Guest post by Ted Malloch

Watchdog Research tracks gray swan events and critical disclosures. Such gray swan events are reliably predictable, yet infrequent disclosures that expose a company’s failures in accounting, internal controls, management integrity and which negatively impact stock prices and valuation.

This is objective financial, management and corporate governance analysis, not some political or conspiracy theory.

Here is the critical question: Was Hunter Biden, the son of Vice President Joe Biden, paid inappropriately as an Independent Director of the Ukrainian company?

Here is what Watchdog found.

“Burisma is a private company and Reuters estimates that it only brings in $400 million a year in revenue. In our analysis, we would expect an independent director like Hunter Biden to make between $55,000—$83,000 a year at Burisma. If Hunter made $83,333 a month as reported by Reuters, then he made over 12 times what a typical independent director at a private company would make.”

Hunter Biden has been all over the news and even part of this week’s impeachment hearings because he was paid to go on the board of the corrupt Ukrainian oil and gas company, Burisma. No one disagrees about its extraordinary level of corruption.

This appointment is clearly a conflict of interest issue and the US State Department already under Barrack Obama, flagged it.

But does it go further?

Is the appearance of corruption also not self-evident, given Hunter Biden’s term as director because his father was serving as Vice President and played the key role in U.S. diplomacy in Ukraine during the early part of Hunter’s tenure on the board.

Vice President Biden has publicly stated at a now infamous Council of Foreign Relations televised meeting, his quid-pro-quo tactic of withholding critically needed US financial and military support, unless Ukraine fired an investigator who was, or had been, investigating the same company, Burisma.

Vice President Biden proudly announced the Ukrainians “delivered” by firing that prosecutor and replacing him with someone who dropped the charges against Burisma. He notably said, “son of a bitch,” do it in six hours—and they did!

The New York Times, reported that Hunter Biden had joined the board of Burisma in early 2014, just shortly after his father was appointed as the lead US diplomat overseeing Ukraine.

Interesting timing or just a coincidence?

The company was then mired in a deep corruption scandal. This was during the Obama era and it was all well documented.

The younger Biden has stated that he was “focused on governance,” and other people familiar with his role have said that he would provide advice on legal issues, corporate finance, and strategy, although he did so remotely and never even visited Ukraine and has no experience in energy, the region, or the charges against the company.

What value did he add?

Why did he get paid such exorbitant fees?

It has also been widely reported that Biden the younger did not possess any relevant experience in Ukraine business affairs or in the global oil and gas industry whatsoever, and Hunter himself stated that he would “probably not” have been offered a seat on the board if his father were not the vice president.

He admitted this himself!

It is therefore logical to conclude that Hunter was only added to Burisma’s board because of his father’s position, which means: Hunter’s appointment looks like, smells like, well is, corruption.

Hunter did have some previous board experience. He served on the board of non-profits as well on Amtrak’s board for several years. His father also got him that job. The past repeats itself in cronyism.

Undoubtedly, as a lawyer, Hunter Biden would have been familiar with the SEC’s rules on proper board governance.

Given Hunter’s statement about focusing on governance at Burisma, it seems that his goal should have been to implement best practices at Burisma to help them clean up corruption.

Hunter was not the sole new Burisma board member added at the time. Oddly, his business partner, Devon Archer, a stepson of US Secretary of State, John Kerry, also joined the board with him.

Does that seem remarkable or just more pay to play, cronyism?

Here’s why Hunter’s participation on the board matters: A company’s board of directors is the last internal line of defense to ensure proper business ethics are followed at a company.

In effect, both Hunter Biden and Devon Archer were supposedly serving as watchdogs for Burisma. In fact, they were not watchdogging, they were part of a bribery scheme.

And who was watching the watchdogs?

So how does Biden’s payment compare to that of other boards?

Before one can make a comparison of Biden’s compensation to other independent directors at other companies, there are a few wrinkles that need to be addressed. The first is that it is not clear how much Hunter was actually paid in full.

The New York Times reported that he made $50,000 a month, or $600,000 annually. However, Reuters reported that Hunter and Devon Archer’s firm Seneca Bohai LLC, received payments of $83,333 monthly, which it then distributed to each Hunter and Devon Archer.

Reuters said that its source had seen records of those payments for 18 separate months. They have now been shown to the public. If those payments were made consistently throughout Biden’s 5-year tenure, then those payments would amount to $1 million annually for a total of $5 million.

So, was Biden paid $600,000 or $1 million annually?

Without more definitive evidence from Biden himself it is impossible to know.

We therefore need to hear from Hunter himself. It is also possible that both are correct, and that he had a salary of $50,000 a month, and also received an additional $83,333 a month for a least 18 months of his tenure.

