Months before GOP  investigators on the House Oversight and Government Committee revealed that ACORN appears to be lobbying illegally in Delaware, a former ACORN employee alleged ACORN violated federal lobbying laws.

The ex-ACORN employee, Ron Sykes, said that Citizens Consulting Inc. (CCI), the shadowy financial nerve center of the ACORN network, filed false lobbying disclosure reports with Congress.

This is important because, as former ACORN national board member Charles Turner said earlier this year on “The Glenn Beck Program,” CCI “is where the shell game begins.”

“ACORN has over 200 different entities that the money gets moved around to – for this purpose to that purpose, this organization to that organization,” said Turner. “We believe the way the money has been moved around, they’ve been laundering money.”

CCI handles the financial affairs of hundreds of affiliates within the ACORN network. ACORN member dues, government money, and foundation grants, are all sucked into the CCI vortex often never to be seen again.

Although CCI is registered as a nonprofit corporation in Louisiana, it does not appear to have sought tax-exempt status from the IRS. Surely it declined to seek tax-exempt status because entities with that status have to publicly disclose financial data. This is the same approach employed by George Soros’s Democracy Alliance, a piggybank for left-wing political infrastructure that is registered as a taxable nonprofit in order to prevent public scrutiny of its finances and internal affairs.

Sykes said he was angry that ACORN affiliate CCI registered him as a lobbyist. “It’s like identity theft,” he said in an interview. “I have no idea why they registered me. I didn’t register myself and was not aware that they were doing it.”

Federal lawmakers have known for years about ACORN’s unorthodox and possibly illegal practices, including its use of government resources to promote legislation and its extensive commingling of funds within its network of affiliates. Former ACORN officials say these activities are controlled by the mysterious CCI, which was located in ACORN headquarters on Elysian Fields Avenue in New Orleans until ACORN shut down that office. Incidentally, the building, a former funeral home, is up for sale. ACORN can’t sell it because the value of the tax liens pending against it exceeds its market value.

Sykes said he came to the nation’s capital in 2006 as an intern for ACORN’s national legislative program, working for it from April 2006 to February 2007. He said he was never a lobbyist although he did help to prepare lobbyists to meet with lawmakers and their staff on issues of interest to ACORN such as voting rights, housing programs, minimum wage laws, and predatory lending. Occasionally he went along on Capitol Hill visits, but arguing for or against specific legislation was not his job, he said.

According to forms filed under the federal Lobbying Disclosure Act by CCI, Sykes lobbied as an employee of CCI on behalf of ACORN between Jan. 1, 2006 and June 30, 2007. He is described in three disclosure forms as a “fellow.”

Sykes said he received a scholarship from ACORN to help him cover living expenses but that it was abruptly cut off months ahead of schedule in February 2007. During his internship he became curious about ACORN’s financial affairs and began to ask a lot of questions about where the money was going. “I guess they got a little irritated and the scholarship money from the ACORN executive board was cut off,” Sykes said.

He found out that his internship was coming to a premature end when he received an email and a telephone call from the legendarily smooth Wade Rathke, who was then chief organizer (CEO) of ACORN. Rathke offered him thanks and told him that he did a great job. “I asked him if there were any positions open and said I’d like to stay but he said there was no funding at this time for a salary for me,” Sykes said.

A former senior ACORN official, Marcel Reid, who was a member of ACORN’s national board from October 2005 to late 2008, said she and other members were unaware that CCI even did lobbying.

Legal reform advocate and lawyer Zena Crenshaw said CCI’s behavior raises several red flags.

“They certainly should be segregating 501(c)(3) funds from their lobbying activities,” said Crenshaw, a founding director and executive director of the National Judicial Conduct and Disability Law Project Inc. (NJCDLP). “I’m not sure how you can segregate them if the lobbyist is handling the money. I don’t know how CCI can be both a lobbyist and a financial manager handling ACORN’s 501(c)(3) funds.”

