To: From: cc: Date: CLINTON, FOUNDATION ee President Clinton Chelsea Clinton Maura Pally Bruce Lindsey Tina Flournoy Bari Lurie Responses to CHAT Managers letter February 11, 2015 Mr. President and Chelsea, «As YOU know, the CHAT Management team sent President Clinton a letter regarding CHAI governance. At your request we have outlined responses to the issues raised in the letter, It is important to note, however, that the letter generally provides allegations without specific examples for us to refute. The general unsubstantiated claims ate difficult to directly refute, yet, the facts as 1 abed G9EGISEPIG ESO Wd6O'O SIOZ 9L wdoutlined below do help build a case that the allegations in the letter are unsubstantiated at best and blatant falsities at worse. Before addressing specific assertions in the letter, it is important to set a context for the existence of CHAI and its relationship with the Foundation dating back to 2008. In July 2008, Ira Magaziner, CHAT’s CEO, and Anil Soni, CHAT’s President at the time, informed the Clinton Foundation that CHAI, then a part of the Clinton Foundation, had been using grant funds from restricted grants (Le., grants made to CHAT pursuant to a written grant agreement that provides that the grant funds shall be used to fund a specific CHAI progtam) to fund other CHAI programs, This practice had resulted in CHAI over-spending its financial resources by over $23 million, The Clinton Foundation was forced to use almost all of the funds it had set aside to begin an endowment to “restore” the $23 million to the original grants, CHAT’s success today is not only due to the vision and leadership of President Clinton, but more directly to the financial support that the Clinton Foundation provided to CHAI at a time when CHAI’s own fiscal mismanagement would have been the end of the organization. That is important context to keep in mind in reviewing the letter and its assertions as outlined below. 2 abed G9EGIOBVIE 1250 WAEO'VO SLOZ OL 41. Board Conflict of Interest ’s Assertion The letter asserts that there is a “recognizable conflict of interest with the Clinton Foundation appointed members who currently serve on the CHAT Board.” The letter continues: “We are very concerned with the current conflict of interest among Clinton Foundation appointees to the CHAI board, where we see evidence that their allegiance to the Clinton Foundation takes precedence over their fiduciary responsibility to act in the best interest of CHAI.” The Facts This is an unfounded accusation without any further statement of example where conflict materialized or that there was any action taken by a board member in anything other than the best interest of CHAI, 2. Clinton Foundation Plans to Exert More Control Over CHAI Letter's Assertic The letter asserts that there is “increasing evidence that the Clinton Foundation plans to exert more control over CHAT. We fear that there is an agenda to ultimately fold CHAI into the Clinton Foundation.” The letter references the following to prove its point: € abed G9EGISEPIG ESO Wd6O'O SIOZ 9L wda. Consolidation of CHAI’s financials into Clinton Foundation’s own financial report and a proposed resolution that CHAL use the same auditors as the Foundation. b, Use of CHAPs accomplishments in Clinton Foundation publicity and fundraising events even though CHAI does not receive funds from these efforts. The Facts This is an unfounded accusation. No one from the Clinton Foundation has raised folding CHAI into the Foundation. In fact, Ira Magaziner brought up this option in his conversation with Simpson ‘Thatcher unprompted, As a controlling entity of CHAI, the Clinton Foundation has a vested interest in ensuring best-in-class governance and financial reporting. To that end, the Foundation-appointed board members led the effort for CHAI to have a governance review, a senior management review and a financial review all conducted by best-in-class outside firms. The intent of these efforts was categotically only to ensure that CHAT is operating at the highest possible standards — the same standards the Foundation holds itself to. Of note, in the past the Foundation has conducted a similar review of itself to continue to operate at these standards. In addition, the very purpose of the process the CHAI Governance Committee is overseeing is to engage independent expert advisers (legal 4 > bed G9EGIOBVLE 12250 WAEO'VO SLOZ 91 4and human resources) to review CHAT's legal and governance structure and senior leadership performance, in order to ensure CHAT's best interests are being protected. ‘The matters raised in the letter regarding CHAI's relationship with the Clinton Foundation and CHAl's Board structure, succession planning, and the impact of a presidential campaign by Secretary Clinton are matters that he has been advised will be included in the advisers’ findings and recommendations. With regards to the use of CHAI accomplishments in Foundation marketing and fundraising, CHAI is part of the Foundation family and, like other programs also part of the Foundation, such as the Alliance, the Foundation promotes accomplishments from all programs. CHAI began as a Clinton Foundation program and has relied over the years on the Foundation’s support — both direct financial support as well as indirect support by way of President Clinton’s continued involvement and the use of the Clinton name and brand, similar the Foundation’s relationship with CGI when it operated as a separate entity. Suggesting that the Foundation promotes CHAI accomplishments