to Bill Clinton as foundation founder, as well as to three board members – Chelsea Clinton, Terry McAuliffe and Bruce Lindsey – with an additional copy to Podesta, in his capacity as "Special Advisor to the Clinton Foundation Board. "

Band apparently wrote the email to explain his role in obvious conflicts of interest that were inherent in the Clinton Foundation and Teneo policy of sharing key Clinton Foundation donors who also were key Teneo consulting clients. The Coca-Cola Company topped the list, having given $ 4.3 million since 2004 to the Clinton Foundation and/or the Clinton Global Initiative while also being a Teneo consulting client.

"Independent of our fundraising and decision-making activities on behalf of the Foundation, we [Band and the other principals at Teneo] have dedicated ourselves to helping the President secure and engage in for-profit activities – including speeches, books, and advisory service engagements," Band noted in the memo.

"In that context, we have in effect served as agents, lawyers, managers and implementers to secure speaking, business and advisory service deals," Band continued. "In support of the President's for-profit activity, we also have solicited and obtained, as appropriate, in-kind services for the President and his family – for personal travel, hospitality, vacation and the like."

Band noted that of Clinton's four then-current consulting arrangements, Teneo had secured all of them for Clinton, as well as assisting Clinton maintain and manage "all of his for-profit business relationships [unspecified in the memo]."

Band concluded: "Since 2001, President Clinton's business arrangements have yielded more than $ 30 million for him personally, with $ 66 million to be paid out over the next nine years should he choose to continue with the current engagements."

The memo also noted he and his colleagues at Teneo had arranged for Clinton millions of dollars in speaking fees.

Band stressed that he and his Teneo partners for the past 10 years "served as the primary contact and point of management for President Clinton's activities – which span from political activity (e.g., campaigning on behalf of candidates for elected office), to business activity (e.g., providing advisory services to business entities with which he has a consulting arrangement), to Foundation activity (e.g., supporting his engagement on behalf of the initiatives and affiliated entities of the Foundation), to his speech activity (e.g., soliciting speeches and staffing and supporting him on speech travel) to his book activity (e.g., editing his books and arranging and supporting him on book tours) to supporting family/personal needs (e.g., securing in-kind private airplane travel, in-kind vacation stays, and supporting family business and personal needs)."

On Dec. 22, 2011, a Simpson Thacher attorney forwarded to Podesta and Mills a draft letter written for Bill Clinton to resign from the Teneo advisory board.

But the conflicts of interest continued, as evidenced by the scandal involving former New Jersey governor John Corzine that broke publicly in 2012, along with the acknowledgment that Clinton had been receiving consulting fees out of the $ 125,000 a month Corzine had been paying Teneo before Corzine's hedge fund, MF Global, declared bankruptcy.

When Eric Braverman, the Clinton Foundation CEO brought in by Chelsea Clinton to implement the Simpson Thacher recommendations, resigned in January 2015, Politico reported that his efforts to implement the Simpson Thacher audit recommendations were thwarted by the conflicting visions of the three Clinton family members and their rival staff factions.

Band did not resign from his various Clinton Foundation board appointments until June 2015, as Hillary Clinton was beginning to organize for her 2016 presidential campaign.

McAuliffe's Global Crossing millions

WND reported in 2013 that McAuliffe, the ultimate Clinton insider, has been at the center of major scandals at every step of his career, though he has never been charged with a criminal violation.

WND told the Global Crossing story as follows:

• Following the Clinton re-election, McAuliffe also served as an on-call D.C. fixer for Gary Winnick, who ran Global Crossing, chartered in the tax haven of Bermuda.
• McAuliffe said Winnick hired him as a consultant to "help work some deals" with the federal government.
• Global Crossing was looking to cash in on the deregulation of the telecom industry and new opportunities in China. In 1997, Winnick offered McAuliffe the opportunity to purchase $ 100,000 worth of Global Crossing stock.
• The stock value skyrocketed when Global Crossing's shares went public in 1998.
• "Operating with an acute sensitivity to the fluctuations of the market bordering on ESP," according to Counterpunch, McAuliffe "sold his shares at the precise moment the stock peaked."
• McAuliffe told the New York Times he made $ 18 million in the deal, selling the majority of his Global Crossing stock in 1999 and 2000, although McAuliffe still insists the actual investment profit was more like $ 8 million.
• Global Crossing's stock collapsed within months and the company went bankrupt.Global Crossing founder Winnick – a former associate of "junk-bond king" Michael Milken, who pleaded guilty and went to prison for insider trading – invited McAuliffe into the deal reportedly because McAuliffe was known at the time to be a Clinton golfing buddy.

Here is how reporter Jeffrey St. Clair, writing in Counterpunch, described how the McAuliffe relationship with Clinton helped Global Crossing secure a key Defense Department fiber-optics contract in July 2001:

Few people inside the Beltway enjoyed better contacts than McAuliffe, as Winnick would soon discover. At an appearance in Los Angeles later that year, Bill Clinton lavished on Winnick his personal endorsement. "Gary Winnick has been a friend of mine for some time now and I'm thrilled by the success that Global Crossing has had."