“This just confirms the need for an examination of the organization’s affiliates,” said Crenshaw, who is also chairperson of the legal affairs committee of ACORN 8, a group of former ACORN members co-founded by Reid that is calling for a forensic audit of ACORN.

ACORN conducted its own sham investigation headed up by former Massachusetts Attorney Scott Harshbarger, a longtime ACORN ally. Harshbarger’s whitewash was unveiled last week in a tightly controlled conference call.

ACORN had been warned by its own lawyer Elizabeth Kingsley of Harmon, Curran, Spielberg & Eisenberg last year that its lack of internal firewalls and its chaotic organizational structure were likely to land it in hot water. Kingsley’s letter to her client was excerpted in a report by Republican investigators on the House Oversight and Government Reform Committee. (The memo was also published at BigGovernment.)

The congressional investigators found that CCI should have paid an excise tax on any lobbying expenditures it made, but noted that evidence indicates the spending was never reported to the IRS.

The investigators also found that by “intentionally blurring the legal distinctions between 361 tax-exempt and non-exempt entities, ACORN diverts taxpayer and tax-exempt monies into partisan political activities.” They argued that ACORN should be stripped of its jealously guarded tax-exempt status because it illegally spends taxpayer dollars on partisan activities, commits “systemic fraud,” and violates racketeering and election laws.

ACORN uses interlocking directorates, which refers to individuals serving as directors on multiple corporate boards, in order to subject its network of affiliates to centralized control from the top. Having interlocking directorates may be widespread and lawful, but the practice raises questions about the quality and independence of board decision-making.

While the ACORN network claims to be a “family” of organizations, embodying the ethos of community organizing, which stresses local action and decentralized authority, it is run by senior officials who treat its national board as a rubber stamp.

It’s worth noting that all three lobbying disclosure forms that reference Sykes were signed digitally by Donna L. Pharr, who is listed as CCI’s assistant treasurer. The services of the ubiquitous Pharr, herself a walking, talking example of interlocking directorates, are in demand all throughout the ACORN empire. She’s on the board of dozens of ACORN affiliates including ACORN Housing Corp. and the American Institute for Social Justice Inc. Pharr is also deputy treasurer of Minnesota ACORN Political Action Committee and is listed in a Michigan Bureau of Elections filing as the contact person for Communities Voting Together, a 527 pressure group.

CCI itself has a long and checkered past. In 1996 the federal Department of Labor sued CCI. The next year a federal court ordered CCI to cough up $10,000 in back wages.

CCI also played a prominent role in Wade Rathke’s eight-year long coverup of his brother Dale’s $948,000 embezzlement from ACORN. Wade was dumped as chief organizer of the group he founded after ACORN’s national board learned that he failed to notify police when he discovered in 2000 that Dale had stolen the money.

Wade Rathke allowed his brother to leave the payroll of CCI to work as his $38,000 a year “assistant” at ACORN headquarters. The missing money was disguised as a loan to an officer on the books of CCI.

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.

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.)

This revelation is important because, as former ACORN national board member Charles Turner said earlier this year on “The Glenn Beck Program,” CCI “is where the shell game begins.”

“ACORN has over 200 different entities that the money gets moved around to – for this purpose to that purpose, this organization to that organization,” said Turner. “We believe the way the money has been moved around, they’ve been laundering money.”

ACORN founder Wade Rathke (left) and ACORN enabler Drummond Pike (right) of Tides Foundation in an undated photo taken in Peru. On the wall is a large poster of Communist icons Che Guevara and Fidel Castro.

When former ACORN activist Ron Sykes was informed by this reporter that ACORN affiliate CCI registered him as a lobbyist, he was angry. “It’s like identity theft,” said Sykes in an interview. “I have no idea why they registered me. I didn’t register myself and was not aware that they were doing it.”

