ACORN’S Enron-Style Accounting: Playing Musical Chairs with Big Money

by Matthew Vadum

The activities of the radical, corrupt to the core, left-wing Association of Community Organizations for Reform Now, which has tangled itself up in an infinitely complex web of deceit, thuggery, and questionable financial dealings, are long overdue for a RICO probe.

Recent well-publicized events that I need not recount here show ACORN’s criminal propensities. In a moment I’ll explain how ACORN’s financial affairs ought to raise a red flag for investigators at the U.S. Department of Justice, but first some background.

ACORN_ENRON

The Racketeer Influenced and Corrupt Organizations (RICO) Act, which was created to prosecute organized crime, allows the federal government to go after individuals who commit any two RICO-related crimes over a decade. The law allows courts to convict persons if it can be shown that they committed those crimes as part of an illegal enterprise and can order disgorgement of their ill-gotten gains from the enterprise.

RICO is the right tool for the job.

Perhaps it’s the only tool for the job because the ACORN network is deliberately structured to deter scrutiny. Its nebulous legal status and opaque corporate structure allow it to keep its activities largely hidden from public view.

The social justice entrepreneurs of ACORN sit on the boards of ACORN and of ACORN affiliates. Many, many, many of them.

These “interlocking directorates” create an appearance of conflict of interest. Such arrangements may be widespread and lawful, but they always raise legitimate questions about the quality and independence of board decision-making. The ACORN network claims to be a “family” of organizations embodying the ethos of community organizing, which stresses local action and decentralized authority.

In fact, ACORN is tightly controlled from the top. One blogger discovered last year that 294 ACORN affiliates operate out of ACORN’s building on Elysian Fields Avenue in New Orleans.

ACORN’s many affiliates have extraordinarily sophisticated financial arrangements that are largely hidden from public view. ACORN uses its system of interlocking boards of directors to oversee its affiliates and make financial mischief.

As Jim Terry of the Consumers Rights League has noted, “ACORN has a long and sordid history of employing convoluted Enron-style accounting to illegally use taxpayer funds for their own political gain.”

Look at a person named Donna Pharr. Pharr sits on the boards of at least 22 ACORN affiliates. She’s also deputy treasurer of the Minnesota ACORN Political Action Committee and is listed by Michigan as the contact person for Communities Voting Together, a “527″ pressure group.

And even now after it was revealed last year that ACORN founder Wade Rathke covered up his brother’s nearly $1 million embezzlement, Rathke remains chief organizer of ACORN affiliate SEIU Local 100, president of ACORN International Inc. (since renamed Community Organizations International), and president and a director of Affiliated Media/Foundation Movement (AM/FM) Inc., which is an ACORN affiliate that produces news segments for eight alternative radio stations.

There are plenty of other examples of directors and officers playing musical chairs throughout the ACORN empire. (See Foundation Watch, November 2008.)

Commenting on ACORN’s complex administrative arrangements, Charlotte Allen observes in the Weekly Standard, “The potential for abuse in an interlocking arrangement governed top-down from New Orleans is as obvious as a thicket of ‘Change’ signs at an Obama rally.”

ACORN takes recycling seriously, at least when it comes to money.

My research determined that ACORN affiliate Project Vote (its proper legal name is Voting for America Inc.) has funneled $16,487,690 to ACORN and other ACORN affiliates since 2000.

The $16 million-plus figure consists of $12,712,121 in direct payments to ACORN, $1,912,647 in payments to Citizens Services Inc. (CSI), and $1,862,922 in payments to Citizens Consulting Inc. (CCI).

CSI is the ACORN affiliate that the Obama campaign paid $832,598 to during last year’s primary season. The Obama campaign falsely declared in campaign finance filings that the expenditures were for “staging, sound, lighting” but corrected the record after my friend the late blogger Nancy Armstrong uncovered the truth. (Armstrong of Garden Plain, Kansas, an ardent researcher of all things ACORN, died at age 49 of a massive heart attack in late July. She ran the MsPlacedDemocrat blog so named because she became disillusioned with the Democratic Party and left it last year to become an Independent.)

CCI is the shadowy ACORN affiliate that has been called the ACORN network’s financial nerve center. CCI controls the flow of money throughout the ACORN network.