The US needs to initiate an FBI directed inquiry into the facts. The Ukrainians should do exactly the same and compare notes. And the US Senate needs to call Hunter Biden and Dev Archer as witnesses should the impeachment trial continue there.

It remains an open question as to whether Biden received any stock options in Burisma. While everyone has focused on cash-compensation, it is often the gains on stock options which richly reward board membership. No one has reported (or asked) about such stock options for Hunter Biden and his pal.

How many did both receive? When and how did they vest?

Were any other payments made, as has been alleged?

How much and to which accounts?

Did they originate in illicit funds stolen by Burisma?

New accusations just filed by the newly appointed Ukrainian Prosecutor General show payments totalling some $16.5 million were actually paid and the money came from duplicitous criminal activity, including money laundering.

The oligarch who put Hunter Biden on the board is suspected of “theft of government funds on an especially large scale.” That person, Mykola Zlochevsky, is accused of embezzling $33 million from the central bank.

His whereabouts are now UNKNOW.

However, the cash payments to Hunter’s firm present another wrinkle, suggesting that Hunter’s role at the company is not clear. Those payments were made out to Hunter and Devon Archer’s firm, Seneca Bohai LLC for what are termed “consulting services.”

There has also been a story in the Wall Street Journal that indicates another firm used Hunter Biden’s name to get a meeting with the State Department and improve Burisma’s image in Washington.

Was he aware that his name was being used, was he part of that effort as well, and was he paid any kickbacks?

If this firm was indeed acting at his direction, that would certainly qualify as more than “consulting services” and would appear to be more akin to outright lobbying efforts.

It has also been reported that Hunter’s father, former Vice President Joe Biden, was paid $900,000 for his own lobbying efforts on behalf of the same firm when he was a private citizen after leaving public office.

Can he confirm that and list what he did to earn such a lucrative contract? Did he register under the FARA laws, as would have been required?

“Consulting” payments to Seneca Bohai also do not square with Hunter and Devon Archer’s roles as independent directors at Burisma.

Federal securities law prohibits any person from serving as an independent director if they “accept directly or indirectly any consulting, advisory, or other compensatory fee…” 17 CFR § 240.10A-3(b)(1)(ii).

The Ukraine is a corrupt and lawless place, RANKED THE WORST IN EUROPE BY E&Y, so maybe Hunter thought he could get away with it there.

However, that squares the circle by putting Hunter Biden in the position of both claiming he was focused on good governance as a board member while also ignoring US best practices for board members. By accepting “consulting” payments AND board compensation, Hunter Biden was breaking a cardinal rule created to promote good governance and stop corruption.

Hunter Biden himself was engaged ironically in corruption where he was supposed to be ferreting it out.

Watchdog’s review of large cap public companies showed that independent board members typically receive a cash retainer of about $100,000 a year at most, with additional fees for serving as chair or serving on specific committees.

A Harvard study published in 2017 provides additional context. That study showed directors at public companies typically receive more than half of their compensation from equity compensation, whereas at private companies, independent directors typically receive most of their compensation in cash. Public companies typically pay more than private companies, but private companies give directors more cash as seen in this table from the study:

Burisma is a private company and Reuters estimates that it only brings in $400 million a year in revenue, meaning that we would expect an independent director for Burisma to make around $50,000 a year.

If Hunter made $83,333 A MONTH as reported by Reuters, then he made over 12 times what a typical independent director at a private company would make.

Was Hunter Biden grossly overpaid?

Yes. Full Stop. Why?

If he was an independent director, then certainly he was over paid. If he received the money for so-called consulting, then it would be harder to argue that he was overpaid, but it would be easy to argue that his claims of being an independent director “focused on governance” — are a sham.

It also raises the question what he consulted on?

Apparently, nothing more than being the son of a powerful American Vice President.

The Joe and Hunter Biden story has many layers. The son is continually bailed out, gotten into college, law school or jobs, and put on boards by or through the father. However, from a corporate governance perspective it highlights the importance of transparency and oversight for good governance.

Having directors who are familiar with the rules but only pay lip service to good governance is a complete failure.

To stop corruption, directors need deep integrity.

It seems abundantly clear that Hunter Biden and his politically connected father did not bring that to Burisma.

Instead, they brought corruption and bribery, what have been dubbed “crony capitalism,” precisely what the US was trying to eradicate in a country like the Ukraine.


Theodore Roosevelt Malloch is a scholar, diplomat, and strategist who has written extensively on corporate governance and business ethics. His soon to be released book, is Trump’s World: GEODEUS.




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