Whether this reflects ACORN’s institutional carelessness or a calculated effort to deceive, the discovery throws some light on how ACORN treats its employees, moves money around the ACORN network, and deals with the federal government. Federal lawmakers have known for years about ACORN’s unorthodox and possibly illegal practices, including its use of government resources to promote legislation and its extensive commingling of funds within its network of affiliates.

Former ACORN officials say these activities are controlled by the mysterious CCI, which is located in ACORN’s headquarters in New Orleans. CCI handles the financial affairs of hundreds of affiliates within the ACORN network. ACORN member dues, government money, and foundation grants, are all sucked into the CCI vortex often never to be seen again.

Although CCI is registered as a nonprofit corporation in Louisiana, it does not appear to have sought tax-exempt status from the IRS. Surely it has declined to seek tax-exempt status because entities with that status have to publicly disclose financial data. This is the same approach employed by George Soros’s Democracy Alliance, a piggybank for left-wing political infrastructure that is registered as a taxable nonprofit in order to prevent public scrutiny of its finances and internal affairs.

Sykes said he came to the nation’s capital in 2006 as an intern for ACORN’s national legislative program, working for it from April 2006 to February 2007. He said he was never a lobbyist although he did help to prepare lobbyists to meet with lawmakers and their staff on issues of interest to ACORN such as voting rights, housing programs, minimum wage laws, and predatory lending. Occasionally he went along on Capitol Hill visits, but arguing for or against specific legislation was not his job, he said.

According to forms filed under the federal Lobbying Disclosure Act by CCI, Sykes lobbied as an employee of CCI on behalf of ACORN between Jan. 1, 2006 and June 30, 2007. He is described in three disclosure forms as a “fellow.” When a person ceases lobbying, the registering organization (in this case CCI) is supposed to declare this fact, but there is no indication in the online lobbying disclosure database maintained by the Office of the Clerk of the House of Representatives that CCI did so.

Sykes said he received a scholarship from ACORN to help him cover living expenses but that it was abruptly cut off months ahead of schedule in February 2007. During his internship he became curious about ACORN’s financial affairs and began to ask a lot of questions about where the money was going.

“I guess they got a little irritated and the scholarship money from the ACORN executive board was cut off,” Sykes said.

He found out that his internship was coming to a premature end when he received an email and a telephone call from the legendarily smooth Wade Rathke, who was then chief organizer (CEO) of ACORN. Rathke offered him thanks and told him that he did a great job. “I asked him if there were any positions open and said I’d like to stay but he said there was no funding at this time for a salary for me,” Sykes said.

A former senior ACORN official contacted for this article, Marcel Reid, who was a member of ACORN’s national board from October 2005 to late last year, said she and other members were unaware that CCI even did lobbying.

Legal reform advocate and lawyer Zena Crenshaw said CCI’s behavior raises several red flags.

“They certainly should be segregating 501(c)(3) funds from their lobbying activities,” said Crenshaw, a founding director and executive director of the National Judicial Conduct and Disability Law Project Inc. (NJCDLP). “I’m not sure how you can segregate them if the lobbyist is handling the money. I don’t know how CCI can be both a lobbyist and a financial manager handling ACORN’s 501(c)(3) funds.”

“This just confirms the need for an examination of the organization’s affiliates,” said Crenshaw, who is also chairperson of the legal affairs committee of ACORN 8, a group of former ACORN members co-founded by Reid that is calling for a forensic audit of ACORN.

ACORN was warned by its own lawyer Elizabeth Kingsley of Harmon, Curran, Spielberg & Eisenberg last year that its lack of internal firewalls and its chaotic organizational structure were likely to land ACORN in hot water. Kingsley’s letter to her client was excerpted in a report by Republican investigators on the House Oversight and Government Reform Committee.

The investigators found that CCI should have paid an excise tax on any lobbying expenditures it made, but noted that evidence indicates the spending was never reported to the IRS.

