Clinton's Efforts on Ethanol Overlap Her Husband's Interests

Clinton's Efforts on Ethanol Overlap Her Husband's Interests

By MIKE McINTIRE
To big rounds of applause, three of the world's richest men -- Richard
Branson, Ronald W. Burkle and Vinod Khosla -- trooped onto a New York
ballroom stage with former President Bill Clinton to pledge support
for renewable energy projects to combat global warming and create
jobs.

It was September 2006, and the Clinton Global Initiative, the annual
star-studded networking event for philanthropists and investors, had
generated commitments to spend billions on ethanol and other
alternative fuels. Cast as good works, many were also investments by
businessmen hoping for a profit.

And sitting in the audience was an influential public official who had
also taken an active interest in renewable sources of fuel: Senator
Hillary Rodham Clinton.

Several months earlier, Mrs. Clinton had sponsored legislation to
provide billions in new federal incentives for ethanol, and,
especially in her home state of New York, she has worked to foster a
business climate that favors the sort of ethanol investments pursued
by her husband's friends and her political supporters.

One potential beneficiary is the Yucaipa Companies, a private equity
firm where Mr. Clinton has been a senior adviser and whose founder,
Mr. Burkle, has raised hundreds of thousands of dollars for Mrs.
Clinton's campaigns. Yucaipa has invested millions in Cilion Inc. -- a
start-up venture also backed by Mr. Branson, the British entrepreneur,
and Mr. Khosla, a Silicon Valley venture capitalist -- that is building
seven ethanol plants around the country. Two are in upstate New York.

A Cilion executive said Mrs. Clinton's office had been helpful to the
company as it pursued its New York projects. More broadly, by steering
federal money, organizing investor forums and offering the services of
her staff, she has helped turn the upstate region into an incubator
for ventures like Cilion's, while providing a useful showcase for her
energy proposals on the campaign trail.

Certainly Mrs. Clinton is doing what would be expected of a senator
trying to stimulate a sagging rural economy in her home state, not to
mention a presidential candidate mindful of the importance of ethanol
in corn-producing places like Iowa. But her actions take on an added
dimension when they intersect with Mr. Clinton's philanthropic and
profit-making endeavors, which have periodically raised questions as
Mrs. Clinton seeks the Democratic nomination for president.

Yucaipa's partnership with the rulers of Dubai and its investment in a
Chinese media company drew attention to Mr. Clinton's connection to
the fund when his wife was preparing her presidential run last year.
In December, aides to Mr. Clinton said he was taking steps to end his
relationship with Yucaipa to avoid potential conflicts of interest or
political imbroglios for his wife, should she become the Democratic
nominee.

Representatives of the Clintons declined repeated requests for comment
that included a detailed set of questions submitted to Mrs. Clinton's
campaign more than a week ago.

Because Mr. Burkle's Yucaipa funds are private, and the Clintons have
refused to release their tax returns, details of Yucaipa's investments
and Mr. Clinton's potential to profit from them are not publicly
available. Last year, after Mr. Clinton published a book on
philanthropy that extols the virtues of investing in renewable energy
and contains a reference to Cilion, a spokesman for the former
president told New York magazine that he consulted for Yucaipa on
renewable energy investments but was not involved in Cilion.

On Wednesday, a spokesman for Yucaipa declined to say how much it had
invested in Cilion, but said it amounted to less than 5 percent of the
company's equity -- small by Yucaipa standards, but enough for it to be
represented on Cilion's board. He said Mr. Clinton did not stand to
profit from Yucaipa's investment in Cilion.

Under an agreement with Mr. Burkle in 2002, Mr. Clinton was to provide
advice and find investment opportunities for several domestic and
foreign funds in Yucaipa's portfolio, and would receive a share of the
profits from those funds. On a financial disclosure report that Mrs.
Clinton filed as a presidential candidate last year, Mr. Clinton
listed several direct investments through Yucaipa, including one in a
Brazilian sugar-cane ethanol company founded by Mr. Khosla, but Cilion
was not among them.

Mrs. Clinton is far from alone in proposing increased federal
incentives for renewable energy -- her opponent, Senator Barack Obama
of Illinois, backs even greater spending on biofuels -- and not all of
her actions on ethanol would benefit the interests of Mr. Clinton and
his associates. She has voted to preserve a tariff on Brazilian
ethanol imports, which helps domestic ethanol producers but works
against investors in Brazilian facilities.

