Hillary gave a special State Department post to an ex-fundraiser — even as he was laying the groundwork for a global firm with ties to her husband called Teneo.
By Rachael Bade 04/13/16 05:56 AM EDT
Photo:Businessman Declan Kelly is pictured. Kelly and his businesses have close ties to the Clintons which some critics, including Sen. Chuck Grassley, have scrutinized. | AP
When Hillary Clinton became secretary of state she personally sought out a man named Declan Kelly to be her economic envoy to Northern Ireland, giving her 41-year-old former fundraiser a special status outside normal diplomatic channels.
“Yeah! Is he now official? Can I call him? Can I ask him to start?” she wrote in an Aug. 28, 2009 email to her chief of staff, Cheryl Mills
By some measures, Kelly was a bargain for the government. The Ireland-born businessman refused a salary, hired five staffers on his own dime and pushed for U.S. companies to invest in the once-troubled region, a diplomatic priority for Clinton.
But while serving as Clinton’s special envoy, reaching out to global corporations for those investments, he was also working for two of them as a private consultant — earning about $2.4 million from Dow Chemical, a longtime client of his and one of the firms that participated in Clinton’s Ireland initiative.
It was also during this time period that Kelly and Doug Band, a close aide to former President Bill Clinton, were preparing to launch a global consulting business that would soon become a well-known and controversial success story. Their new venture, Teneo Holdings, would go on to employ numerous Hillary Clinton associates, including her closest confidante, Huma Abedin, and, for a time, Bill Clinton as “honorary chairman,” giving clients rare access to the couple and their network of world leaders.
The fact that Kelly and Band were laying the groundwork for their enterprise while Kelly was working for the State Department, reported here for the first time, represents a fresh illustration of the blurring of the lines between Hillary Clinton’s political network and her State Department that critics have long noted. And it shows how one enterprising fundraiser was able to insinuate himself into Clinton’s inner circle and then built a 500-person, multinational consulting firm whose value, at least at first, was greatly enhanced by its founders’ closeness to the Clintons.
Manhattan-based Teneo has been a center of palace intrigue for years because of its proximity to the former first family. And in its early days, Teneo directly benefited the couple themselves, though the company emphasizes that it no longer has those ties.
With Bill Clinton serving in the paid position of honorary chairman, and Hillary as secretary of state, Teneo initially billed itself as a one-stop shop for “C-suite consulting,” a blend of public relations advice for CEOs and more technical investor relations work. Corporate executives paid $250,000 a month — sometimes more — for consulting and assistance. They also, in some cases, got to hobnob with a former president. The firm forged a mutually beneficial relationship with the Clinton Global Initiative, the fancy annual Clinton Foundation event starring the former president and other world leaders. The New York Times and The New Republic first reported three years ago how the philanthropic gathering provided an ideal nexus for Teneo to both recruit new clients and enhance the visibility of existing clients by getting them speaking roles.
Eight former employees and other sources with knowledge of the start-up or close to the Clintons told POLITICO that many Teneo clients received exposure to Bill Clinton, invitations to salon dinners filled with D.C. power players, or meetings at CGI with foreign leaders in the years immediately after the company’s founding. They also said a key element of Kelly and Band’s pitch to new clients was donating to the foundation or joining CGI to “raise your leadership profile.”
“They used the Clinton connection to launch it,” said a former employee who was there before the public unveiling. “The pitch was: ‘Yes, we’ll be just as good as anybody else at doing the substantive work that you need a consulting firm to do for you — but we’re going to bring all these relationships to the table at the same time.”
And it all started while Kelly was at Clinton’s State Department, working doggedly to promote her agenda of persuading businesses to invest in Northern Ireland and winning strong praise from his boss.
At a grand State conference packed with Irish politicians and global corporate chieftains, organized by Kelly in October 2010, Hillary Clinton cheered U.S. companies for pumping money and “more than 1,000 new jobs” into Northern Ireland — including Dow Chemical, Kelly’s longtime client, for opening a supply chain consulting service in Belfast.
“I especially want to thank and recognize Declan Kelly,” Clinton said. “I appointed Declan to this post in September 2009, and just a little more than a year later, I think, it proves the wisdom of that appointment.”
Just days before that shout-out from Secretary of State Clinton, the founders set up the various entities that would later fall under the Teneo umbrella. The firm would not begin operating in its current form until June 2011, about a month after Kelly left the State Department. But the groundwork actually came earlier.