The investigators also found that by “intentionally blurring the legal distinctions between 361 tax-exempt and non-exempt entities, ACORN diverts taxpayer and tax-exempt monies into partisan political activities.” They argued that ACORN should be stripped of its jealously guarded tax-exempt status because it illegally spends taxpayer dollars on partisan activities, commits “systemic fraud,” and violates racketeering and election laws.

“Operationally, ACORN is a shell game played in 120 cities, 43 states and the District of Columbia through a complex structure designed to conceal illegal activities, to use taxpayer and tax-exempt dollars for partisan political purposes, and to distract investigators,” the report said. Structurally, it is “a chess game in which senior management is shielded from accountability by multiple layers of volunteers and compensated employees who serve as pawns to take the fall for every bad act.”

The report examines the ACORN network’s abusive interlocking directorates, and claims that the group deliberately organized itself to escape legal and public scrutiny. “ACORN hides behind a paper wall of nonprofit corporate protections to conceal a criminal conspiracy on the part of its directors, to launder federal money in order to pursue a partisan political agenda and to manipulate the American electorate.”

ACORN uses interlocking directorates, which refers to individuals serving as directors on multiple corporate boards, in order to subject its network of affiliates to centralized control from the top. Having interlocking directorates may be widespread and lawful, but the practice raises questions about the quality and independence of board decision-making.

While the ACORN network claims to be a “family” of organizations, embodying the ethos of community organizing, which stresses local action and decentralized authority, it is run by senior officials who treat its national board as a rubber stamp.

It’s worth noting that all three lobbying disclosure forms were signed digitally by Donna L. Pharr, who is listed as CCI’s assistant treasurer. The services of the ubiquitous Pharr, herself a walking, talking example of interlocking directorates, are in demand all throughout the ACORN empire. She’s on the board of dozens of ACORN affiliates including ACORN Housing Corp. and the American Institute for Social Justice Inc. Pharr is also deputy treasurer of Minnesota ACORN Political Action Committee and is listed in a Michigan Bureau of Elections filing as the contact person for Communities Voting Together, a 527 pressure group.

CCI itself has a long and checkered past.

In 1996 the federal Department of Labor sued CCI. The next year a federal court ordered CCI to cough up $10,000 in back wages.

CCI currently owes at least $400,117 in back taxes to the IRS, Arkansas, District of Columbia, Indiana, Louisiana, and Maryland, according to the Nexis tax liens database. This figure excludes the $442,533 in tax liens that the IRS has rescinded over the past five years after they were presumably paid. Tax liens are only issued by creditor tax agencies after a tax debt has become seriously delinquent. The ACORN network has had millions of dollars in tax liens filed against it since 1989.

Last year Wade Rathke was dumped as chief organizer of the group he founded after ACORN’s national board learned that he failed to notify police when he discovered in 2000 that his brother Dale, who was a senior official at CCI, had embezzled $948,000 from the group.

Wade Rathke engineered a cover-up for his brother and allowed him to leave the payroll of CCI to work as his $38,000 a year “assistant” at ACORN headquarters. The missing money was disguised as a loan to an officer on the books of CCI.

Despite being expelled from ACORN, Wade Rathke remains involved with at least five ACORN affiliates. Rathke recently changed the name of ACORN’s international consultancy, ACORN International, to Community Organizations International. Both ACORN and Rathke maintain that COI is no longer an affiliate in the ACORN network.

Rathke also remains chief organizer of the New Orleans-based Local 100 of SEIU, another ACORN affiliate he founded. He does not appear to have stepped down as president and director of Affiliated Media Foundation Movement (AM/FM), an ACORN affiliate that produces news segments for eight alternative radio stations. He is also publisher and editor-in-chief of Social Policy magazine, a quarterly journal published jointly by two ACORN affiliates (ACORN Institute and American Institute for Social Justice).

And Rathke’s family members remain employed by ACORN. His common law wife, Beth Butler, and his son and daughter still work for ACORN. Butler is ACORN’s regional director for the Southeast U.S.

(This article was originally published by the American Spectator on Aug. 17, 2009.)