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Monday, June 22, 2015


Wall Street analyst: Major accounting firm neglected to exercise due diligence

Hillary Clinton


NEW YORK – Along with filing financial reports filled with errors and misstatements, “Big Four” accounting firm PricewaterhouseCoopers neglected to verify whether the Clinton Foundation obtained tax-exempt status for its various sub-entities, including its AIDS charity, contends respected Wall Street analyst Charles Ortel.

As WND has reported, Ortel’s six-month investigation indicates the Clintons have diverted tens millions of dollars donated for charitable purposes to the personal enrichment of themselves and their close associates.
He says PWC neglected to exercise due diligence in fulfilling its professional responsibilities in conducting even the most basic inquiries required of an honest audit.
PWC, he says, failed to inquire whether the Clinton Foundation has applied for and received duly issued IRS tax-exempt determinations for its various sub-entities and activities, including fighting HIV/AIDS globally under the auspices of the Clinton Health Access Initiative Inc., also known as CHAI.
He notes that there as an “Old CHAI” and a “New CHAI” that was created after Hillary Clinton became secretary of state. In addition, the foundation launched the Clinton Global Initiative and numerous foreign funds and endowments created, for instance, in conjunction with George W. Bush to raise money for the victims of Hurricane Katrina in 2005 and the 2010 earthquake in Haiti.
In his draft report, Ortel says PWC’s “work product concerning the Clinton Foundation in 2013 is riddled with errors.”
Ortel documents “each material deficiency in appropriate detail,” but he also poses an important preliminary question: “Did PWC, as part of its 2013 audit, establish that under applicable laws and regulations that the Clinton Foundation, including its various sub-entities and numerous charitable endeavors, many of which have been foreign based, is duly constituted as a tax-exempt organization?”
PricewaterhouseCoopers has not replied to numerous requests from WND, by email and by telephone, to comment. Ortel also asked PWC a number of questions based on his investigation and has received no reply.
Ortel insists the question of whether the Clinton Foundation is validly constituted as a U.S. tax-exempt organization is “fundamental to any analysis of its financial statements.
If it is not validly constituted, he says, “the organization and its directors face substantial financial liabilities as well as other penalties that would severely impact, even bankrupt numerous parties.”
“Moreover, if the Clinton Foundation is not validly constituted as a U.S. tax-exempt organization, the legal implications for the board of directors may be severe,” Ortel writes.
In addition, there would be severe “tax consequences for those who donated to what may be a fraudulent charity, including thousands of ordinary individuals and families worldwide, as well as for wealth foundations, foreign donors, foreign governments, and possibly even the U.S. government for all contributions the U.S. government entities have made to the Clinton Foundation since inception.”
Tax-exempt purpose: To build Clinton library
As WND has previously reported, the Clinton Foundation’s initial IRS tax-exemption determination was obtained for the purpose of building the Clinton presidential library
While the Clinton Foundation’s IRS determination letter dating back to the foundation’s creation in 2001 is not archived on the Clinton Foundation website, its 2002 IRS Form 990, Part III filing makes clear the organization’s “primary exempt purpose” in narrowly defined terms: “to design, construct, and initially endow a presidential archival depository to house and preserve the books, correspondence, documents, papers, pictures, and other memorability of President Clinton.”
WND has also reported that the idea to morph the purpose of the Clinton Foundation from building the Clinton presidential library to fighting HIV/AIDS worldwide arose from a conversation Bill Clinton had with Nelson Mandela, which is recounted in Clinton’s 2007 bestselling book “Giving: How Each of Us Can Change the World.”
While the discussion led in 2002 to the creation of the Clinton Health Access Initiative Inc., it is not clear the Clinton Foundation sought or received a new tax-exempt determination letter from the IRS to expand the foundation’s purpose from building the Clinton presidential library to fighting HIV/AIDS worldwide.
“The Clinton Foundation has yet to produce definitive and compelling evidence that it was ever authorized appropriately by the IRS to do more than serve as an archival records repository based in Little Rock, Arkansas for the papers and related memorabilia of President Bill Clinton,” Ortel charges.
“It is true that an application to form a companion entity called Clinton Health Access Initiative, Inc. (“New CHAI”) as a tax-exempt organization was approved by the IRS on 15 March 2010,” Ortel acknowledges. “However, the application posted on the Attorney General of New York State Charity Bureau website is incomplete, false, and misleading, so it is difficult to understand why it was approved, less than three months following its submission on or around 31 December 2009, and whether CHAI can reasonably continue to operate having procured IRS tax-exempt approval fraudulently.”