Kelly had met Band, often referred to as Bill Clinton’s surrogate son, while volunteering for Hillary Clinton’s presidential campaign. As a young college graduate, Band spent several years in the White House counsel’s office under Mills, and, at 27, became President Clinton’s personal assistant, carrying papers and keeping track of schedules. In Clinton’s post-presidency, when he helped engineer CGI, he became known as Bill’s gatekeeper, organizing meetings between the former president and world leaders.
Former employees say that Kelly, Band and a longtime associate of Kelly’s named Paul Keary began planning for their joint consulting firm long before the incorporation and the official launch in June 2011. In 2009, several weeks before he took his unpaid State post, Kelly created his own private consulting firm and Keary created two others, which would later combine under the Teneo umbrella.
The three predecessor firms wooed clients and employees while Kelly still had the prestige of serving as Clinton’s special envoy. Employees who worked for the firms said there was at times overlap between them, and it was sometimes unclear, at least to them, who worked for which firm or which clients belonged to which company. They were aware of a plan to join forces eventually.
“Basically it was all set up, but they were careful about keeping it separate,” said an employee who was there in the early years. “When I worked there prior [to the launch], I worked with Paul Keary Consulting, but there was an expectation that it would one day become Teneo.”
Kelly, Band and Keary all declined numerous interview requests. But Kelly once told an interviewer that he never benefited from his State Department job because he already had strong business ties in his home country of Ireland.
The State Department, citing privacy laws, would not disclose whether Kelly filed any disclosures of his consulting work while serving as special envoy.
Government employees are typically restricted in their ability to receive outside income. But Hillary Clinton’s State Department expanded the use of “special government employees,” a relatively rare status originally created for scientists and others with unusual technical expertise that cannot be provided in-house. This allowed certain workers chosen by her or her staff, including Kelly, to receive money from private firms, including those who might potentially have business before the federal government.
These exceptions have come under scrutiny by Republicans. Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) is investigating Abedin’s work for Teneo between 2012 and 2013, a period in which she served Hillary Clinton at State while also earning $105,000 from the firm. The State Department’s inspector general office is also probing the matter, requesting records from Teneo and issuing a subpoena to the Clinton Foundation — though Abedin’s lawyers have long denied there was any conflict of interest in her dual-job status.
“Ethics rules and laws generally prohibit government employees from using their public positions for personal gain,” said Grassley. “When people wear multiple hats, the State Department, as well as every other government agency, needs to double down on efforts to make sure employees aren’t using government resources, including access to people in power, for their personal business development or to help favored clients.”
People close to Bill and Hillary Clinton say they weren’t involved in Teneo’s founding and didn’t keep close tabs on its growth. In early 2012, after one Teneo client, MF Global, went belly up, and Teneo came under scrutiny for charging the firm $125,000 a month just before its investors lost hundreds of millions, Bill Clinton stepped down from his role as honorary chairman.
Just how much compensation Bill Clinton was promised has been the subject of much speculation, with one author reporting he had an initial contract valued at $3.5 million. But the former president ultimately kept only $100,000 for his Teneo work, according to the Clintons’ tax returns and a source familiar with the arrangement.
“There were varied conversations regarding the president’s advisory services, for which — as indicated on their tax returns released this past July — he ultimately was compensated $100,000 for the advice he provided to the firm,” the source said.
Hillary Clinton’s campaign and Bill Clinton’s office declined to comment.
Former Teneo employees and Clinton associates agree that while the couple didn’t play a role in creating the firm, they did not raise concerns that they were aware of the potential conflicts that might arise — or the potential perception that aides could use their connections to make a lot of money.
Sources also told a quintessential Washington tale in which a shrewd businessman, Kelly — whom well over a dozen former employees identified as the major inspiration behind Teneo — worked his way into the Clintons’ good graces by fundraising for Hillary then joining forces with Bill Clinton’s closest companion.
“[Kelly] did the envoy thing for a track record, you know, check the box… And it was all self-funded, so he would tell you he did a public service,” said one. “But it also benefited him: a lot of visibility and a lot of press showing him associating with the Clintons, burnishing the Clinton brand, getting those connections.”
Tipperary-born Declan Kelly was little known in U.S. political circles in March 2007, when he showed up at an Irish America Magazine awards ceremony in New York City. After growing up in poverty in Ireland, he built a Dublin-based public relations firm from nothing and struck gold upon selling it to a bigger British firm. Often called the best salesman in the room even by people who don’t like him, Kelly was later part of a $40 million employee buyout of a related company. They ultimately sold the firm in 2006 for $260 million to American consulting giant FTI, making him even wealthier — all before his 39th birthday.
