DATELINE: November 20, 2008, Chicago
The front page of today's New York Times carries the following headline: Bill Clinton Said to Accept Terms of Obama Team. Peter Baker and Helene Cooper report later in the article that former President Bill Clinton has agreed to reveal the names of major donors to the William J. Clinton Foundation, his charitable foundation. We find this to be highly disturbing and potentially unethical. It may also be a...
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breach of the William Clinton Foundation’s own privacy statementand President Clinton’s duty of loyalty to the foundation. President Clinton has refrained from revealing donors to his foundation in the past. See Ian Wihlelm, Campaigning for Charity: An Interview With Bill Clinton, Chronicle of Philanthropy, Sept. 18, 2008. At the time, Clinton told Wilhelm, I haven't thought much about [revealing donor identities]. The only reason I didn't want to do the library donors is that no previous president had. I suppose if Hillary were elected president, or maybe even if she had been nominated, we would have had to go back to the donors and at least disclose everyone that didn't object to it. But I wouldn't have any objection to it... I'm basically pro-disclosure. My reluctance in the library case is not that I was ashamed of anyone who gave me money. It was because when the people gave me money, they had a reasonable expectation that their gifts would remain anonymous. Section 6033 of the Internal Revenue Code provides that the Form 990 tax returns of public charities such as the Clinton Foundation must be made available to the public, but Section 6104(d)(3)(A) provides that the names of donors and contributors listed on Schedule B to the Form 990 are excluded from otherwise mandatory public disclosure. To be clear, we are not suggesting that Section 6104(d)(3)(A) prohibits voluntary disclosure, but a good case can be made that it creates an expectation of privacy. President Clinton’s past refusal to reveal donor information also creates an expectation of privacy on the part of donors. Large donors who made gifts pursuant to written agreements may have gone so far as to contractually mandate that their names not be disclosed. Any donor who made his contribution through the foundation’s Web site was guaranteed non-disclosure except in certain specifically prescribed circumstances. The foundation’s privacy policy, making specific reference to the charitable solicitation Web page form, states: Our site's donations, registration and contact forms, online surveys, and merchandise transactions may also request or require users to give us personally identifiable information (like their name, telephone number, home address and e-mail address). We may use the information from our donations form, registration form, merchandise purchase forms and surveys to contact the user, but users may opt-out of receiving future mailings. We will not sell or disclose your personally identifiable data to any third party unless: (i) we change Web site hosts or our host transfers business assets (as further described below); (ii) we first obtain permission from you; (iii) we need to share it with agents or contractors who perform services for us; or (iv) we are required by law to disclose it. Last time we checked, getting your wife a job in the Obama Administration did not trigger a legal requirement that confidential donor information be disclosed. Plenty of people choose not to seek public office because they don’t want to go through the vetting process, but that process is not mandated by law. The plain fact is that President Clinton should have thought about the implications of his fundraising activities on behalf of his foundation when he engaged in them. Expediency does not obviate donor expectations to or foundation promises of privacy. It is also worth noting that recently a court decided that an organzation that was subject to open record laws had to obtain permission from donors before releasing their names because they had an expectation of privacy. We are working to get the cite to the case, but the holding suggests that even without an explicit binding obligation, there may be a legal right to non-disclosure. President Clinton can solve the problem he and Senator Clinton now face by first obtaining permission from donors who relied on his Web site’s privacy statement or who required confidentiality as part of separate gift agreements before revealing those names to the Obama Transition Team. We believe he has an ethical obligation to obtain permission of other donors before releasing their names given the customs and the expectation of privacy created by Section 6104(d)(3)(A). We also note that unauthorized revelation of names would likely be interpreted as a violation of the Association of Fundraising Professional’s Code of Ethics. In pertinent part, the Code states: 2. Members shall not engage in activities that conflict with their fiduciary, ethical and legal obligations to their organizations, clients or profession. 17. Members shall not disclose privileged or confidential information to unauthorized parties. 18. Members shall adhere to the principle that all donor and prospect information created by, or on behalf of, an organization or a client is the property of that organization or client and shall not be transferred or utilized except on behalf of that organization or client. Although the AFP’s code is not legally binding, it carries great weight, particularly given AFP’s stature as the leading trade association for professional fundraisers. By revealing the names of donors without their permission, President Clinton would be making a mistake that many founders make: He does not own "his" foundation. It is a private entity separate and apart from President Clinton. Its assets, including its donor lists, are not his. They belong to the foundation. The directors of the foundation have a fiduciary duty to protect charitable assets. In our view, revelation of donor names when the donors contributed with the expectation of privacy is a breach of the duty of loyalty to the foundation, potentially jeopardizing future contributions and diminishing the foundation's reputational capital. President Clinton now finds himself with personal interests that diverge or conflict with those of the Clinton Foundation. He does not have the legal right to simply disclose donor names. Such revelation strikes us as a violation of the three quoted standards. Disclosure also may constitute of a breach of President Clinton’s duty of loyalty under Arkansas law, depending on how those duties are formulated. Another solution to the problems faced by President Clinton and Senator Clinton is for President Clinton to resign whatever positions he holds with the foundation and stop doing work on its behalf. Once again, it is critical to distinguish between the organization and the founder. The Clinton Foundation can continue doing its good works without President Clinton. This would be appropriate given other statements in the Times article. Nothing would stop President Clinton from starting anew. He could continue his works independent of the foundation, but voluntarily agree to whatever terms the Obama Administration demanded. President Clinton apparently has agreed to subject the future activities of the foundation to review by the Obama Administration. It is not clear to us why this is appropriate. It strikes us as a breach of fiduciary duties on the part of foundation directors who acquiesce. The foundation is not President Clinton. It is a private entity with a charitable mission. Why should its mission be subverted so that President Clinton and Senator Clinton can pursue their private interests? Typically, when someone who is on the faculty of a large university or an officer of a corporation is asked to join the government, they resign their position and rearrange their lives. Here the institution is being required to rearrange its activities. The Obama Administration is not without fault, either. Their questionnaire for candidates for positions in the new administration is too intrusive. We like good government as much as the next guy, but at some point conflicts-of-interest and disclosure standards can be too stringent. A good case can be made that if we live in a world of equality and two-working spouses, then one spouse's activities should not be taken into account when making hiring decisions for public office. If Senator Clinton breaches the public trust once in office by letting her husband inappropriately influence her, the remedy is immediate termination of Senator Clinton's employment. Until there is a breach, Senator Clinton should be given the benefit of the doubt. If the Obama Administration believes that there were public perception problems and insurmounatable conflicts, it should have never made the apparent offer. Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, any advice (but none is intended) relating to federal taxes that is contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.
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THE FOREGOING IS NOT AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. IF LEGAL ADVICE IS REQUIRED, THE NONPROFIT OR OTHER PARTY IN QUESTION SHOULD SEEK THE ADVICE OF QUALIFIED LEGAL COUNSEL.