Ortel notes that judging from subsequent filings of IRS Form 990 by New CHAI, its official tax-exempt purpose was: “to support governments to build and strengthen integrated health systems in the developing world and expand access to high-quality care and treatment for HIV/AIDS, malaria and other diseases”
“While laudable, the stated purpose of New CHAI may not afford private donors the possibility of obtaining tax deductions under U.S. law in that furnishing services abroad that are the legitimate responsibilities of foreign governments has been consistently held to be other than a valid charitable purpose as far as U.S. law is concerned,” he argued.
Independent certification?
Ortel stresses that since Dec. 31, 2013, the Clinton Foundation has solicited contributions for its annual operations and for an endowment fund, continuously holding out PWC’s audit as independent certification of the foundation’s financial results for 2013.
Yet, Ortel told WND he can find no documentation that PWC, in conducting its audit of Clinton Foundation financial statements, ever bothered to inquire into the status and specific content of the IRS tax-exempt determination letters that the Clinton Foundation and its various subgroups, including CHAI, possess that would allow them to receive tax-exempt donations to fight HIV/AIDS or engage in any of the other charitable purposes the foundation specifies on its website and published literature.
He points out that according to IRS Filings for New CHAI covering 2010, 2011, 2012 and 2013, the Clinton Foundation exercised the legal power to control the operations of New CHAI.
“It is not clear, however, that the Clinton Foundation was ever appropriately authorized by the IRS to pursue the stated purposes of New CHAI that are so much at variance from its own authorized purposes, serving as an archival records repository and operating exclusively inside the United States from a Little Rock, Arkansas base,” he notes.
This led Ortel to pose the following questions to PWC in an email dated May 19 that PWC has yet to answer:
  • What evidence has PWC obtained that that the Clinton Foundation and New CHAI in particular were validly authorized by the IRS to engage in tax exempt purposes other than those approved in May 2002?
  • How closely did PWC investigate disclosures made and authorizations received from the IRS that the Bill, Hillary, and Chelsea Clinton Foundation was actually a duly constituted tax-exempt organization in each year it operated, including 2013 and previous years where the top-level Clinton Foundation, as the parent company of New CHAI, CGI, and its various predecessors, controlled the activities of CHAI and the Clinton Global Initiative?
  • How closely did PWC examine each entity that may have worked in league with the Bill, Hillary, and Chelsea Clinton Foundation, including the various named joint ventures and special purpose efforts purportedly led by the top-level Clinton Foundation, including the Bush-Clinton Katrina Fund, the Clinton-Bush Haiti Fund, the U.K. fundraising entity and the Swedish fundraising entity?
  • Did PWC examine whether the top-level Clinton Foundation in operating these various sub-ventures as a tax-exempt charity had authorization to act as an agent for foreign governments beginning as early in July 2002, when the HIV/AIDS was first conceptualized as a charitable purpose that could be added without specific approval to the IRS tax-exemption determined for funds donated to build the Clinton presidential library?
  • 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?
  • Did PWC review the application to form New CHAI submitted close to year-end 2009? Did PWC compare this application to consolidated financial statements prepared by previous Clinton Foundation auditor BKD for 2007, 2008 and 2009, that are available through the New York State Charity Bureau Service?
Responsibility to investigate
A careful analysis of audit guidance published by the American Institute of Certified Public Accountants, AICPA, makes clear auditors have a responsibility to investigate the legal and regulatory framework applicable to the entity being audited and the industry or sector in which that entity operates – a standard that applies equally to foundations operating as charities having applied for and received duly issued IRS tax-exempt determinations.
Specifically, Ortel cites AU-C Section 250 of the AICPA “Clarified Statements on Auditing Standards,” SAS No. 122, titled “Consideration of Laws and Regulations in an Audit of Financial Statements.” The section makes clear the auditor has a responsibility to take into account the applicable legal and regulatory framework.
Section 122.13 states: “The auditor should obtain sufficient appropriate audit evidence regarding material amounts and disclosures in the financial statements that are determined by the provisions of those laws and regulations generally recognized to have a direct effect on their determination.”
Section 122.14 (a) charges fulfilling this responsibility includes, “Inquiring of management, and when appropriate, those charged with governance about whether the entity is in compliance with such laws and regulations.”
Ortel concludes that if it’s true that the Clinton Foundation was “never authorized to engage in what has become, by far, its largest activity, then the balance of this memorandum deals with significant accounting issues that pale in comparison to legal perils that directors, management and donors to the Clinton Foundation must soon face.”


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