Bill and Hillary Inc.

SEVERAL years ago your correspondent attended a talk that Bill Clinton gave to the rich and powerful of a megacity in Asia. On a sweltering night the former president discussed his philanthropic foundation and the global battle against AIDS, climate change and poverty. The host, the boss of a local bank, then asked Mr Clinton to give the audience a special insight into whether his wife would run again for president. Mr Clinton sidestepped the question—while trying to give the star-struck crowd a sense that they really had a window into American power. His financial disclosures later indicated he was paid $500,000 for the speech, one of hundreds of talks he has done for his personal benefit, not for his charity.

The mix of politics, profit and philanthropy evident that evening has become a problem for the Clintons. Their foundation and financial affairs are now a liability: a swirl of truth, innuendo and crazed conspiracy theories. What shortcomings there are, it is true, pale into insignificance compared with Donald Trump’s empire of lies and misconduct (see article). But Mrs Clinton has been repeatedly forced to defend her own financial affairs, weakening her campaign.

Scrambling to limit the damage, the Clintons say they will wind down part of their activities, including the Clinton Global Initiative (CGI), a philanthropic event that operates as a division of the Clinton Foundation, their charity. In New York on September 21st, at the CGI’s final gathering, Mr Clinton croaked that it had “turned out better than I ever dreamed”. The crowd, including the actor Ben Affleck, New Zealand’s prime minister, activists and weepy billionaires, hugged to John Lennon’s “Imagine”. Yet a review of the Clintons’ affairs suggests there are things to worry about as well as admire.

You may say I’m a dreamer

The Clintons’ activities have three pillars. First, their role as politicians and the holders of public office. Second, their private income-generating activities, mainly “for-profit” speeches that they give for their own gain rather than for the foundation or other causes. The Economist estimates that, based on their tax returns and other disclosures, the couple have given 728 such talks since Mr Clinton left office in 2001, making $154m of fee income. Of this, 86% came from Mr Clinton. Mrs Clinton gave no for-profit speeches while in office, but because of Mr Clinton’s speaking tours, $49m, or 32% of the couple’s for-profit speech revenue, was made while she was secretary of state in 2009-13. Some gigs echoed the banality of the campaign trail—try the American Camping Association in Atlantic City. Others were far-flung, with visits to Moscow, Jeddah and Beijing. About 43% of total revenue came from events abroad.

After the crisis of 2008-10 concerns rose about banks “capturing” regulators and politicians, so payments from these firms are controversial. The frequency of the Clintons’ for-profit speaking appearances at some banks does raise eyebrows: 13 talks for Toronto Dominion, 12 for Goldman Sachs and ten for UBS. Of the 23 Western banks that regulators classify as systemically important, 12 have paid the Clintons on a for-profit basis. Still, overall only 15% of the Clintons’ cumulative speech income came from financial firms. Mrs Clinton’s campaign declined to comment on the figures in this article.

The third pillar is the Clinton Foundation, a sprawling philanthropic conglomerate. It was formed in 1997 to fund Mr Clinton’s presidential library and then morphed into something bigger. Mr Clinton says the inspiration came just after he left office, in 2001, when he was based in Harlem and helped local firms there. He realised the benefits of partnerships. After the attacks of September 11th 2001, he raised funds to help the victims’ children. In 2002 the foundation took on HIV in the emerging world. Since then, new divisions have been added to respond to new problems. Today it has 12 divisions, including its health activities abroad, the CGI events and its work in Haiti.

The foundation’s expansion and operating performance have been impressive. But its governance, sources of capital and approach to related parties are flawed.

Revenues from donations and grants rose from $10m in 2001 to $338m in 2014, the last year for which accounts are available. Assets rose from $21m to $440m. Unlike many foundations, the Clinton Foundation operates projects on the ground and employs 2,000 staff. It runs a fairly tight ship, with 64% of revenues in 2014 spent on its projects rather than on overheads.

The foundation is surrounded by hyperbole, so judging the outcomes it has delivered is difficult. It claims to have helped 100m people, and if you include the activities by participants at CGI events, this number rises to 535m, or one in every 14 people on Earth. Even if you discount this figure by 90%, it would be a major achievement. About two-thirds of the foundation’s spending is by the division that works on HIV. Here its record is indisputably good, particularly in working to reduce the price of antiretroviral drugs.

The foundation’s governance shows little sign of independence from the family or their political careers. Chelsea Clinton acts as vice-chairman. (Dynastic appointments are common in American philanthropy: Michael Bloomberg’s daughters are on his foundation’s board, for example.) The chairman, president and several senior executives worked for the Clintons in government or on their political campaigns.

Mr Clinton wanted a philanthropic empire, but unlike America’s tycoons he had to do it with other people’s money. The foundation is mainly financed by the pillars of society, for example the Gates Foundation. But an estimated $181m, or 9%, of its cumulative revenues has come from foreign governments and $54m of that, or 3% of the total, from autocratic states such as Saudi Arabia and Kuwait. A further 40% has come from other foreign sources, including multilateral bodies and companies. Donations are either earmarked for specific projects, or go into a general kitty.

An obvious question is what ancillary benefits donors thought they were getting, and here the Clintons’ sloppy approach to conflicts of interest is evident, with the three pillars of their activities—public, private and charitable—colliding. Donors to the foundation attempted to get, and on occasion may have got, favours from Mrs Clinton while she was secretary of state. Most of these requests appear to have been for meetings with her. There was a flow of communication between donors, aides and Mrs Clinton’s government office.

The $154m that the Clintons have made from for-profit speeches also involves potential conflicts of interest. You might expect the cost of hiring an ex-president for an evening to atrophy over time as his proximity to power declines. But Mr Clinton’s for-profit speaking fees have risen since Mrs Clinton became a big political figure in her own right, especially for events abroad (see chart). The benign explanation is that there has probably been a general inflation in the fees famous speakers get over the past decade. But the Clinton Foundation has sustained Mr Clinton’s profile. And some customers may have perceived that Mr Clinton’s marriage gave him an insight into the government while Mrs Clinton was secretary of state.

Belatedly the Clintons have realised how damaging their arrangements are. If Mrs Clinton becomes president, Mr Clinton says he will step down from the foundation and that it will stop taking donations from foreigners and private firms. In a similar effort to resolve potential conflicts of interest, Tony Blair, who seems to have mimicked the Clintons’ business model, said this month that he would cease much of his commercial work and focus on his charitable activities. It seems likely that the Clinton Foundation will eventually be broken up, with each division having to secure its own donors.

The foundation has done many good works. But it grew in an innocent phase of globalisation, when the public were a little more forgiving of politicians getting rich while simultaneously seeking office, helping the needy and raising funds from business people and foreign governments. After the financial crash, and at a time when a majority of Americans feel the economy is rigged by an elite, the collision of politics, power, money and suffering seems tawdry. It will become tragic if the Clintons’ financial affairs assist the election of a demagogue.