By Mark Hemingway, RealClearInvestigations

November 19, 2019

Hunter Biden’s work at Ukrainian energy firm Burisma Holdings included a little-noted conflict of interest that wouldn’t pass muster in the United States, an American investor watchdog group says: He served for pay on the company’s putatively independent governing board despite having also been paid as a consultant to company management.

The group’s study of Burisma also found that the pay of former Vice President Joe Biden’s son was more than 12 times comparable board pay at similarly sized companies.

The conclusions are from Watchdog Research, a firm that describes its work as “CarFax reports for businesses.” It scrutinizes publicly available records to warn investors of potential trouble at companies.

Vice President Joe Biden, left, and son Hunter arrive in Beijing, 2013.

The authors, Watchdog Research principles Brian Lawe and John Cheffers, say it would be illegal in the U.S. to have an arrangement such as Hunter Biden’s – being a corporate governance monitor while also a paid consultant to company management. Federal securities law forbids anyone from serving as an independent board member if they “accept directly or indirectly any consulting, advisory, or other compensatory fee.”

“Obviously, U.S. law does not apply to a private foreign entity because that company is not subject to federal securities law,” Lawe and Cheffers write. But, they say, “by accepting ‘consulting’ payments AND board compensation, Hunter Biden was potentially breaking a cardinal rule created to promote good governance and stop corruption.”

Neither Burisma nor Biden’s attorney, George Mesires, responded to requests for comment. But in a statement last month, Mesires described his client’s work as actually improving Burisma’s corporate governance. “Hunter focused his work on the principles of corporate transparency, governance and responsibility, which was based on his prior experience as a lawyer and director on other boards,” he said.

Mesires said that when the vice president’s son was asked to join the board of Burisma, he was already “advising Burisma on its corporate reform initiatives” in his capacity at the politically influential law firm Boies Schiller Flexner. According to Mesires, “Hunter joined the board as a non-executive director, meaning he was an independent board member and not a member of the management team.”

Hunter Biden was appointed to the board of the politically connected Ukrainian company a month after his father was named the Obama administration’s “point person” on Ukraine in March 2014. According to Mesires, he stayed on with Boies Schiller Flexner until the end of 2017, almost three years after he joined Burisma’s board.

When asked by the New York Times, the law firm declined to elaborate on the specific nature of the work Biden did for Burisma, though the Times did note “previously unreported financial data from the Ukrainian prosecutor general’s office show the company paid $283,000 to Boies Schiller for legal services in 2014.”

According to Reuters, Hunter Biden “regularly attended” Burisma’s twice-yearly board meetings, which took place outside of Ukraine.

And though he had no experience in the oil and gas industry or serving on the boards of for-profit companies, appears to have received unusually high compensation for this service.

According to Reuters, “records show 18 months in which two payments of $83,333 per month were paid to [Hunter Biden’s company] Rosemont Seneca Bohai for ‘consulting services.’” Evidently one of the $83,333 payments was for Hunter Biden’s board service while the other was for his business partner and co-Burisma board member Devon Archer.

Home near Kyiv, Ukraine, of Mykola Zlochevsky, owner of the gas company Burisma, which hired Hunter Biden in 2014.

The payments, which would have amounted to roughly $1 million annually each for Hunter Biden and Archer, are much higher than board members for comparable companies are paid. In their report, Cheffers and Lawe point to a 2017 Harvard study on board compensation. According to that study, a private company with annual revenue of less than $500 million paid board members between $55,230 and $82,986 a year. Reuters reports that Burisma had revenue of $400 million last year. Burisma may have paid Biden more every month than board members at similar-sized companies would be expected to receive each year.

“If he received the money for consulting, then it would be hard 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,” observes the Lawe-Cheffers report.

“The New York Stock Exchange has guidance on what qualifies a director as independent,” Cheffers told RealClearInvestigations in an interview. “The director can have no ‘material’ relationship with the company prior to serving on the board because that would compromise their duty of loyalty to the corporate entity and the shareholders. Independent directors are independent from management because management has an inherent conflict of interest to use their control over the company to benefit themselves over the shareholders or the corporate entity.”

Other evidence suggests that Hunter Biden’s value to Burisma was his political connections. He told ABC News he would "probably not" have been offered the seat on Burisma’s board if his father had not been vice president. On Nov. 5, The Wall Street Journal reported that a consulting from hired by Burisma “used Hunter Biden’s name in a request for a State Department meeting and then mentioned him again during the meeting as part of an effort to improve Burisma’s image in Washington.” The meeting took place in 2016, when his father was still vice president.