as an indication of a takeover is unfounded and unreasonable. g abed G9EGISEPIG ESO Wd6O'O SIOZ 9L wd3. tary Clinton’s Possible Presidential Run Threat Letter's Assertion The letter asserts that: “If, Secretary Clinton decides to run for President of the United States, the Clinton philanthropic activities including CHAI will undoubtedly feel the impact of very aggressive opposition tactics.” Further, that: “informal concerns about perceived conflicts of interest have already been raised by a number of our donors.” And, “The fact that the Clinton Foundation appoints a majority of our boatd seats and that it continues to Promote CHAI’s work as its own undermines our ability to claim our independence from the Secretary ... We are also concerned that the Secretary’s campaign might limit the way CHAI operates ... Gaining further distance from the Clinton Foundation will help insulate CHAI from the fundraising impact of a potential presidential run.” Tra has previously asserted that with continued affiliation with the Clinton Foundation, CHAI stands to lose donor support if Secretary Clinton decides to run for president. If this were true, CHAT likely would have experienced a loss in donors during Secretary Clinton’s 2008 presidential run. When pressed about what if any support was lost in 2008, Iza only cited the government of Norway. The Facts There is no proof that any donors, including Norway, dropped off in 2007 6 9 aed G9EGIOBVLE 12250 WAEO'VO SLOZ 91 4or 2008 because of the presidential campaign. In 2007, the government of Norway gave CHAI $5,429,527.24 and in 2008, the government of Norway gave CHAT $6,683,683.08, OF note, they also gave CHAT $7,980,803 in 2009 Without citing any specific donors or conversations, it is impossible to refute the hearsay that donors are expressing concern about a presidential run. We can, however, demonstrate that CHAI did not suffer from loss of donors in 2007 or 2008. 4, General Fundraising Letter’s Assertion The letter asserts that: “CHAI management raises almost all of the money for CHAI without the involvement of the Clinton family.” he Facts This assertion is simply wrong, Both of YOU, President Clinton and in more tecent years Chelsea, have actively fundraised and maintained relationships with CHAI’s more generous funders. The notion that CHAT would attract just as many donors without YOUR name or involvement is simply not realistic. Governments and funders open their doors to YOUR world renown credibility, reputation, and record of success. Over the years, YOUR family has made appearances at fundraising events and meetings 7 L ebed G9EGIOBVLE 12250 WAEO'VO SLOZ 91 4and has engaged in various direct outreach efforts to CHAT’s major funders including, IrishAid, UNITAID, EJAF, the Government of Norway, PEPFAR, and the Gates Foundation. Of note, UNITAID - one of CHAI’s largest donors — is a result of YOUR engagement with Philippe Douste-Blazy, the organization’s chairman. A more recent example was when the CHAT Human Resources for Health (HRA) team asked YOU, President Clinton, to speak with Jim Kim on behalf of the program to help make progress with the consortium of CHAI, Partners In Health, and Last Mile, led by the government of Liberia. YOU were also instrumental in working with the U.S, government, in particular USAID and President George W. Bush, to secure the funding for the HRH program in Rwanda. That program would never have happened had YOU aot done the high level advocacy for CHAI and the government of Rwanda. Notably, YOU have also attended several fundraising dinners where YOUR involvement has continued to drive support for CHAI programs. For example, in 2011, when YOU attended an event in Ukraine, which helped raising far mote funding than was expected, and has kept the program running for the past fout years. It is clear that CHAT benefits both directly and indirectly from YOUR relationship and continned engagement with these entities. In addition to financial support, as directly provided in 2008, and continually provided through fundtaising efforts, YOU continue to play a 8 abed GOEEI9BVIE 2250 WHOLVO S102 OL 4key role in CHAT’s work by signing many MOUs that enables CHAI to work in all of the countries that it works in. Foreign governments sign these MOUs because they are signing with YOU, a former president, knowing YOUR key involvement is critical to these efforts. 5. Succession ters ‘The letter asserts that: “the CHAI Board needs to prepate a succession plan for positions held by President Clinton as Chairman and Ira Magaziner as Vice Chairman. With the current Board structure, CHAI’s independence could be completely compromised and real and perceived conflicts of interest would become intensified.” The letter asserts that a fully independent CHAI Board of Directors would mitigate this tisk. The Facts Again, unsubstantiated assertions are difficult to directly refute, however, there are no facts supporting this claim that succession planning would be compromised by any of the Foundation-appointed members. In fact, the opposite has happened as succession planning has been productively underway. 