There's no evidence that Winnick and Clinton had even met each other before that evening. But the endorsement proved fruitful. It signaled not only Clinton's faith in the company, but also sent a message to federal agencies that Global Crossing was a firm that they should do business with. It soon paid off. A few months later Global Crossing won a $ 400 million contract from the Pentagon after repeated prodding from the White House.

After the contract was awarded, McAuliffe arranged for Winnick to play a round of golf with Clinton. Shortly after the afternoon on the links, Winnick donated $ 1 million to the Clinton presidential library.

Reuters reported in 2001 the Pentagon had canceled the Global Crossing deal following an investigation by the Defense Department inspector general that was prompted by unsuccessful bidders, causing a sharp decline in the stock price of the company.

Global Crossing 'accounting irregularities'

In the summer of 2001, Ray Olofson, then the vice president of finance for Global Crossing, became concerned the then-bursting technology bubble had tempted Global Crossing to begin using a range of accounting tricks to artificially inflate its earnings statements.

On Aug. 6, 2001, as reported by the New Republic at that time, Olofson wrote a five-page letter to Global Crossing's general counsel, James Gorton, outlining his concern that the company's bankers, shareholders and the Securities and Exchange Commission had been intentionally misled about Global Crossing's financial strength.

In response, Gorton asked Global Crossing's outside legal counsel, Simpson Thacher, to launch an independent inquiry.

On Feb. 4, 2002, Simpson Thacher, after conducting a round of interviews and reviewing company documents, reported to Gorton the results of its audit, allowing Gorton to issue an official statement that after "consultation with outside counsel" management was confident Global Crossing's accounting methods were appropriate and "the allegations made by Mr. Olofson were without merit."

On Jan. 28, 2002, Global Crossing filed for Chapter 11 bankruptcy protection with about $ 12 billion in debt and assets of more than $ 22 billion, making it the fourth-largest bankruptcy filing in U.S. history at that time, with the Enron bankruptcy, filed in December 2001, being the largest.

On Feb. 8, 2001, the FBI announced it was joining the SEC in an investigation into the bankruptcy, after not only disregarding Olofson's whistle-blowing warning, but also firing him among the 1,200 employees let go in November 2001 as part of a cost-cutting measure.

Simpson Thacher audits Global Crossing

After Global Crossings filed for bankruptcy, Simpson Thacher was strongly criticized for not catching in its audit the fraudulent financial accounting that whistleblower Olofson was attempting to get corrected.

"The law firm that Global Crossing Ltd. asked to examine a whistle-blower's allegations about the company's accounting methods failed to interview the executive, the company's auditor or make sure that its board knew about the issues," the Los Angeles Times reported on Feb. 22, 2002.

"Global Crossing's general counsel at the time, James Gorton, asked the New York firm of Simpson Thacher & Bartlett last summer to investigate the claims by then-Vice President Roy Olofson, who said the telecommunications company was misleading its investors and bankers," the Los Angeles Times continued.

"But Simpson Thacher didn't talk to Olofson, company auditor Andersen or Global Crossing directors, instead relying largely on executives who assured the law firm that the board and Andersen had debated the issues already," the newspaper concluded.

Simon Thacher chief 'FOB'

Richard Beattie, chairman of Simpson Thacher's executive committee, defended the law firm's audit of Global Crossing.

"This was an accounting issue that the accountants had signed off on and the board had fully discussed in meetings in the spring," Beattie explained to the Los Angeles Times. "I don't believe we did anything wrong."

On Dec. 15, 2004, Judge Gerard Lynch of the U.S. District Court for the Southern District of New York approved a $ 325 million fraud suit accusing Winnick and other Global Crossing officials of inflating revenue, with Simpson, Thacher &Bartlett agreeing to pay $ 19 million of that total.

The record also documents that Beattie continued to work closely with the Clinton Foundation to implement the law firm's audit recommendations, right up to January 2015 when Eric Braverman resigned, frustrated he was unable to implement the Simpson Thacher recommendations for change.

An email from Podesta to Mills on Dec. 22, 2011, forwarded an email from Simpson Thacher that made clear Beattie had personally participated in drafting Bill Clinton's letter of resignation from the Teneo board that was attached to the email chain, as noted above.

An email from attorney Bruce Lindsey to attorney Jennifer Reynoso at Simpson Thacher on March 6, 2012, documented that Beattie had lunch with Chelsea Clinton as the foundation was continuing to sort out its internal problems.

On July 2, 2013, the Clinton Foundation announced Chelsea finally had succeeded in replacing Lindsey with her former McKinsey associate Eric Braverman.

In December 2014, the Clinton Foundation approved a salary of more than $ 395,000, plus a bonus, for Braverman, while voting to extend his board term through 2017, just weeks before Braverman let the foundation that January.

Beattie's résumé on the Simpson Thacher website notes his ties to the Democratic Party, commenting that his record of public engagement dates to the Carter administration, in which he served as general counsel of the Department of Health, Education and Welfare. The résumé also notes Beattie was a special adviser to Secretary of State Madeleine Albright during the Clinton administration and served as President Clinton's emissary for Cyprus.

The Clintons' corruption is exposed in "Partners in Crime: The Clintons' Scheme to Monetize the White House for Personal Profit," available at the WND Superstore!