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Sunday, October 28, 2001 - Page updated at 12:00 AM

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Gates Foundation wields newfound clout

Seattle Times staff reporter

The world's largest charitable foundation has tackled African sleeping sickness in Sudan and school reform in the United States, even bought paint for Seattle's Phinney Neighborhood Association building.

The past two years at the Bill & Melinda Gates Foundation have been about learning — quietly and with remarkable speed — how to use extraordinary resources to fix schools and solve some of the world's most confounding health problems.

To do that, the foundation has amassed a $24.2 billion endowment — an amount so large the foundation must give away the equivalent of $3.3 million a day just to meet federal law.

Now, as the Seattle-based philanthropy comes of age, it is embracing a new leadership role and the bully pulpit that accompanies the Gates name and money.

The most tangible evidence: a new Washington, D.C., policy office that opened this month, run by a former top economic adviser in the Clinton administration. Foundation officials insist it's not a lobbying office; indeed, laws restrict overt lobbying by charitable organizations.

But the D.C. office signals the foundation's interest in using political clout to advance its agenda.

Large foundations typically mature over time, but the Gates Foundation "is moving on Internet time," says one philanthropy watcher. "They're doing it in two years instead of 50 years."

"We kept our heads down for awhile and just did our work," said Patty Stonesifer, the foundation's co-chairwoman and president. But recently, and a little reluctantly, Stonesifer said, the foundation has realized that creating lasting, systemic change "requires you to work externally."

And yet the foundation remains a closely held, almost mysterious enterprise, a reflection of its founders' passions and personalities. The Gateses personally review every major grant of more than $1 million, meet frequently with staff members and push — impatiently at times — for results.

"Godzilla of giving"

From the outset, it was clear the Gates Foundation would operate on a unique scale — the "Godzilla of giving," said one observer.

In August 1999, the Gateses merged two smaller foundations into one behemoth, moved into the foundation's new Eastlake headquarters and began formalizing their charitable work, which until 1995 was run out of the basement of the Seattle home of Bill Gates' father, Bill Gates Sr.

In little more than two years, the foundation has awarded nearly $4.3 billion in grants. It receives 2,000 grant applications and letters a month, everything from enterprising proposals about children's vaccines to "my cat is having trouble adjusting to my new dog," said spokesman Joe Cerrell.

Its staff has grown from 133 to 221, still tiny compared to most large foundations. About half the Gates Foundation workers are trainers and technical staff involved with wiring libraries for Internet access.

By law the foundation must give away 5 percent of its assets annually — that's $1.2 billion a year of the $24.2 billion total endowment. The endowment is managed so conservatively it is largely insulated from the economy's ups and down, foundation officials say. While some foundation leaders make six-figure salaries, Stonesifer draws no salary and Bill Gates Sr., foundation co-chairman, was paid $66,000 in 1999.

It has virtually no bureaucracy, not even a board of directors.

It is run by three family members (the Gateses and Bill Gates' father) and Stonesifer, a former Microsoft executive and longtime friend of Bill Gates.

That insular structure has attracted criticism. Pablo Eisenberg, a senior fellow at the Georgetown University Public Policy Institute, argues the Gateses need a board of directors to bring wider perspectives to their giving.

"Is that good for a democracy, that so much money — quasi-public money — is being distributed and directed by, basically, four family members?" he asked.

Late-night e-mails

Bill and Melinda Gates meet several times a year with staff members to consider new research, talk about progress and evaluate priorities. They study spreadsheets and drill potential grant recipients with questions.

That's in addition to their frequent e-mails. Stonesifer jokes that she knows it's Sunday because her e-mail in-box fills up with messages from Bill Gates.

Staff members say Melinda and Bill Gates approach their work differently. Bill Gates is analytical, even mathematical, looking for the exact combination of funding and scientific advances needed to make headway.

He reads voraciously, asks questions and is "a little impatient" for results, said Gordon Perkin, the foundation's executive director for global health. Gates takes home thick medical texts, then peppers Perkin with questions such as: Why isn't anyone working on a transmission-blocking vaccine for malaria? (They are, as it turns out. It's one of several vaccine candidates in the research pipeline, funded partly by the foundation.)

Melinda Gates tends to focus on consensus-building and using the foundation's work to sway opinion. She has stepped up her role in recent months. At a May event in Washington, D.C., she spoke on global health, marking one of the first times she has spoken on behalf of the foundation outside Washington state.

The foundation's evolution

A few years ago, Gates was attacked for not giving away more of his wealth. Then, as he poured billions of dollars into the foundation, critics charged he was using charity as a shield to deflect attention from Microsoft's antitrust woes.

The foundation's grants regularly make headlines and set records — its $1 billion college-scholarship program is among the top philanthropic gifts ever made.

And they occasionally generate controversy: A minority scholarship program caused grumbling among opponents of affirmative action; contributions to family-planning efforts have drawn protests from anti-abortion groups.