“He already had a successful career in Ireland, so he arrived here with quite a bit of money and tremendous ambition,” said one longtime acquaintance in the Irish-American community. “And he became very successful very fast.”
Kelly’s mix of hardscrabble charm and hustle had helped him build an impressive client roster on both sides of the Atlantic, winning over CEOs like Dow Chemical’s Andrew Liveris and Coca-Cola’s Muhtar Kent. But Kelly also had a brash quality that made him some enemies as he recruited clients.
“People called him ‘50-50 Kelly’ because he would go into a prospective client’s office and say, ‘Oh my God, you guys are so f—ed up. I can’t believe you’ve made it this far … But it’s good you called us. We could fix this,’” said one former colleague. “Half the time, corporate clients would come out and say, ‘Get this guy out of our office!’ The other half the time, they’d say, ‘Oh, geez! We better get to work with these people.’”
The Irish award’s ceremony, hosted at a Broadway theater, was populated by mid-tier celebrities, including Claude-Michel Schönberg, the Les Misérables composer, and comedian Kathy Griffin. But Kelly’s eye was on the guest of honor: Hillary Clinton, then gearing up for her first presidential run.
As he wriggled between people snapping pictures of Clinton, a camera whacked him in the forehead, leaving a bloody gash. Undeterred, Kelly shook hands with Clinton while tending his wound, according to someone who witnessed the moment.
Starting with that handshake, Kelly found his way into Clinton’s world. He jumped into her 2008 campaign, joining brainstorming meetings with top campaign advisers to urge Clinton to take on then-rival Barack Obama through social media — and openly criticized staffers he didn’t think were up to snuff, according to one participant in the meetings.
He also organized a group called Irish Americans for Hillary, plumbing his network of contacts for support and bundling what one Irish publication estimated was about $3 million through swanky fundraisers in New York, Boston, San Francisco and Chicago.
Several of those fundraisers featured Bill Clinton, including one in Dublin that priced out at $2,300 a head — an event the Irish Independent called “one of the most exclusive events … this year.” Actor Gabriel Byrne hosted another at his Brooklyn brownstone home, where 75 guests paid thousands of dollars each to mingle and snap pictures with Bill while his wife was off debating in South Carolina.
After Hillary withdrew from the race, Kelly kept in touch with the Clintons. In late November 2008, Kelly’s alma mater, the National University of Ireland Galway, honored the former president at a Metropolitan Club gala in New York. Kelly got to introduce Bill, according to an Irish news account.
As president, Bill Clinton had created a “special envoy” post for Northern Ireland to help facilitate peace talks between fractured Irish leaders and the British, choosing former Senate Majority Leader George Mitchell for the role. President George W. Bush continued that post.
In both administrations, however, the envoy’s focus was mainly politics, not solely economic development, like it became during Kelly’s tenure. Kelly’s predecessors also generally had bigger State Department roles and were nominated by a sitting president, and several were confirmed by the Senate as ambassadors. Kelly’s post, for which he declined to take a salary, was created in-house at State and did not require Senate confirmation.
Still, with strong ties to Ireland, including a brother who served in the European Parliament, Kelly had the business credentials Clinton needed to fortify a strong U.S.-Northern Ireland economic connection. He accepted the job with an enthusiasm matched only by Clinton herself.
“I want to send him to both Ireland and the North as soon as possible,” Clinton wrote to Mills in her Aug. 28, 2009, email, prodding her to get an announcement out immediately.
After his appointment in September 2009, Kelly quickly staffed up by making an unconventional move and hiring five employees using money out of his own pocket. One used the title “deputy to the U.S. State Department’s Economic Envoy to Northern Ireland,” and, according to his current bio, was tasked with “helping to drive investment to the region from U.S. corporations and facilitate bilateral trade.”
Another “adviser” to the economic envoy, was “responsible for executing a number special initiatives to help drive economic development in support of the ongoing peace process,” according to his current bio. And a third was named “senior counsel,” according to her LinkedIn profile, working with two additional employees to start up a mentoring program placing Irish fellows at American companies.
Despite job titles that sounded like State Department positions, and despite their regular interactions with official State Department staff and Irish diplomats, none of them were official government employees, and thus they had no constraints on their outside activities.
“The State Department does not have a record of these individuals being employed by the Department,” reads a State Department statement for this story.
