Clinton faces questions on her husband's charity

WASHINGTON (Reuters) - Former U.S. President Bill Clinton's charity should stop taking foreign donations to avoid any conflict of interest with his wife Sen. Hillary Clinton's work as secretary of state, a top Republican said on Tuesday.

Clinton was expected to be confirmed easily as the top U.S. diplomat but Republican and Democratic lawmakers raised the issue of her husband's charitable fund-raising as she testified before the Senate Foreign Relations Committee.

Sen. Richard Lugar of Indiana, the panel's top Republican and a centrist voice on U.S. foreign policy, said an agreement between President-elect Barack Obama's team and the William J. Clinton Foundation did not go far enough to prevent potential conflicts of interest.

"The core of the problem is that foreign governments and entities may perceive the Clinton Foundation as a means to gain favour with the secretary of state," Lugar said.

"The only certain way to eliminate this risk going forward is for the Clinton Foundation to forswear new foreign contributions when Senator Clinton becomes secretary of state," he said.

Clinton, who was accompanied by her daughter, Chelsea, but not her husband, listened to Lugar but did not address the matter in her opening statement, nor did she face specific questions about the matter from her fellow senators.

She broke little new ground on how Obama may approach the issues of restraining the nuclear programs of North Korea and Iran, promote Arab-Israeli peace or manage an expected drawdown of U.S. forces in Iraq and a planned build up in Afghanistan.

While saying she and Obama supported the six-party process to end North Korea's nuclear programs, Clinton hinted at a willingness to examine alternatives to the talks among the two Koreas, China, Japan Russia and the United States.

NO "SURPRISE"

On most issues, however, she evaded giving precise answers, declining to say how an Obama administration may engage Iran whether it may open a low-level diplomatic presence in Tehran.

"We are looking at a range of options ... we don't want anything I say today to take our friends and allies by surprise," Clinton said at one point. "We cannot tell you with any specificity what steps we intend to take."

Iran denies that it is seeking nuclear weapons, saying its atomic program is to generate power. Obama's aides, however, regard containing Iran's nuclear programs as one of their top challenges as he prepares to take office on January 20.

The hearing's flash of news was Lugar's misgivings about a deal worked out between former President Clinton and the Obama team on how to handle donations to his foundation, which combats HIV/AIDS, global warming and poverty.

Under the deal, the foundation has disclosed past donors, which include the governments of Saudi Arabia and Norway, and has agreed to submit future donations to a State Department ethics review and disclose donations annually, Lugar said.

"This agreement is a beginning, not an end," Lugar said.

While making clear his preference was for the foundation to stop accepting foreign donations, Lugar also offered the New York senator a compromise by proposing the following steps:

-- The foundation disclose donations of $50,000 (34,300 pounds) or more immediately rather than annually.

-- Foreign pledges of more than $50,000 be disclosed when they are made and when the money is actually received.

-- Gifts of $50,000 or more from any foreign source be submitted to a State Department ethics review; under the current agreement, only donations from foreign governments or entities they control must go undergo this scrutiny.

OUTSTANDING QUESTIONS

The Democratic chair of the committee, Sen. John Kerry of Massachusetts, acknowledged there were outstanding questions over her husband's fund-raising but said the New York senator would help restore the United States image abroad.

"Her presence overseas will send a strong signal immediately that America is back," Kerry said in his opening statement. "She will take office on a first-name basis with numerous heads of state."

In her first comments on foreign policy since her surprise nomination, Clinton said the United States must address Israel's security needs as well as the political and economic aspirations of the Palestinians.

She he did not speak in detail about the Israeli offensive in the Gaza Strip that began December 27 and that has killed 952 Palestinians according to Gaza's Hamas-run Health Ministry, including some 400 women and children.

Israel says 10 Israeli soldiers and three civilians hit by Hama rockets have died.

About a half-dozen protesters sat quietly through the hearing holding signs pleading for a cease-fire in Gaza. But as the hearing adjourned for lunch, they shouted: "What about the people of Gaza?" and "Stand up, Hillary, we need your voice for the people of Gaza."

Clinton left without acknowledging the protesters, who quietly filed out for lunch with the rest of the audience.

Obama surprised many by tapping his former rival for the Democratic nomination to become his secretary of state, selecting a political heavyweight who won more than 18 million votes in the Democratic primaries before leaving the race.

(Additional reporting by Sue Pleming; writing by Arshad Mohammed and Sue Pleming; Editing by David Wiessler)