ACORN is no stranger to shady lobbying practices.
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.