Some of Kelly’s envoy office employees were also doing consulting work for Kelly’s private firm, listing Declan Kelly Consulting on their résumés. They would become among the first Teneo employees. Because they weren’t officially on the State Department payroll, their work would not receive the typical oversight given to State employees. It’s unclear whether they were required to file any sort of disclosure forms, and the State Department would not comment on what obligations they may or may not have had to meet.
All of them declined to be interviewed for this report.
At first, Kelly set up shop inside empty office space belonging to Avenue Capital, a midsize investment firm whose CEO, Marc Lasry, was a major Hillary Clinton campaign contributor and longtime Clinton friend. Chelsea Clinton had worked for Avenue Capital between 2006 and 2009, and Band had provided advice on one investment strategy of the firm, according to a Band bio.
Kelly later moved to an office he personally paid for inside the Seagram Building in midtown Manhattan, a space he would call the “Office of the U.S. Economic Envoy to Northern Ireland.” There he also ran Declan Kelly Consulting.
Bill Clinton got involved in Kelly’s work early on. Sidney Blumenthal, a longtime Hillary confidant and adviser to the Clinton Foundation, proposed the idea of a CGI event featuring the former president and Irish ministers in the fall of 2009. According to an Irish Times account of the event, Kelly also pitched Bill on the session in New York.
Hillary loved it: “I think this is a good idea and see no conflict,” she emailed senior aides, adding Band on the list. At least one adviser, Mills, urged caution, writing back, “Let’s discuss — I can see how they might feel differently.” And though it’s not clear who “they” meant, the CGI panel occurred that fall, with Kelly joining President Clinton and the Irish ministers onstage.
Kelly and his staff, meanwhile, created a U.S.-Northern Ireland mentoring program for Irish youth, arranging internships with American companies. Two of the first to sign up were Coca-Cola, Kelly’s longtime client, and UBS, which was then working with Paul Keary’s company and would soon join the Teneo fold.
Kelly also spent more than six months organizing a U.S.-Northern Ireland Economic Conference in Washington, featuring Secretary of State Clinton and CEOs — the event where Clinton would praise him and his client Dow.
He’d again tap Bill for support. Just days before the conference, Bill flew to Northern Ireland to join Kelly in promoting economic expansion and the event, reports show.
“The president has remained keenly interested in Northern Ireland and the work we’re doing on behalf of Secretary Hillary Clinton there,” Kelly told the Irish Voice for a story about Bill’s visit. “He agreed to visit and I am hugely thankful to him for that.”
The envoy’s work was not the only thing on Kelly’s plate during those years.
After becoming friends during Hillary’s 2008 presidential race, Kelly and Band decided to join forces on a consulting company one night over dinner at Band’s Essex House apartment adjacent to Central Park South, according to stories they told Teneo employees at company retreats.
They had to deal with a speed bump first. Kelly had been working as a top executive for FTI Consulting. Upon stepping down in July 2009, he had signed a two-year noncompete agreement that barred him from doing consulting work for anyone else. It offered him, however, a chance to continue working for FTI part-time as a consultant for Dow Chemical and Coca-Cola.
Kelly opted to keep those lucrative relationships — companies that would later become two of Teneo’s first and biggest accounts. And between August 2009 and January 2011, in the midst of his State Department work, Dow paid Kelly $2.4 million through FTI for consulting fees, according to a source familiar with the arrangement.
Although not as prominent as his State Department work, Kelly’s consulting was not a secret. He was identified as a spokesman for Dow, for example, in a 2011 news story about Dow’s internal finances. His FTI separation agreement, filed with the SEC, also mentioned he would continue consulting work for select companies.
Meanwhile, Keary — the third founder, a longtime colleague of Kelly’s from his FTI days — became a central player in the trio’s future enterprise by setting up two firms that, like Kelly’s company, would be folded into Teneo Holdings.
The same lawyer who registered paperwork for Declan Kelly Consulting with the state of New York in July 2009 filed papers on Sept. 17, 2009, establishing Paul Keary Consulting and on Nov. 18, 2009, setting up Teneo Strategy Consulting — a name that would stick.
Through those firms, Keary built up their future company’s client list while Kelly was restrained from doing so by virtue of his noncompete agreement.
Many of the clients that signed with Keary overlapped with Bill Clinton’s work. The USA bid committee for the World Cup, for example, hired Keary in 2010 to help make the pitch for future games. Earlier that year, Band had joined the board of directors for that very committee, and Bill Clinton himself lobbied the international soccer league FIFA that fall to try to snag the tournament for the U.S.
