Politics and Charitable Foundations: Like Oil and Water

The President of the United States has a charity problem. New York State investigators and the media alike have probed into ways the Trump Foundation’s grantmaking may have benefited the life and political career of Donald Trump. New York Attorney General Barbara Underwood (D) is currently leading a civil case accusing the Foundation of using its funds for Trump’s personal benefit, proposing a $2.8 million fine. Shortly thereafter, the state tax department began a criminal investigation to see if the foundation improperly aided the Trump campaign during the 2016 election.

New York State’s tax department has subpoenaed Trump’s former personal lawyer Michael Cohen—who recently pleaded guilty to two unrelated charges of violating campaign finance law—spurring speculation about what evidence Cohen may provide to these other investigations. Underwood’s office cites instances of Corey Lewandowski, Trump’s former campaign advisor, requesting that the Foundation provide grants to Iowa charities days before that state’s Republican caucuses. She also notes a series of cases where the Trump Foundation took direction from the Trump campaign while hosting events. The Trump Foundation also allegedly paid legal fees for Trump’s business interests.

President Trump responded to the legal scrutiny with an aggressive tweet calling the investigation a partisan attack, and he reminded followers that his foundation gave more money to charity then it took in through donations. (Internal Revenue Service rules mandate that private foundations like Trump’s spend a minimum proportion of their assets on charitable activities such as grants; failure to meet the minimum incurs excise taxes.) On August 30, a Trump Foundation lawyer issued a formal response that accused the attorney general’s office of political bias and noted that former New York Attorney General Eric Schneiderman (D) started the lawsuit shortly before the 2016 presidential election.

Trump and his allies drew comparisons between his foundation and the Clinton Foundation, which has struggled with its own set of conflicting interests. President Trump’s 2020 campaign manager even cited a chart saying the Trump Foundation gives a higher percentage of its donations to charities than the Clinton Foundation did. While this comparison has been challenged because the nonprofits are two different types of organizations—the Clinton Foundation is legally a public charity, not a private foundation like Trump’s—there is a consensus among laymen and experts alike that both organizations exist to privately channel money and exert influence on behalf of their founders. During the 2016 election, the Clinton Foundation was an albatross around the former Secretary of State’s neck. Critics accused her of accepting money from foreign governments and failing to disclose donors—even though the foundation promised to do so as part of President Obama’s deal to appoint Hillary Clinton to the State Department. And the federal Justice Department launched yet another investigation earlier this year into the Clinton Foundation.

But of course, the Clinton family’s misdeeds do not mean the Trump family did nothing wrong. As one long-time philanthropy expert observed:

Even the mainstream press has called for the Clinton Foundation’s closure.  The critical point is that for Trump, the violations, while real, are the sort of stupid mistakes made by someone who doesn’t have the vaguest understanding of the purposes foundations serve. Foolish and probably illegal, but only in a “pay-the-fine sense.”  By comparison, the big-time extortion racket that was the Clinton Foundation, while probably technically legal given all its lawyers, was a deeply cynical and thoroughly immoral abuse of the foundation from top to bottom.  Conservatives should be more than happy to raise the question of the degree to which foundations are wandering dangerously close to the political line.

As the Trump Foundation investigations continue, philanthropists and political hopefuls should recognize the dangers of mixing philanthropic organizations and political causes. Donald Trump is just the latest elected official to receive scrutiny, but politicians of all stripes have landed in hot water after dabbling in charitable causes, many of which have convenient side benefits.

Even if the officeholder carries out his or her public duty without reproach, questions about the integrity and sincerity of the charitable enterprise will remain. Former New York City Mayor Michael Bloomberg faced criticism because of the funds he gave to social and cultural causes through the Carnegie Corporation while he was in office. New York Times reporter Sam Roberts noted that social-service and arts groups received “anonymous” donations in the tens of thousands of dollars: All involved allegedly knew that they came from then-Mayor Bloomberg. Many critics of the three-term mayor claim his political success in part stemmed from buying off potential adversaries with philanthropic donations shielded from public view.

Bluntly put, having close ties to a 501(c)(3) while in public office is asking for unwanted attention. It’s too easy to use organizations to trade, or appear to trade, influence. Just look at Secretary of the Interior Ryan Zinke and his Great Northern Veterans Peace Park Foundation in Whitefish, Montana. Zinke started that nonprofit, but his wife took over as president after Zinke was appointed to the Cabinet. Now Halliburton—a company whose oil drilling projects require approval from Zinke’s Department—is starting a development project in Whitefish near the foundation-run park. (Halliburton is also possibly sweetening the deal by building a microbrewery next to land owned by the Foundation—something Zinke has wanted to see happen for a long time.) The inspector general of the Interior Department opened an investigation into potential conflicts Zinke and his foundation may have.

These kinds of real or potential conflicts are common, and they are not an area where the Left credibly point fingers. To take one egregious example from recent history, former House Ways and Means Chairman Charlie Rangel (D-N.Y.) was named one of the most corrupt members of Congress by the David Brock-aligned liberal group Citizens for Responsibility and Ethics in Washington (CREW) and was censured by the House of Representatives in a bipartisan vote. The list of Rangel’s financial ethics violations is long enough to fill a book, from the millions of dollars he owed the government in unpaid income taxes to the way he used his office to solicit charitable donations from businesses while he chaired the House committee that was writing tax laws affecting the same businesses. And for what charity was he raising millions of dollars from interested lobbyists and businessmen? The humbly named Charles B. Rangel Center for Public Service in New York City.

There are no heroes in these types of news stories. The best thing for Zinke, Trump, Clinton, Bloomberg, Rangel, or any elected official to do is to forego sitting on boards or holding leadership positions with charities until after making a full retirement from “public service.”