Bill Gates' passion on global health has driven much of the foundation's work; more than half of its grants are made in that area. While his early philanthropy focused on access to technology, more recently Gates has said that was naïve and called instead for worldwide attention to basic health care for the poorest nations.

The foundation earmarked $1.44 billion for world health issues last year, almost $300 million more than the U.S. government did, according to an analysis by The Boston Globe newspaper.

Its emphasis on "low-visibility, high-impact" diseases has created new political cachet and research vitality around medical issues such as sub-Saharan Africa's painful Guinea-worm disease. About 135 countries now provide hepatitis B vaccines, and 45 more plan to introduce it within four years, saving an estimated 550,000 lives a year.

The number of countries providing the vaccine is up markedly from two years ago, a change Perkin credits to Gates-funded initiatives.

Gates grants have helped speed development of new malaria and tuberculosis vaccines. And the foundation's leadership in the development of a vaccine for HIV/AIDS has drawn other government and private funders to that cause. The foundation has spent more than $347 million to combat HIV-AIDS in the past three years.

A subtle course correction

In the early days, foundation officials were reluctant to talk about their giving. Some observers saw the foundation as a philanthropic Lone Ranger, targeting areas neglected by others and forging ahead on its own.

Foundation leaders confess they may have been naïve about the impact they could have on public policy.

"If you'd told me three years ago I'd be meeting with the president of Kenya, I'd have asked 'Why? What would I ask him?' " Stonesifer said. "Now I know exactly what to ask: 'What is your plan for vaccinations?' "

What's happening now is a subtle course correction, not an about-face.

The foundation recently added three key staff members with extensive government experience; focused its giving more sharply; clarified policy positions; and aggressively sought partnerships with other funders.

The staff includes Helene Gayle, who for six years headed the Centers for Disease Control's primary center dealing with HIV/AIDS, tuberculosis and sexually transmitted diseases; Sylvia Mathews, deputy director of the White House Office of Management and Budget in the Clinton administration; and David Lane, chief of staff to former U.S. Commerce Secretary William Daley and former executive director of the National Economic Council. Lane runs the new D.C. office.

The library initiative, the Gateses' first major philanthropic effort, will have wired computers to the Internet and trained staff in 12,400 of the 19,300 libraries in the U.S. and Canada by the time it winds down next year.

Next step: to bring technology to places where libraries don't exist, including American-Indian reservations and developing countries.

And in the next year, the foundation will begin wrapping up teacher- and principal-training programs and zero in on high-school reform by pushing for creation of small high schools.

Tom Vander Ark, the foundation's executive director for education, is preparing a policy statement outlining the foundation's educational beliefs and trying to get other foundations to sign on. Earlier this month, the foundation announced a $60 million grant program with Carnegie Corp. of New York to redesign high schools.

Increasingly, the foundation uses its giving to make a statement it hopes will draw others to its causes.

Last year, the foundation made a $25 million grant to a research consortium to accelerate testing of microbicide products to protect women against AIDS and other sexually transmitted diseases. That grant was in direct response to a study that cast doubt on whether such products were able to block transmission of HIV.

Foundation officials think that research still shows promise. "We decided to increase funding to send a signal ... we were not backing down," Stonesifer said. She sent Gates an e-mail, "and overnight we had the 'go, let's do it.' "

Local giving

The foundation's Pacific Northwest giving has been more quirky, funding such projects as a foster-parent appreciation picnic ($2,500) and the construction of a covered, handicapped-accessible play area at a Longview elementary school ($5,000).

Those local grants are "the face of Bill and Melinda in the Northwest," said Jaime Garcia, a former United Way of King County executive hired to head up regional giving.

Now, it's likely local giving will become more focused around the foundation's $40 million Sound Families program to help create transitional housing. It is believed to be the largest single gift ever by a private foundation to address homelessness.

That program is a good illustration of the foundation's leveraging strategy: Give enough money to make an impact, but don't try to solve the problem alone.

A lot more visibility

The Gates Foundation has grown more comfortable in the spotlight, even knowing its every move will be scrutinized.

"A lot of foundations like to operate below the radar screen, but they don't hide," said Dorothy Ridings, president and CEO of the Council on Foundations, an association of grant-making foundations and corporations.

Stepping out as an agenda-setter could carry some risks, said Tom Riley of Philanthropy Roundtable, a national association of charitable donors. "When you think big — 'let's open a D.C. office' — you can get your head in the clouds," he said.

But a leadership role seems inevitable with a foundation increasingly willing to use its clout.

"You've got donors in the prime of their business lives, in the prime of their personal development," Riley said. "They keep doing new stuff, adding another billion here, $4 billion there. They're evolving right in front of your eyes."

With its bold agenda, large endowment and growing sophistication, the Gates Foundation may be America's most-watched foundation, Riley said.

Ultimately, that may matter more than how much it spends. Because where the Gates Foundation goes, others certainly will follow.

Jolayne Houtz can be reached at 206-464-3122 or jhoutz@seattletimes.com.

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