6 abed GOE6LORPLE 42350 WdOL¥O GlOZ 91 G46. Additional Assertions Outside of The Letter While not included in the letter, Ira has made a number of false assertions to various parties at the Clinton Foundation over the past weeks. These assertions are outlined below: Financial reporting Lea's Assertion Isa incorrectly asserted that if the Clinton Foundation removed CHAI from its financial reporting, the total overhead for the Clinton Foundation grow to be 39%, The Facts This is patently false. As reported in the Foundation’s 2013 990 — which does not include CHAI — the Clinton Foundation’s overhead is 9.9%, (program expenses are 80.7% and fundraising is 9.4%). Ira uses creative accounting and his own teinterpretation of our numbers to artive at 39%. Specifically by referting to page 17 of the Foundation’s audited 990, Ira re-cateporized the $15.2 million we had reported as “other”, meaning other programmatic costs, as general overhead and was conflating “other” with non-programmatic activities. By adding 15.2m to out overhead costs, Ira is able to get to 39%, However, this 15.2m is all Ptogram expenses, including costs attributable to the Alliance, Too Small 10 OF ated B9E6L9BYLE E280 WALIvO SIOZ 9b 4to Pail, No Ceilings, Haiti, as well as costs for programmatic work as allocated by our auditors Pricewaterhouse Coopers (PwC). The 15.2 million is broken down the following way: Breakdown of Other Expenses ($15.2M) Alliance Grants 2,400,000.00 Other Grants 425,000.00 Occupancy for Programs 757,840.00 Days of Action 477,000.00 ‘Too Small to Fail and No Ceilings 399,000.00 Haiti 5,228 180.00 Taps 1,579,444.00 Tatern Program 375,000.00 Tegacy 972,729.00 Foreign Policy 1,030,536.00 Staff Supporting Programs 1,536,000.00 Total 15,180,729.00 Ira takes issuc with how we are classifying programmatic costs. While PwC allows for some portion of marketing and press staff to be allocated to programmatic costs, Ira says CHAT does not do that and he feels this different calculation compromises CHAI. He feels the same way about Portions of rent being allocated as programmatic. Ira has requested a 14 LL abed B9E6L9BYLE E250 WALIivO SIOZ 9b 4meeting between CHAT CFO and Andy Kessel so that our accounting can be shared a mote detailed level. CHAI Seating at the Foundation ras ertion Ira announced that he was pulling CHAT staff ftom 1271 on the grounds that we do not provide enough seats, the process for getting seats is laborious, and CHAI staff is not well treated. Ira claims that the Foundation only provides CHAI 10 seats at the office and that is not enough to accommodate the 52 local, full-time CHAT employees who visit ot live in the New York area. Additionally, Ira has said that he has heard from CHAI staff that Clinton Foundation employees have created an unftiendly work environment, causing CHAI staff to be uncomfortable. The Facts The Foundation has allocated 12 seats for CHAI’s use and has never been asked for additional seats. CHAT employees sign up each week so they can reserve a seat or meeting space at 1271. Based on the record of staff sign ups, the seats for CHAI are used but arc rarely full. On average, 6 of the 12 seats are occupied. There were 5 days during the last 2 months where 12 or more CHAT staff came to the office, which we accommodated with additional seating. 12 24 bed B9ESISELE ESO WdbiPO S102 9b ®4In response to Ira’s unilateral removal of CHAT staff, I offered him additional seating, noting that while we cannot accommodate all 52 CHAI staff we could find more seats for them if they need it, up to 20. I also offered to work with them to develop a more user-friendly system for CHAI staff to reserve seats. In addition, I’ve asked Ira for more details on staff complaints for how CHAT staff has been treated so I can address them. In conversations with CHAI staff that have been in the office this week I did not hear any complaints about poor treatment. I have yet to heat back from Ira on this topic. Annual Staff Holiday Party Ina’s Assertion Tra’s assertion is that CHAI staff was not invited to the 2014 Foundation holiday party, as they have been in years past. The Facts For the 2014 holiday party we invited all New York-based staff, but not staff outside of New York, to manage cost and capacity. This applies to all programs, including CHMI, Alliance, CHAI, CGEP. However, while we do not invite staff outside of the New York area, we do accommodate staff who live in the region of are in town for a meeting, 13 £) abed G9EELOBYLE 2250 WZIv0 S102 OL 4Tn 2013, we asked CHAT to help cover some of the costs for the holiday party since including CHAI would increase the number of attendees considerably, noting that when CGI was a separate entity they would cover 4 portion of the costs for the holiday party. CHAI said no to helping to cover costs. We invited CHAI staff anyway, both New York-based and Boston-based, and they spread the invite to a much larger circle of CHAI staff in other locations, resulting in CHAI bringing 170 people to the party. We learned later many people traveled in to New York just for the party and Ita tried to have the Foundation cover the travel costs because he did not approve them. In 2014, Julianne asked CHAI if we should invite both their Boston-based staff and New York-based staff and she said that Maura Daley asked why would we want to do that. We did invite the New York-based CHAI staff, as we did with all other initiatives. Some of the New York staff invited Boston based staff as theit guest. In addition both Meghan Wareham and ‘Te Nuthulaganti, two Boston-based CHAI staff, were in town for meetings and we invited them so they could attend the holiday party. Lastly, when the Foundation was distributing annual holiday cards and gifts in 2014, we asked Ira for his staff list so we could send holiday gifts to CHAI staff. Ira refused to provide a list of contact information to the Foundation. 14 y| abed 69EELOBYLE 2250 WdZIvO S102 OL 4