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SCOTT SIMON, host:

The Bill and Melinda Gates Foundation is the largest charity in the world by far. And being big means that it gives away a lot of money. Incidentally, the Gates Foundation has given past and current grants to NPR that total a little over $3 million. But being so huge also means that the Gates Foundation has a lot of money to invest.

This week, the Los Angeles Times looked into how the foundation invests some of the billions of dollars that are in its portfolio, and it found a number of instances, perhaps 41 percent of that portfolio, in which the foundation has invested on companies that have policies that actively undermine the social welfare goals of the foundation.

No one with the Gates Foundation agreed to speak with the Times or with us to explain their investment policies. On Wednesday, the foundation said on its Web site that it would review all of their investments to see if they meet the foundation's principles. On Thursday, it replaced that notice with another, which seemed to move away from any promised change.

Charles Piller was the lead reporter on the series for the Los Angeles Times and we asked him to give us some example of places where investments conflicted with the foundation's goals.

Mr. CHARLES PILLER (Los Angeles Times): One, I think, important example has to do with the heroic efforts of the foundation to improve the conditions of people in developing nations related to important diseases, including polio, measles and AIDS. Unfortunately, what we found was that in certain cases the health of the people in the areas that the Gates Foundation is giving money to was being harmed dramatically by their investments. We found a baby in a small town in Nigeria - Ebocha, Nigeria - that town, the name means city of lights, and the lights come from 300-foot tall gas flares at a nearby oil plant operated by a multinational corporation. And this series of flares spews out horrific pollution that is the scourge of that area and in fact has greatly affected the health of the local population, including this young boy. Justice Etta(ph) is his name.

Ironically, at the same time, Justice has been the beneficiary of the Gates Foundation program to support the vaccination efforts for polio and measles in that area. The reason it's ironic is that Gates is also a huge investor in ENI, which is the Italian oil company that owns that plant, and in five other very large multinational oil companies that operate plants in Nigeria with similar flares and cause really devastating environmental problems and health problems in that area.

SIMON: Mm-hmm. So on the one hand, the moneymaking side of the company is investing in the company that promotes pollution. And on the other side, the foundation is investing in programs that try and alleviate the practical affects of pollution.

Mr. PILLER: Indeed. It's really a classic follow-the-money problem. The way charitable foundations are set up, they are required by tax laws to give away approximately five percent of their funds, annually. The other 95 percent they invest in order to replenish their endowment. And what we found is that Gates Foundation investments tended to be in companies that not just had bad records, but that were among the very worst companies rated by independent agencies.

SIMON: What's another one of the outstanding examples you have?

Mr. PILLER: Well, one of the industries that the Gates Foundation invests heavily in, about $1.5-plus billion, is the pharmaceutical industry, including most of the companies that are most important in the development of AIDS drugs. Now, this is also the Gates Foundation's most important charitable area. Why have they not pressured the pharmaceutical companies to be more generous, to understand the problem of access a little bit more clearly, and to help this extremely profitable industry share some of that wealth they've made from their sales and developing nations, with a health crisis going on in the developing world?

SIMON: Until this week, perhaps, the Gates Foundation - by far the largest in the world - was most prominent among those foundations that engage in what's called blind eye investing. And they simply believe that the moneymaking wing of a foundation is supposed to keep up the endowment, should have nothing to do with the philanthropic arm, and there's no coordination. And that's been considered by many foundations to be the best way to keep down overhead, and certainly the way they do business.

Mr. PILLER: That's indeed true. So it would be a very bad mistake to believe that the Gates Foundation was exceptional in this way. On the other hand, increasingly, other foundations - including extremely large ones such as the Ford Foundation - have been examining whether they can be more beneficial to their constituencies. For example, there are dozens of proxy resolutions mounted every year by shareholders in large companies to influence the behavior of those companies on such issues as AIDS, on other issues related to the environment and global warming.

And so as a starter, the Gates Foundation could commit to support by voting its billions of dollars in equities in the direction of projects and resolutions that are supportive of their own charitable goals.

SIMON: Charles Piller of the Los Angeles Times, the latest posting on the Gates Foundation Web site says that it, quote, does not anticipate any change in its investment policy, but that as in the past it will not invest, quote, if a company's profit model is centrally tied to corporate activity that we find egregious.

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