CCI is where ACORN founder Wade Rathke’s brother Dale worked. Dale Rathke embezzled almost $1 million from ACORN, and apart from having to pay the money back, got away scot-free. Big brother Wade orchestrated an eight-year coverup of the embezzlement with senior ACORN management. When the coverup fell apart last year, Wade Rathke was expelled from ACORN and until very recently law enforcement hadn’t lifted a finger to investigate.

As former ACORN official Charles Turner has said, CCI “is where the shell game begins.” CCI employees are no doubt helping to give a major shot in the arm to the document-shredding industry right now.

According to the most recent publicly available IRS Form 990 (tax return) for Project Vote, in 2007 the voter registration and get-out-the-vote outfit alone paid $1,907,592 to ACORN, $705,705 to Citizens Services Inc., and $395,260 to Citizens Consulting Inc.

Since 2000 ACORN affiliate the American Institute for Social Justice Inc. (training and publishing) paid ACORN $1,926,831, CCI $362,464, and ACORN Associates Inc. $258,593.

On its 2002 tax form, the Institute disclosed a $1,684,184 “community reinvestment” grant to ACORN, along with a $9,637 loan to SEIU Local 100. (On the same document, the Institute also reported receiving a $50,000 interest-free loan from the Tides Foundation for “purchase of equipment,” and a $4,000 interest-free loan from the George Soros-funded Open Society Institute’s Progressive America Fund Inc.) In an LM-2 (labor union disclosure) form in 2007, SEIU Local 880 revealed that it gave $60,118 to ACORN for “membership services.”

On its 2006 tax form, the American Institute for Social Justice Inc. disclosed that it provided a $4,952,288 “community reinvestment” grant to ACORN, the non-tax-exempt Arkansas nonprofit corporation that controls the ACORN network.

Why is all this money flying around the ACORN network? What could the group possibly being doing with it all? What other network of tax-exempt nonprofit entities does business this way?

ACORN may have reasonable explanations for some or all of these suspicious transactions but it has yet to offer them. In light of recent developments, these are questions it should be forced to answer.

ACORN lawyer Elizabeth Kingsley raised the alarm about interlocking directorates and the perilously close ties between ACORN and Project Vote. As the New York Times reported last fall, Kingsley found:

[T]he tight relationship between Project Vote and Acorn made it impossible to document that Project Vote’s money had been used in a strictly nonpartisan manner. Until the embezzlement scandal broke last summer, Project Vote’s board was made up entirely of Acorn staff members and Acorn members.

Ms. Kingsley’s report raised concerns not only about a lack of documentation to demonstrate that no charitable money was used for political activities but also about which organization controlled strategic decisions.

She wrote that the same people appeared to be deciding which regions to focus on for increased voter engagement for Acorn and Project Vote. Zach Pollett, for instance, was Project Vote’s executive director and Acorn’s political director, until July, when he relinquished the former title. Mr. Pollett continues to work as a consultant for Project Vote through another Acorn affiliate.

“As a result, we may not be able to prove that 501(c)3 resources are not being directed to specific regions based on impermissible partisan considerations,” Ms. Kingsley said, referring to the section of the tax code concerning rules for charities.

She also found problems with governance of Acorn affiliates. “Board meetings are not held, or if they are, minutes are not kept, or if minutes are kept, they never make it into the files,” she wrote.

Project Vote, for example, had only one independent director since it received a federal tax exemption in 1994, and he was on the board for less than two years, its tax forms show. Since then, the board has consisted of Acorn staff members and two Acorn members who pay monthly dues.

The newspaper also interviewed George Hampton and Cleo Mata, two former Project Vote board members. Both denied serving on the board and Hampton, who acknowledged he had been an ACORN member, said he had never heard of Project Vote.

Ironically, Rathke condemned interlocking directorates in the corporate world. In 1980, he endorsed the proposed “Corporate Democracy Act” which would have fined directors up to $10,000 per day for “serving more than two corporations” simultaneously. (Heritage Foundation backgrounder, March 11, 1980)

Go figure.

(This article is an updated version of an article originally published by the American Spectator.)


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Posted Sep 25th 2009 at 7:10 am in ACORN, Big Labor, Obama | 31 Comments