Keary also won UBS’ business. In 2009, the Swiss bank’s Zurich branch came under fire for helping wealthy Americans evade taxes. UBS would not answer questions about the dates and specifics of the arrangement, but a former employee said Teneo helped arrange a series of events at which UBS executive Bob McCann appeared on stage with Bill Clinton and George W. Bush starting in May 2011, called “Revitalizing America.”
McClatchy reported Clinton received $1.5 million for his participation. And UBS expanded its Clinton Foundation donations from $60,000 in 2008 to $600,000 in 2014, according to The Wall Street Journal.
All the while, the three founders started laying the foundation for the merged firm. Just days before Kelly’s big moment at the U.S.-Northern Ireland economic conference, where Clinton praised him, a series of corporate filings in Delaware formally set up various corporate entities that would fall under the new, merged Teneo umbrella: Teneo Capital and Teneo Global on Oct. 11, 2010; Teneo Holdings on Oct. 12, 2010.
The founders also tapped the Clinton network for seed capital. Belinda Stronach, a Canadian businesswoman who was close with Bill Clinton and whose nonprofit donated to the Clinton Foundation, has acknowledged publicly that she had invested in Teneo Capital.
While Kelly and Keary continued operating their own separate firms, they overlapped more often as they readied to merge into one company, sources say. In early 2011, some of Kelly’s envoy staff would assist Keary’s firms with administrative issues or clients, several sources say.
And while Kelly and Band did not have ownership stakes in Keary’s firms, they appear to have played some role in the business. Band, still working for Bill Clinton, recommended multiple employees from the Clinton world that would later join the merged company — a trend that would accelerate around the launch. They included close adviser Justin Cooper, who helped write Bill Clinton’s autobiography; Thomas Shea, who also worked in the Clinton White House; and several others from Bill’s post-presidential office and the foundation.
For his part, Kelly also played a role by interviewing some potential employees. And some Teneo employees worked out of his envoy office, too, one source said. He’d later hire at least two additional State employees to join the start-up, including an assistant to Mills and a U.S. diplomat who worked in Northern Ireland.
Kelly also served as an initial point of contact for at least one account that signed with Keary’s firm in January 2011, according to someone familiar with the account: The Rockefeller Foundation. That nonprofit had a longstanding relationship with the Clinton Foundation that included millions worth of grants and donations dating back to 2005. It, too, became a Teneo client.
And that was just the start of the Clinton Foundation- or Bill Clinton-linked clients to sign around that time. AGT International CEO Mati Kochavi, for example, became another early client, sources say. He appeared onstage with Bill Clinton at a CGI panel on Haiti in September 2010, a few months before the two sat down together for a CNBC special in early 2011.
And two for-profit education firms — Laureate Education, which paid Bill Clinton $16 million to be honorary chancellor between 2010 and 2014, and GEMS Education, which also paid him about $5.5 million for consulting — also would sign with Teneo. Neither would tell POLITICO when and how they got involved, but Laureate CEO Doug Becker is a Hillary campaign donor and close pal of Band’s, former employees say.
Bill Clinton would allow Laureate to use his name and likeness to market the school around the world. And Laureate and GEMS — along with other Teneo clients Dow and Tenet Healthcare — donated between $1 million and $5 million to the Clinton Foundation over the years, according to The Washington Post’s database of donors.
In early 2011, some employees say they were trying to wrap their heads around who worked for which entity — Paul Keary Consulting, Teneo Strategy Consulting, or Declan Kelly Consulting — or which client was signed with which firm.
“There was client work” happening all throughout early 2011 said a person familiar with the start of the firm. “Now whether it was a client for Declan, Teneo or Paul consulting entities, it didn’t matter to me. It was all for the same business as far as I was concerned.”
Employees saw the writing on the wall.
“It was apparent to me at the time that Declan and Doug had been talking about launching this company for a long time and Paul would be the key third partner. They were just waiting for that [noncompete] cooling-off period to launch the company,” said someone who worked for the firm before the official launch.
In early May 2011 — just over one month before his FTI noncompete expired — Kelly resigned from his post at State to focus all his attention on the much-anticipated public launch. And the following month, just days after Kelly’s noncompete agreement expired, he, Band and Keary publicly announced Teneo, moving all their offices, employees and already impressive client roster into one location.
Staffers were told Bill Clinton would come aboard, and the company from then on would “grow like gangbusters,” as one employee described it.
Despite all her interest in Northern Ireland, Hillary Clinton never appointed another envoy to fill Kelly’s vacancy.