Citizens Consulting Inc. (CCI), the shadowy financial nerve center of the embattled radical activist group ACORN, has filed false lobbying disclosure reports with Congress, according to Ron Sykes, a former ACORN employee.
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.”
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.)