In fact, Mrs. Clinton had long opposed ethanol subsidies, but in May
2006, she switched gears and introduced a bill to create a $50 billion
"strategic energy fund" to expand the use of ethanol and other
alternative fuels. The bill, which was reintroduced last year, would
direct billions of dollars to develop cellulosic ethanol, an
experimental fuel made from organic materials other than corn.

In addition to the legislation, Mrs. Clinton has spent an increasing
amount of time in upstate New York, promoting the region as fertile
territory for renewable energy projects. In Lockport in July 2006, she
said she was working with the State University of New York College of
Environmental Science and Forestry -- which has offered technical
assistance to Cilion and other companies in the region -- to support
locally produced ethanol, rather than "just relying on corn in the
Midwest."

"Because I want New York farmers, I want farmers around the country,
to participate in this," she said. "It's going to take building
production facilities, and we're starting to do that."

Several business and academic leaders in the region said they had
crossed paths more than once with Mr. Clinton, Mrs. Clinton and Mr.
Khosla on the issue of biofuels, specifically cellulosic ethanol.

Cornelius B. Murphy Jr., president of the environmental college, said
Mrs. Clinton became very active in assisting the school's renewable
energy projects starting in late 2005, and has since been involved in
about eight events with the college. In 2006, the college also heard
from Mr. Clinton, who wanted to talk to experts there about cellulosic
ethanol and the concept of using forest products in place of corn.

"I'm amazed at how much her husband has picked up on this," Dr. Murphy
said of the former president. "He was very interested in the growth of
energy feed stocks and how that could be worked into an integrated
biorefinery."

One of the biggest champions of cellulosic ethanol is Cilion's
founder, Mr. Khosla, a co-founder of Sun Microsystems who has grown
close to Mr. Clinton in recent years through a mutual interest in
renewable energy. In November, at a renewable energy forum in Iowa
that was attended by some of the presidential candidates, Mr. Khosla
opened his PowerPoint presentation with a quote from Mr. Clinton on
the economic benefits of green investments.

Mr. Khosla provided seed money to create Cilion in June 2006, and
shortly before the Clinton Global Initiative that September, Cilion
announced it had received $160 million more, including an unspecified
amount from Yucaipa. He is also backing another company, the Mascoma
Corporation, which wants to build a plant in the Rochester area that
will convert forest products, like wood chips and switch grass, into
cellulosic ethanol.

Mr. Khosla did not respond to a request for comment.

Although Cilion uses corn, it hopes to eventually make cellulosic
ethanol once the technology becomes commercially viable, said Jerry
Wilhelm, the company's executive vice president. Mr. Wilhelm said
Cilion, which also has projects in California, Pennsylvania and
Washington State, picked New York because of its large potential
ethanol market, the availability of farmland and local support.

Mr. Wilhelm said that the New York projects were at an early stage,
but that Mrs. Clinton "definitely has been helpful," not only in
writing letters but also in her general support of renewable energy
initiatives in the region.

"We've gotten some letters of support from her that we've used in the
permitting process," he said in an interview. "We haven't asked for a
lot, but what we've asked from her, she's responded."

Late Wednesday, Yucaipa disputed that Mrs. Clinton had written any
letters on behalf of Cilion. Efforts to reach Mr. Wilhelm to clarify
the matter were unsuccessful.

Cilion's efforts to set up a base of operations in upstate New York
included joining the board of the Greater Rochester Enterprise, a
nonprofit group that promotes business opportunities in the region.
The group, which provided Cilion with office space and made
introductions to key people, has worked closely with Mrs. Clinton on
several renewable energy initiatives.

Mrs. Clinton arranged for the group to work with the U.S. Green
Buildings Council to produce a report on the economic benefits of
renewable fuels and energy conservation in the Rochester area, where
both of Cilion's ethanol projects are. The report concluded, among
other things, that there should be more incentives to use locally
generated renewable energy, and it cited a Cilion project, along with
several others, as an example of available resources.

The 17-page report, which devotes a full page to Mrs. Clinton and
mentions her eight times, "would not have happened without the
senator," said Dennis M. Mullen, president of the Greater Rochester
Enterprise.

"We have met with the senator on numerous occasions, not only on
ethanol but also other issues," Mr. Mullen said. "She has helped us
promote that in numerous ways."

Cilion, meanwhile, recently revamped its Web site and added comments
from Mrs. Clinton and other presidential candidates to illustrate the
depth of political support for ethanol. The new site quotes Mrs.
Clinton saying the country needs "an Apollo-like effort" to invest in
renewable energy, and it provides a link to her strategic energy fund
at hillaryclinton.com.

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