Documents show co-founder’s brother stole $947,000
The liberal political organizing group ACORN faced internal chaos and allegations of financial mismanagement and fraud long before two young conservatives embarrassed the group with undercover videos made at field offices across the country.
Internal ACORN documents show an organization in turmoil as last year’s presidential election approached, with a board torn over how to handle embezzlement by the founder’s brother and growing concern that donor money and pension funds had been plundered in the insider scheme.
Minutes from a meeting ACORN held in Los Angeles last summer reveal an organization then on the brink of financial collapse. “Currently owe over $800k to IRS” the minutes note. “Haven’t paid medical bills of over $300k. We are essentially ‘broke’ nationally and lots of offices are struggling.”
Some top ACORN officials tried to shield the scheme, which involved Dale Rathke, the brother of ACORN founder Wade Rathke. “Leadership has no faith in staff. Wade betrayed them,” the minutes say.
The documents present a troubling picture of one of the nation’s leading social justice advocacy groups, with more than 400,000 members, offices in 75 cities and an expanding international presence.
Founded in 1970 and supported in part by government grants, ACORN has forged relationships with banks, federal and state agencies and nonprofits that have made it a major force in helping low-income families buy homes and in bringing marginalized voters to the polls. The ACORN political action committee endorsed Barack Obama last February.
ACORN said in a statement Saturday that it has taken “decisive action” to correct problems detailed in the documents, which it said were stolen and leaked to investigators for a House oversight committee. Spokesman Brian Ketten-ring said ACORN has reorganized, severed its connections to Wade Rathke and “been made whole relative to the monies stolen in 1999-2000.” He also said “arrangements have been or are being made to correct all tax delinquencies.”
An investigation by Republican members of the House Committee on Oversight and Government Reform also showed that there was concern within ACORN that its voter outreach efforts, which are required to be nonpartisan, were aimed at electing Democratic candidates, a key complaint of conservative critics.
In a June 2008 report to ACORN, Washington lawyer Elizabeth Kingsley, who conducted an independent review of the group’s finances, found that poorly documented money transfers between ACORN and an allied organization, Project Vote, may have allowed tax-deductible charitable contributions to be used for political purposes. She also noted conflicts created when decision-makers at the tax-exempt entity had roles in political activities.
“My question all along was, are we funding a liberal political agenda with taxpayer dollars without knowing it?” said Rep. Darrell Issa, R-Calif., who co-sponsored last week’s House legislation cutting off ACORN’s federal funding and also led the oversight committee investigation that was released in July. “By the end, it was clear to me, this organization can’t assure anybody, including itself, that it won’t use our money for partisan politics.”
Conservative ire over ACORN has been building since the 2008 elections, when the group mounted voter-registration drives that helped propel the victories of Obama and other Democratic candidates. The Obama campaign paid Citizens Consulting Inc. of New Orleans, a close ally of ACORN, more than $800,000 for get-out-the-vote activities, and the group’s political action arm endorsed Obama.
Obama’s ties to ACORN date to his days as a community organizer in Chicago. He represented ACORN in a lawsuit in 1994 and conducted two leadership training sessions for ACORN’s Chicago chapter in the late 1990s. In 1992, Obama served as director of Project Vote in Chicago, helping to register 150,000 voters on the South Side.
Obama has said previously that ACORN did not advise his presidential campaign. “We don’t need ACORN’s help,” he said last October.
Issa’s investigators unearthed e-mails and documents offering details of how the organization reacted to the discovery that Dale Rathke, the former chief financial officer of ACORN, had embezzled $947,000 in 1999 and 2000. Wade Rathke left his post as ACORN’s chief organizer in June 2008 after the embezzlement was discovered.
Neither the full ACORN board nor most of its staff knew about the embezzlement until a donor revealed it in 2008, eight years later. ACORN reached a private settlement with Dale Rathke in which he and his family agreed to repay the money that, according to ACORN documents, he spent on luxury hotels and trips on the Concorde. The organization agreed not to turn over the matter to prosecutors.
Minutes of an ACORN conference in Washington in August 2008 reflect the group’s concern that Wade Rathke kept vital information from the board.
“Wade never fully told anyone on the board,” the notes show. “He allowed Dale to continue working for ACORN and despite his assurances to the management committee at the time allowed him to continue being involved with almost all finances.”
Under the confidential negotiated settlement, the Rathke family agreed to repay ACORN at a rate of $30,000 a year.
Issa said his inquiry found a handful of Wade Rathke loyalists in charge of nearly 200 entities and affiliates with varying status – some tax exempt, some political – but with blurred lines.
“If you weren’t interested in merging all your corporate entities to foster one political end, why did you create this structure that would allow you to do just that?” Issa said.
In a statement, ACORN called the committee report not credible.
“Just as news organizations separate their editorial, news and advertising departments by function, so too do community organizations separate functions to protect the integrity of each function,” it wrote. “Mr. Issa illogically says we did both too much and not enough in this vein, belying the amateurish nature of the report as a whole.”
Issa said ACORN’s financial problems invite questions about its voter-registration effort. ACORN reported collecting more than 1 million applications for low-income people and minorities in the 2008 election, up from 500,000 in 2006.
Backlash after videos
ACORN, which is funded with both government money and private donations, works under a variety of affiliates to encourage homeownership and civic involvement among low-income citizens. Its offices in the District of Columbia and Baltimore were among those targeted in video stings in which a couple posing as a pimp and prostitute received counseling from ACORN workers that might help them evade federal tax laws.
As the videos gained traction online, calls for criminal investigations and an end to funding have intensified. Georgia Gov. Sonny Perdue and Louisiana Gov. Bobby Jindal, both Republicans, have ordered state agencies to cut off ACORN’s funding. In California, Republican Gov. Arnold Schwarzenegger called for an investigation, while in New York, Democratic Gov. David Paterson imposed a 30-day hold on ACORN’s contracts. Elected officials in Rhode Island and Illinois have joined the chorus.
Meanwhile, authorities in Miami last week issued arrest warrants for 11 former registration canvassers on allegations that they falsified hundreds of voter registration cards. In Nevada, ACORN faces a hearing this month, with two former employees accused of illegally paying canvassers to sign up voters.
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